TC09618 - [2025] UKFTT 01019 (TC)

Mr Firth’s submissions seek to draw a line beginning with the “life and death” nature of inheritance tax, via provisions covering ‘leases for life’ to the conclusion that a company must have a life force to be liable for the tax in question.

However, Inheritance Tax began life as Capital Transfer Tax. It remains primarily a tax on transfers of value.

It is certainly the case that there is a deemed transfer of value on death, but this case does not concern such a transfer. In this case this Tribunal is concerned with the freestanding charge on property comprised in a settlement at the ten-year anniversary of that settlement. The notion that IHT is ‘fundamentally concerned with life and death’ is perhaps reaching a little too far and does not accord with the reality of the tax charge being imposed in the present case.

Mr Firth’s guiding principles are sensible and uncontroversial. However, I disagree that they point towards the result he seeks.

The approach is summarised pithily in the extract above from the Good Law Project case. That is to say, 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.

In this case, the purpose of the legislation is clear. Section 201 is intended to determine who bears liability for tax.

Section 201 sets out a list of potential persons who might be liable to the relevant tax charge. Broadly speaking, these are the trustees, any person with an interest in possession, any person receiving a benefit, or the settlor.

201(1)(d) covers the circumstances where the settlor may be liable. It provides (so far as is relevant) that such liability arises where the transfer is made “during the life of the settlor”.

I agree with Mx Lunt (and I don’t think Mr Firth disagrees) that a company can be a settlor.

The question is therefore, where the settlor is a company, how is the Tribunal to interpret the phrase “during the life of the settlor”.

Mr Firth’s approach suggests that what the parliamentary draftsperson meant was to implicitly exclude all corporate settlors from liability. Mx Lunt’s approach is that the Tribunal can simply interpret the ‘life’ of a company to be its period of incorporation.

I would find it surprising if the draftsperson had intended to create a wide exclusion from liability for corporate settlors without expressly stating as much. It would have been very simple for the clause to begin with the words “In the case of a settlor who is an individual” so as to make such a limitation express.

I find it inherently far more likely (and in keeping with Mr Firth’s third ‘guiding principle’) that the draftsperson intended to include all settlors, leaving it to the courts to determine whether a transfer was “made during the lifetime of the settlor” in any given case.

I see no basis for Mr Firth’s suggestion that the word ‘life’ can only mean human life. It is perfectly possible for the definition of a word to be wide enough to enable application to different subject matter. The dictionary definition I have been provided with (to echo the words of Lord Hodge in the O Case) allows any citizen to understand the meaning of the act so they can regulate their conduct accordingly.

In the case of a company, I find that it is perfectly possible to interpret the phrase “during the life of the settlor” as meaning “at a time when the settlor is a live company”.

This is in keeping with the ordinary meaning of the words of the section, is consistent with the use of the words elsewhere and with the way the draftsperson has chosen to draft the section.

There may be arguments as to whether a particular company is ‘live’ at a given moment, but there may similarly be arguments in relation to a human settlor as to whether they are alive at a given time. There is no need to settle existential questions of when life begins and ends (or stops and starts) in order to determine this case.

In the normal course of events, a UK company which has been duly incorporated and remains on the register of companies would seem to me to be live. However, the parties to a given case can raise any arguments they wish to the effect that a particular settlor should not be considered a live company at the material time.

In considering the question of consistency across the statute, Mr Firth cited various sections which he argued can only apply to human life. I am doubtful that the general expectation of consistency really supports the suggestion that Parliament intended to exclude corporate settlors from being liable to the tax.

In any event, the sections Mr Firth took me to do not seem to me to support his argument. For example, although it is true that it is commercially unlikely that a life insurance policy would be offered covering the life of a company, or a lease for the life of a company, there is no reason to suggest the draftsperson intended to exclude the application of the statute to such situations.

The examples Mr Firth cite that use the words “life” and “death” in close proximity do not provide his argument with any greater strength. This case is about the question of whether an event occurred “during the life of a company”. The case is not concerned with how ‘death’ might be applied to a company.

I answer the common issue under rule 18 thus: yes, a company that has made contributions to a trust can be liable for any inheritance tax arising on the 10th anniversary of that trust as a result of Inheritance Tax Act 1984 s201(d), if it is a live company at the time of the transfer.