I cannot think of any reason why it cannot be made but have never come across it.
The simple question is can a Deed of Variation be executed to vary a gift to an individual so it passes to a private limited company instead?
Ian Partington
Horwood and James
There is no reason why a DoV in favour of a limited company cannot be executed.
Malcolm Finney
Hi Ian,
Law of Property Act 1925 - A person is a corporation.
Regards
Richard Bishop
PFEP
Richard, I think the original post wanted to check if the recipient of the re-directed inheritance could be a “company” as opposed to perhaps the normal situation where the recipient is an “individual” as IHTA 1984 s 142 appears to be silent.
However, the section does not limit or define who may benefit by use of the terms “individual”, “company” etc the section in fact being silent. Hence, a company may be the recipient and I suggest there is no need to identify the definition of the term “person” for
s 142 purposes.
Perhaps you disagree?
Malcolm Finney
Agree with @MalcFinney. Nothing in s142 precludes a variation in favour of a limited company.
There was something about this in Tolley’s tax Planning for post death variations.
Andre Davidson
Finantium
Malcom
S.142 is a rather blunt tool, HMRC does provide guidance with Inheritance Tax: instrument of variation checklist (IOV2). It clearly states “who” is to benefit must be included in the variation.
The Property Act is very clear on the definition of ‘who’, for the purposes of wills an instruments. Who: can be a person or corporation.
I’d suggest this is why s.142 is silent. It would simply repeat the previous act.
Richard Bishop
PFEP
LPA 1925 s 61 does not define the term “person” exhaustively but merely confirms that the term “includes” a corporation where used in the instruments listed. The section is, however, of no help in confirming whether, for example, a non-corporate recipient or any other category of recipient can benefit under a DoV.
IHTA 1984 s 142 is, I would suggest, silent because there is no intention to restrict a recipient benefitting under a DoV to a “person”.
If the section had explicitly stated that a donee/transferee must be a “person” to be capable of benefitting under a DoV this would therefore exclude any foreign entity, for example, which under UK law would not be classified as a “person” whereas I would suggest that any such entity can in fact benefit under a DoV (eg French SCI; Dutch Bewind).
Malcolm Finney
The Interpretation Act 1978 defines “person” as including a body of persons corporate or incorporate.
Peter Eager
Retired Solicitor
I will admit to being perplexed by the discussion on how “person” is defined in the context of s.142 IHTA.
“Person” appears to be used for 2 different identities – the deceased, and those purporting to make the variation (although “appropriate person” is included as a third identity).
Other than in s.142(3A) and (3B), which place conditions on a gift to which s.23(1) applies, there appears no definition of, or restriction on, the identity of the beneficiary under a variation.
Mindful that a variation is merely a gift by the original beneficiary(s) dressed up as a gift by the deceased for IHT purposes (and some CGT purposes), I suggest that provided a gift may validly be made to the intended beneficiary undr the general law, then a variation to which s.142 applies may also be made in favour of that beneficiary.
In the absence of any specific restriction within the legislation, I agree with Malcolm that the potential beneficiaries under a variation valid under s.142 in generally unlimited.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Unfortunately I believe the Interpretation Act only applies to Acts of Parliament and subordinate legislation, not Wills.
Simon Northcott