Spc00730

INHERITANCE TAX - interest.

THE SPECIAL COMMISSIONERS

GILLIAN RICHARDSON
		Appellant

-and-

             HER MAJESTY’S COMMISSIONERS OF
             REVENUE AND CUSTOMS
			Respondents

Commissioner: Richard Barlow 

					 	

Sitting in public in Manchester on 23 October 2008.

The appellant in person.

 Mr Colin Ryder for HM Revenue and Customs. 

© CROWN COPYRIGHT 2009

DECISION

1.	The appellant is the executrix of the estate of Mrs Vera Oliver and she appeals in respect of a notice of determination under section 221 of the Inheritance Tax Act 1984 (IHTA) by which she was notified that she was liable, as executrix, to pay £19,662.74 as interest in respect of the estate.

2.	I was shown two wills made by Mrs Oliver.  In the first, dated 29 May 1961, she left her estate to the appellant (“as my daughter”) subject only to the payment of debts, funeral and testamentary expenses.  In fact the appellant is not Mrs Oliver’s daughter and she referred to her in that way because, at that time, she regarded her as like a daughter to her.  In the second will, dated 3 July 1985, Mrs Oliver left her estate to the Motor Neurone Disease Society and appointed a solicitor to act as the executor.  I was not shown the third will which was dated 29 May 1996 but it is agreed between the parties that it revoked the 1985 will and left the estate to the appellant.

3.	  The solicitor who had been appointed executor of the 1985 will and Mrs Oliver, before her death, were both based in York as was the appellant but unfortunately when Mrs Oliver died on 30 September 2002 the appellant was not then apparently still in contact with Mrs Oliver and no-one told the appellant that Mrs Oliver had died for a year or so afterwards.  By then the solicitor had started to administer the 1985 will.  Mrs Richardson believes that the solicitor had acted incompetently and in bad faith and perhaps even dishonestly in respect of that will and I was told that the Law Society had appointed another firm to take over and run his practice.  I am not in a position to make any findings about that nor is it relevant for me to do so.

4.	What is certain is that there was a long delay before Mrs Richardson was appointed executrix of the 1996 will.  Fortunately for her she had a copy of it and although the original was not found the will was eventually proved by production of that copy.  The delay was caused by the necessary enquiries and the applications to the civil courts.

5.	Mrs Oliver’s estate was valued, in round figures, at £550,000.  The precise figures are not relevant as the appeal before me relates only to the interest claimed by the respondents based on the inheritance tax, the amount of which is not in dispute.  That interest is £19,662.74 and the calculation of that amount is not in dispute either.

6.	That interest is less than the increase in the value of the estate between the death of Mrs Oliver and the time the inheritance tax was paid though, as Mrs Richardson correctly pointed out, that is not relevant to any question whether the interest on the delayed payment of the tax is properly payable.

7.	The respondents’ claim for interest is based on section 233 of IHTA as amended which read at the material time, so far as is relevant:

“(1) If-

(a)	…
(b)	an amount of tax charged on the value transferred by any other chargeable transfer remains unpaid after the end of the period of six months beginning with the end of the month in which the chargeable transfer was made, or
(c)	…

then subject to subsection 1A below it shall carry interest from the end of that period at the rate applicable under section 178 of the Finance Act 1989.  

8.	Paragraph (a) applies to chargeable transfers other than on death and paragraph (c) applies to certain transfers of nationally important property, woodlands and transfers before 1979.  Clearly paragraph (b) is the relevant provision.  Section 4 of the Act provides that the death of a person creates a deemed transfer at the moment immediately before the death and so tax is chargeable on that basis and the provision for interest is intended to recognise the fact that HMRC are out of money already due to them if there is a delay in payment.

9.	Given the nature of that interest claim, it is not surprising that there is no relief or exception provided for cases where the delay was unavoidable.  The interest simply recognises that HMRC were out of the money for whatever reason.   

10.	Mrs Richardson’s argument is that it is unfair that the interest should be charged when it was no fault of hers that the estate took a long time to be administered and that the delays were caused by the solicitor who dealt with the 1985 will and the slowness of the Courts in dealing with her application to have the 1996 will recognised and her appointment as executrix.  She also claimed that she had been mislead or misdirected by HMRC.

11.	The arguments about general unfairness, even if factually correct, though as the estate increased in value by more than the interest claimed it is a matter of opinion whether any unfairness has resulted; cannot override the unequivocal provisions of the statute.                     

12.	The Special Commissioners do not have any jurisdiction to waive tax otherwise due, even if there has been misdirection by the Department.  That was confirmed in the case of Executors of Patch –v- Revenue and Customs SpC 600.  However, although it is irrelevant to my decision I will record it that my conclusion on the evidence given is that there was no misdirection.  Mr Richardson when he gave evidence said that he or his wife had first contacted the Department in August 2007.  Mrs Richardson complained that she had not been sent statements of the interest as it accrued.  There is no obligation on HMRC to send such statements and it could not have been done before August 2007 in any event by which time most of the interest had accrued.  Mrs Richardson claimed that she or her husband had been told that the interest was frozen at about £13,000 but Mr Rayner the person alleged to have said that denied he had used that word and I prefer his evidence to that of Mr and Mrs Richardson whose evidence was inconsistent on this and other points.  In particular they were unsure who was supposed to have been told the interest was frozen and yet claimed to have a clear recollection that that word had been used.

13.	Mrs Richardson also complained that she had been told the interest was £13,520.11 and that £5,549.58 had been added to it but in fact both sums were referred to in the Calculation of Inheritance Tax sent to her.  The first figure related to the real property in the estate and the other to the other assets.  By the time the tax was paid a small amount of additional interest had accrued in addition to those amounts.

14.	Even if there had been an unreasonable delay in dealing with the matter on the part of HMRC, which I am satisfied was not the case in any event, that would not have afforded Mrs Richardson a remedy as was confirmed by the Special Commissioners in Prosser –v- IRC SpC 362.

15.	In the circumstances the appeal fails.  Under section 224(5) of IHTA I confirm the determination appealed against.     

Richard Barlow
Special Commissioner

Release date: 7 January 2009

SC/3142/2008