FW: The principle of legitimacy and the admitted fiction in s.43(2) ITA 1984

Those listening to the debate last night in the House of Commons will recall an interesting discussion on the principle of legitimacy. That was also evoked by Lord Sumption in the latest Reith Lecture in his discussion earlier in the afternoon about power, its exercise and the law.

Taking that point further , I have long been concerned about the fact that no analysis of the scope of application of the definition of a settlement to foreign immovables was made in Standing Committee A in 1975, or in the later Scottish Proper Liferent amendment, despite the question having being raised generally at §1735. Whilst it was permissible to override the land law of a nation within the United Kingdom, it certainly was not outside it, without conquest or settlement. The Government spokesman in fact made no attempt to warn the Committee as to any intention of HMRC to override the common law restriction on Parliament and for that matter on the Courts having no jurisdiction to adjudicate settlements, fictional or otherwise over foreign immovable property rights where there was no trust.

That is a blatant breach of the common law principle of legitimacy, as HMRC are either extending the effect of s.43(2) ITA beyond what Parliament actually intended and was able to do, or worse deliberately obscured their intention to override the common law, upon which their supremacy in national matters depends, as set out ably by their Lordships in Philipson-Stow to which I have referred in an earlier post.

Whilst certain experts decided to use the French treaty as a mechanism fo avoiding dry succession, using the French facility to defer payment of the French succession duty on a usufructuary right granted under a succession, enabling a credit against a deemed settlement assessment in the UK, that was discriminatory in relation to any lifetime gift of a nue-propriété of an immovable to children, one example. Is what only amounts to a tolerance in interpretation now to be converted into an opaque form of parallel statute?

Again that is hardly “legitimacy” if that was Parliament’s intention rather than a falsehood by omission from or by HMRC or the Treasury.

The usufruit issue is apparently being taken to the First Tribunal, and Mr Davidson of HMRC has attempted to harden the Manual up as a final bastion by using the term “fiction”. I understand he has now taken advice from a Treasury lawyer on the latest wording of the manual having abandoned his previous view on the second phrase of the first sentence of the last paragraph referring to administration, and that of the term “regulated”, not governed in the first phrase of the admitted fiction. .
HMRC’s view appears to have been strengthened earlier, by views from city firms seeking to impose a fictional fiscal structure within the succession duty treaty with France. Given the change to the relevant property régime the view proffered is no longer tenable or workable.

I stress that the treatment of a usufructuary dismemberment inter vivos or on death is perfectly assessable as a division of property into separate rights at law, with an extinction at nil vale of the usufruit on death, rather than their inequitable conversion into movable equity by the Revenue.

Perhaps the Revenue have been misguided into believing that in leveling the playing field in Scotland, where the Parliament has fiscal jurisdiction over property rights to Europe and further afield, where it has none, was permissible in the same manner as their current crusade on contractors, ably repulsed by Keith Gordon. However, neither Parliament nor the Courts have any jurisdiction to impose settlements on foreign immovable rights and property by way of law, fiction, whether under a principle of legitimacy by non-disclosure, or otherwise.

Peter Harris