TC09618 - [2025] UKFTT 01019 (TC)

Mr Firth, for the Appellant argues that “life” has its ordinary meaning and refers to the period between birth and death of a living thing – i.e. the state of being alive. Mr Firth submits that a company is not alive, does not die and does not have a life, accordingly, it cannot be liable under s.201(1)(d).

Mr Firth begins by setting out three ‘guiding principles’ of statutory interpretation.

The first is the importance of using the ordinary meaning of words. In support of this he cites an excerpt from Imperial Tobacco Limited v The Lord Advocate [2012] UKSC 61:

“The best way of ensuring that a coherent, stable and workable outcome is achieved is to adopt an approach to the meaning of a statute that is constant and predictable. This will be achieved if the legislation is construed according to the ordinary meaning of the words used.”

Mr Firth also drew my attention to the following paragraphs from R (on the application of O (a minor, by her litigation friend AO)) (Appellant) v Secretary of State for the Home Department (Respondent) [2022] UKSC 3 (“the O Case”).

At [29] Lord Hodge said:

“29.

The courts in conducting statutory interpretation are “seeking the meaning of the words which Parliament used”: Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591, 613 per Lord Reid of Drem. More recently, Lord Nicholls of Birkenhead stated:

“Statutory interpretation is an exercise which requires the court to identify the meaning borne by the words in question in the particular context.”

(R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] AC 349, 396). Words and passages in a statute derive their meaning from their context. A phrase or passage must be read in the context of the section as a whole and in the wider context of a relevant group of sections. Other provisions in a statute and the statute as a whole may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which meaning is ascertained. There is an important constitutional reason for having regard primarily to the statutory context as Lord Nicholls explained in Spath Holme, 397:

“Citizens, with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament.”

And at [31]:

As can be seen from the above, the context of the words is also of vital importance in determining the intended meaning.

Mr Firth’s second principle is a presumption that a concept should be assumed to have been used consistently by the legislature in different places within the same piece of legislation. He refers to R (Good Law Project) v Electoral Commission [2018] EWHC 2414 (Admin) where Legatt LJ said at [33]:

“Save for one point, there is no dispute about the principles of statutory interpretation. The basic principles are that the words of the statute should be interpreted in the sense which best reflects their ordinary and natural meaning and accords with the purposes of the legislation. It is generally reasonable to assume that language has been used consistently by the legislature so that the same phrase when used in different places in a statute will bear the same meaning on each occasion – all the more so where the phrase has been expressly defined.”

The third principle is the relevance of how the legislation has been drafted. Put another way, the question must be asked as to whether the draftsperson would have drafted the section differently if they intended it to apply in the way argued for. Mr Firth rightly suggested “Parliament would not intend an odd and difficult interpretation”.

To illustrate the principle Mr Firth referred to (Total E&P North Sea UK Limited v. HMRC [2020] EWCA Civ 1419, where Newey LJ said at [37]:

“...Had Parliament intended the section 7(5) election to be subject to a limitation of the kind that the UT considered to exist, it could be expected to have explained its wishes more clearly and to have catered for the sorts of issue I have mentioned”

None of these principles were contested by Mx Lunt.

Having set out these principles, Mr Firth sought to demonstrate that his proposed interpretation of ‘life’ was correct. He argued that his proposed interpretation was manifestly correct in the context of inheritance tax, a tax that Mr Firth described as being “fundamentally concerned with life and death”.

Mr Firth took me to various other sections of IHTA, which he suggested were clear that life must be by reference to the state of being alive, which ends with death. For example:

On my reading, none of these sections would clearly show an intention by the draftsperson to exclude corporate entities from their scope.

Mr Firth also took me to sections 94 and 202 as an example of when companies were expressly made subject to IHT. These sections concern the apportionment of transfers of value by a close company to participators in that company. Section 202 lists as liable “the company making the transfer of value concerned”.

Sections 94 and 202 make sense in their particular context – a specific provision concerning companies makes reference to companies. However, it does not offer a great deal of assistance when considering the approach to take to wording that may refer to a wider class of entities.

Mr Firth also suggested that it was necessary to choose only one of the limbs of the meaning set out in the dictionary definition set out above, on the basis that “it is not possible for the same word in the same place in the legislation to have two different meanings”. When asked whether there was any authority for the suggestion that a definition could not encompass both of the limbs set out above, Mr Firth was not able to cite any.

The reason for this is that there is, so far as I am aware, no reason why a definition cannot encompass multiple limbs that apply to different entities. So long as the definition can be clearly applied to a given set of facts, there should be no issue in understanding the intention of parliament.

Mr Firth set out practical problems with applying the second limb of the dictionary definition.

He pointed out that the dictionary provided a number of examples to illustrate the definitions of ‘life’. One of those examples was the phrase the example that “The newer batteries have a much longer life”. Mr Firth said that ”battery life and machine life refer to a period of time, rather than a period in time. For instance, a battery’s life may be 1 year, but that does not refer to any particular year or even a consecutive period of time (depending on actual use)”. He commented further that “A battery that has reached the end of its “life” still exists in physical terms beyond that point (and can, potentially be recharged).” Mr Firth also commented that “How does one identify when the “life” begins – is it when the battery comes into physical existence, when it begins to be used or something else”.

In the context of companies, Mr Firth said that similar problems might arise in determining when a company’s life begins and ends, and what happens when a company is reinstated to the register.

Finally, Mr Firth drew my attention to paragraph 28 of Sch 13 Finance Act 2025. This legislation introduces changes to IHTA that seem to put the point beyond doubt in future cases.

Paragraph 28(6) of that schedule amends the “general interpretation” section of IHTA (s 272) to include:

“A reference in this Act to a settlor’s being alive or dying is to be read, in relation to a settlor who is a body corporate, as a reference (respectively) to the body’s being in existence or ceasing to exist.”

However, paragraph 48 of the same schedule limits the application of the new insertion in some circumstances:

“48.

The insertion of section 272(2) of IHTA 1984 by paragraph 28(6) of this Schedule (meaning of references to dying or being alive in the case of corporate settlors) is to be disregarded in construing section 201(1)(d) of IHTA 1984 in relation to property that became comprised in the settlement before 6 April 2025.”

The explanatory note to paragraph 28 provides:

“Insofar as this change affects the interpretation of subsection 201(1)(d) which relates to the settlor’s liability to IHT on settled property where the trustees are non-resident, this clarifies the existing law.”

The explanatory note also states that the schedule that includes the above

“set[s] out additional changes consequential on or connected to the changes which replace the domicile-based inheritance tax (IHT) system with a new residence-based system.”

Mr Firth does not suggest that the changes indicate that his proposed interpretation was correct, resulting in a positive decision to change the law. Instead, he puts forward the above as an example of how Parliament would have legislated if it was intended to cover corporate settlors in s 201(1)(d). This draws upon Mr Firth’s third ‘guiding principle’.

Overall, Mr Firth suggests that his interpretation is correct, and that HMRC’s approach must fail.