5 years before he died the deceased spent a 6 figure sum on his daughter’s wedding. Is this a failed PET or was it legitimate expenditure on his own behalf? There seems to be an argument that the father spent his money for his own benefit although his daughter and guests also benefitted. Has anyone come across this before?
I recall an extensive discussion on this forum a few years ago on the tax treatment of paying for a wedding. I can’t access it at the moment but am sure a search under the term “wedding” will find it.
Diana Smart
Gordons LLP
I had case where the deceased had very shortly before he death spent a considerable sum on a cruise for himself, a carer and two friends. I thought that the cost of his and the carer’s holiday was personal expenditure, the two friends was a PET. Unfortunately he did not live long enough to go on the cruise.
Applying the same principle- if it justifies the term- I would say that the cost of the daughter’s wedding probably is a PET as the father’s consumption is a small part of the cost.
But, and here I hesitate, what if the deceased’s cultural background makes it customary for the father of the bride to put on a lavish show for reasons of family dignity and community standing? Wouldn’t that push it in the direction of his personal expenditure?
For a six-figure sum it may be worth running it before the Tribunal. It is after all a question of fact
Tim Gibbons
As Diana says, there was an extensive discussion on this a number of years ago.
Unfortunately, the discussion was before the change to the database management and access to the earlier posts has been lost - a great shame as it contained a lot of valuable commentary.
The stream generated many varying views and was informally raised with HMRC. The response was that every case would need to be considered on its own facts, and that it would be inappropriate to try and create a general rule. I recall the subject being referred to as “a can of worms”!
Whilst paying for your daughter’s wedding results in a reduction in your estate is the act one of bestowing bounty and, if so, upon whom – each individual guest, the Happy Couple or some combination of the various parties involved?
The more you look into it, the more fraught it becomes.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
PO Box 421, Wilmslow, Cheshire SK9 0EX
T: 07712 664127
Email: paul@paulsaunders.net
Is it really the case that TDF has entirely lost its database prior to a given date? That’s a very great shame, and makes the contributors feel as though they want to retain a copy on a memory stick for the foreseeable future.
Julian Cohen
Simons Rodkin
I would say that this expenditure is no different from someone who spends ££££ every week on lavish house parties. I can spend my wealth any way I want
Peter Eager
Surely we haven’t lost all earlier discussions before a certain date??
As pointed out above there was indeed a very exhaustive discussion on the “wedding cost” issue. I attempted to do a search but couldn’t find it.
I participated in that discussion but must confess I haven’t the heart to rethink what I and others posted at that time. There seems to be little point in having to continue to reinvent the wheel again and again.
Perhaps the Moderator would be kind enough to post clarifying the position re past posts.
Malcolm Finney
I remember the discussion, but thought it either went to court or there was a finding?
The correspondence was in August/September 2012 (!). i have found some of the emails but have no intetelligent idea on how to forward them effeciently.
see below - for 2 of the replies
The main pint, sorry point, perhaps is that the advent of Champagne socialism in the period intervening between 1975 has led to a shift in meaning.
Both William Hancock and Gareth Jones’ position as hardened IHT practitioners needs to be heeded.
Few non-dipsomaniac bacchanalians now grasp what “disposition” means simply because Latin is no longer taught as a matter of principle in schools, and therefore rarely studied otherwise than by a minority of lawyers. “Dis”
“position” does actually mean and infer transfer as it means putting something, “posit”, from one place or person, and by definition therefore to another place or person. It does not embrace or comprehend pouring the champagne, or moussant into the lawn, or some other long suffering aspidistra or recipient, as a reverence to the god of the Treasury, at whose alter I certainly do not worship.
The asset or thing disposited has to be repositioned, and frankly the issue is now getting to the point where the term disposition is not being correctly read in the English context in which it is being used. It is within the context of a transfer of value, and is an inherent part of that definition. I am aware that the definition has been extended beyond the natural meaning of disposition in several areas, but I stress that there is no specific statutory definition of disposition, which therefore has to be restrained to its natural meaning in plain English.
What is curious is the intense concentration on the single subsection, without reference to the context of the remainder of the definition of which it is a part.
The Oxford dictionary will in itself refer back to the latin roots of the word. I agree that it does not say transposition, but it does not have to, as that has a separate meaning: the action of transposing something.
The Oxford dictionary refers to the meaning of disposition as being:
3 [mass noun] (Law) the distribution or transfer of property or money to someone, especially by bequest.
I think that the issue ends there does it not?
The asset has to be transferred to someone, or distributed to someone. I do not think that the term “distributed” in law can refer to uncorked wine or food. Was the feeding of the Five Thousand a taxable event?
This boils down to the inevitable conclusion that the estate of another party has to be increased, it does not cover waste or expenditure.
That is the problem with allowing the Treasury and CTO arrogate the definition and interpretation of the law by reference to their own deviant understanding, rather than by reference to the latin root from which the term is taken, and to the Oxford dictionary.
In short they need to be reminded of their Grammar and syntax, as the historic presence of Oxford or Cambridge graduates there has been lessened in favour of lesser gods than logic and plain English.
Were statute to be read straight in this and other areas, s.43 and the assumption that everything foreign that is neither trust burden or charge has to be settlement, being one case in point, the Treasury would find itself owing tax back to those from whom it has been appropriated without statutory foundation.
Peter Harris
Overseas Chambers
At 7.112 of Dymond there is an example of A hosting and paying for a lunch he has with B. I disagree with the conclusion. In my view, if A booked the restaurant, A has made a disposition but it is not a transfer of value so it can be any degree of gratuitous up to 100%. Dymond does not dissent from this point at any rate: if there is no transfer of value within s 3(1) you do not even go to s 10(1).
A wedding where the parent (s) contract direct with the venue, caterers and other suppliers involves a disposition by them but not a transfer of value so no IHT consequences even if 100% gratuitous.
Pretty well anything is a disposition, except an omission not caught by s3 (3). It surely includes even an executory contract to purchase services and even for one’s own sole benefit.
A transfer of value is a defined term in s3 (1) and does not require a transfer. It is a disposition whereby an individual’s estate is worth less after than it was before.
If a parent contracts with X to purchase wedding services there is no reduction in his estate. His liability to pay, or payment itself, is balanced by the 'value’ of his contractual rights. The weird world of hypothetical buyers and sellers is thus invoked by s160 and the contract must be regarded as assignable even if it is not. The argument that no one would take an assignment does not run.
What remains real is the subject-matter of the valuation i.e. the actual contract. There is no reason to suppose that the hypothetical purchaser would pay less than the contract price, perhaps save a modest discount so market capitalism may receive its due genuflection.
When the contract is performed, the chose and its value disappear from the parent’s estate but there is no second discrete disposition nor any operation associated with the earlier one. Under s268 an operation includes any omission but surely an omission not to enter into the contract at all or rescind it under its terms would be so ludicrous a proposition that even a judge would get it. I do not accept that the consumption by guests of the contracted services is a relevant operation though operations by persons other than the putative transferor can be associated in principle.
It is rather like entering into a lease that expires (more or less) gradually. And there is nothing artificial about this. It is the natural consequence of the delivery of services under a contract to purchase them.
They are consumed.
…
To placate my fellow Topers in the Forum, the act of my sharing my bottle of Lagavulin involves a second disposition or perhaps an associated operation if a guest pours his own dram. I fear that there may be here as often a probably unintended difference between good and services.
I do not think it matters whether a third party e.g. the child can also enforce the contract. Surely nobody formally excludes the 1999 Act. Before HMRC lock themselves in the lavatory to await Mother, I would say that a contract by A with X to provide lunch to B alone would cause a significant reduction in A’s estate as A’s bare right to enforce it would be only of nominal value.
In Dymond A is not buying lunch for B. He is contracting with the restaurant to buy THE lunch. As was ever the case the precise contractual formation is crucial. It does not work if B books and A pays.
I agree with Dymond that if there is a reduction in A’s estate it is gratuitous, that the whole reduction is then a transfer of value with no credit for his own lunch, and that it is not a PET. I would also add that nor is it eligible for the spouse exemption if B is Mrs A.
In 1973 misgivings were voiced that crass stupidities like this could arise but they were patronisingly dismissed. It was a different era. Common sense and the Nelson touch could be applied by HMRC and judges, who were also parents and the judges at least were into lunch.
The present Tax System, incorporating the Gawke Test, now follows the East German model and we are all subversives or informants. The main qualification for the Bench remains never to have travelled on a bus; in the Chancery Division this can be a positive. We have to rely on the judges and as ‘lawyers’(quotes to include Jon Zigmond, honoris causa) we have to predict for our clients’ benefit what they will say. We have to trust the intellectual rigour of a Lord Walker to reach a sensible conclusion if at all possible.
Possibly we may still rely on Capital Taxes to deny themselves the thrill of the pursuit of the explosively controversial risking the displeasure of their masters. Bags of weddings in the Shires. HMRC’s Manual is silent. It would be odd if they had no view at all or were claiming FOI exemption.
Asking them direct can be problematic as the reply may cast doubt (if only in the mind of one’s insurers) upon one’s robust opinion; an unfavourable reply may not indicate that they implacably oppose your view, only that they are not ready to publicly license the world and (appropriately here) its wife on a carte blanche basis not least ultimately via this Learned Forum.
And sometimes their view is actually wrong.
Jack Harper
Jack Harper & Co
2 Likes
I have tracked down the earlier correspondence, which I now have on a 47 page pdf, but I don’t know to send this on a forum.
Or, of course, I could copy and paste the original Word document, but there may be a size limit on a posting.
Thank you, Penelope - Keep the aspidistra flying. I remember Robert Venables joining in as well.
Peter Harris
www.overseaschambers.com
The question raised in 2012 –
Paying for a wedding
If a traditionally-minded father spends say £25,000 on paying for his daughter’s wedding and a lavish reception, would members consider this a gift to the bride or payment by the father of an expense which naturally falls on him so that no element of gift is involved? To keep things simple let us assume that the couple are paying for the honeymoon themselves.
Does it make any difference if the daughter is still young enough for the payment to qualify as a disposition for family maintenance?
Would it make a difference if the father paid for his son’s wedding, where there is no established tradition that the father pays?
Andrew Brooke,
Anderson Longmore & Higham, solicitors
One of my own contributions to the thread, which I think ran to 84 altogether, eventually –
I hesitate to join in this debate again, but still…
I think most of us, probably all, agree that the legislation ought not to result in any tax arising from such as was mentioned in the original posting by Andrew Brooke [only two weeks ago!], but I fear that is an emotive conclusion, and the legislation is not drafted in such a way as to give a clear exclusion/exemption. And raising the ante by offering your friends round-the-world tickets or flying your guests to New Zealand for the reception merely illustrates this.
The New Shorter Oxford English Dictionary gives ten meanings or uses of ‘disposition’. None of those listed uses precisely the words sought, but I suggest the most apt meaning in the context of this thread is ‘to change the position of something’. This would include a simple purchase of goods and services; exchanging my cash therefor. Unless I have deliberately overpaid for those goods and services, that will not be a transfer of value.
Making the goods or services available to my wedding guests will be another disposition, which will normally be a transfer of value, or more probably a number of transfers of value. Save where the transfer of value results from an omission to exercise a right, a transfer of value need not result in another person’s estate being increased, either in value or nature.
So, I think agreeing with Jon Zigmond, the only question remaining is whether or to what extent the transfers of value are PETs or chargeable transfers.
Ray Magill