We have a UK resident non UK domiciled client, for whom HMRC are contesting the domicile status.
Determining non UK income and gains is now relevant in order to arrive at a settlement amount with HMRC.
Clients mother died in 2006. In 2013 he receives funds from the sale of her properties. Currently, it is not clear whether;
the properties were passed to him under the Will and he sold them. Gain in his name - base cost MV at her death.
the properties were held in Trust, sold by the Trustees and he received a payment - s87
the properties were sold by the PR’s of the Estate and the funds distributed to him.
I am unclear on point 3 - the Estate is NR. What is the definition of a settlement for s87. Could an estate be a settlement and therefore s87 apply?
Or, is a non UK estate, categorically not a settlement and therefore, any gain arising would have been that of the PR’s and, the client received the funds (clean capital).
TCGA 1992 s.97(7) provides the definition of “settlement” for s 87 purposes namely that contained in ITTOIA 2005 s.620.
An estate is not a settlement for present purposes (ie s87) despite the apparent bounteousness nature of a will and the definition contained in s620 including an “arrangement”.
This is a good question. Section 97(7) TCGA 1992 provides that ‘settlement’ in this context takes its meaning from s.620 ITTOIA 2005. In turn, that enactment provides that the term ‘includes any disposition, trust, covenant, agreement, arrangement or transfer of assets (except that it does not include a charitable loan arrangement)’. On first inspection, and if read in isolation, the word ‘arrangement’ in this context would appear to be somewhat wide.
However, the scope of s.620 is restricted by case law. In particular, when construing a predecessor of that provision (namely, s. 411(2) of the Income Tax Act 1952), Goff J held in Willingale v Islington Green Investment 48 TC 547 that the wording did not encompass wills. This was said to follow from the earlier decision of IRC v Buchanon 37 TC 366, which was concerned with s.20 of the Finance Act 1943.
Accordingly, the answer to your question is that an estate is not a settlement for the purposes of s.87.
Further detail on this point, should you need it, can be found in Kessler, Taxation of Non-Residents & Foreign Domiciliaries (21st Edn.) at [86.8.1].
This is a good question. Section 97(7) TCGA 1992 provides that ‘settlement’ in this context takes its meaning from s.620 ITTOIA 2005. In turn, that enactment provides that the term ‘includes any disposition, trust, covenant, agreement, arrangement or transfer of assets (except that it does not include a charitable loan arrangement)’. On first inspection, and if read in isolation, the word ‘arrangement’ in this context would appear to be somewhat wide.
However, the scope of s.620 is restricted by case law. In particular, when construing a predecessor of that provision (namely, s. 411(2) of the Income Tax Act 1952), Goff J held in Willingale v Islington Green Investment 48 TC 547 that the wording did not encompass wills. This was said to follow from the earlier decision of IRC v Buchanon 37 TC 366, which was concerned with s.20 of the Finance Act 1943.
Accordingly, the answer to your question is that an estate is not a settlement for the purposes of s.87.
Further detail on this point, should you need it, can be found in Kessler, Taxation of Non-Residents & Foreign Domiciliaries (21st Edn.) at [86.8.1].
The general question was resolved by Lord Wilberforce in a CGT case who cited the general principle of English law, outside statute, that you cannot have a settlement without a trust. An estate is not a trust. There is no trustee.
It is a constant in English law that you cannot have a settlement without Coke’s confidence, or privity, or as Lord Wilberforce put it in Roome and Denne v Edwards [1982] AC 279 at page 292 at G : “The Finance Act 1984 contains no definition of “settlement”…… So a “settlement” must be a situation in which property is held in trust.” Here the current CGT definition of a settlement does attempt to extend this, but it still does not apply to an estate. All the statutory terms advanced imply an action by an individual.
There is arguably no “disposition, etc.” or “arrangement” or trust or privity involving the will and action of an individual in the creation of an estate, it already exists as a matter of law whether the deceased be aware of it or not.
HMRC, or one of its Hydra’s heads, accepts the orthodoxy of the legal position about when a will trust becomes operative if at all: TSEM6035 and 6045. Another one of its Hydra’s heads cannot get that particular head round the TRS excluded trust issue that it is possible in law that more than 2 years after death a will trust may not yet have come into existence.
My unanswered letter of 4 August 2022 said " I write to ask what legal authority does HMRC have for making any estate register in TRS to obtain a UTR? All estates are obliged to notify under s7 TMA 1970 so I don’t accept that TRS is in substitution for that obligation, though I would accept that HMRC could properly accept that an estate that did register for TRS had fulfilled that obligation so that no penalty was exigible".
There is no authority under FSMA 2000 and the 2017 MLRs or under the Commissioners for Revenue and Customs Act 2005 or under TMA 1970. So where do the vires come from?
I note that the Hydra had poisonous breath and blood so that even its scent was lethal. It probably did not respond to letters.