UT (Tax & Chancery) UT/2023/000079 UT/2023/000109 - [2025] UKUT 00059 (TCC)

The FTT had made observations about the decision in St Barbe Green at FTT[120] to FTT[128] (as we have summarised and addressed above), stating that this decision was significant to the Section 102 Property Issue as well as the Section 103 Debt Incurred Issue. These included the FTT having set out at FTT[127] that Mann J had referred to the settled property as being “property from which liabilities have been notionally deducted”, then saying:

“127.

...It therefore seems to us to be clear that the deduction of settlement liabilities is a matter which goes to calculating the value of the property to which the deceased is to be treated as being beneficially entitled as opposed to the identification of the property to which the deceased is to be treated as being beneficially entitled. We would add that further support for that proposition is to be derived from the terms of paragraph 11 of Schedule 15 to the FA 2004 because it is clear from the language in paragraph 11(6) of that schedule that a liability which affects the value at which property is to be brought into account in calculating the value of a person’s estate does not prevent the part of the property which does not exceed that liability from being part of the estate. Otherwise, paragraph 11(6) would not have been needed.”

In its discussion of the Section 102 Property Issue, the FTT accepted HMRC’s submission that the preamble in s102(1) was satisfied in relation to the Property, concluding that there was a disposal of the Property by way of gift when Mrs Elborne sold the Property to the Life Trustees at an undervalue. It was common ground that the condition in s102(1)(b) was satisfied (and the FTT also concluded that the alternative condition in s102(1)(a) was satisfied).

The FTT’s conclusion on the Section 102(3) Issue was therefore determinative in the Appellants’ favour on the Section 102 Property Issue. The FTT explained its conclusion:

“146.

The short answer to the above submissions is that, in our view, Mr Bradley is right in saying that Section 102 can have no effect in relation to the Property because, for inheritance tax purposes, even before the application of the section, Mrs Elborne fell to be treated as beneficially entitled to the whole of the Property and therefore there is nothing to which Section 102(3) can apply. That is clear from the judgment of Mann J in St Barbe Green and it is supported by the way in which paragraphs 11(1), 11(6) and 11(7) of Schedule 15 to the FA 2004 are worded.”

The FTT then identified (at FTT[163], FTT[181] and FTT[159]) that this conclusion essentially answered the Election Issue and the Section 102A Issue (but dealt with all of the matters contested between the parties in relation to those issues).