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

HMRC submit that s102 applies in respect of the transfer by Mrs Elborne of her interest in the Note with the effect that such interest falls to be treated as property to which Mrs Elborne was beneficially entitled immediately before her death and forms part of the value transferred by way of the deemed transfer of value immediately before her death.

There are five components that must be satisfied for the Note to fall within s102:

It was common ground that the requirements of (1), (2), (3) and (5) were satisfied in relation to the Note. The issue is whether the requirements of s102(1)(a) or s102(1)(b) are met, ie whether:

“(a)

possession and enjoyment of the property is not bona fide assumed by the donee at or before the beginning of the relevant period; or

(b)

at any time in the relevant period the property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise;

and in relation to this section “the relevant period” means a period ending on the date of the donor’s death and beginning seven years before that date or, if it is later, on the date of the gift”

Not only are s102(1)(a) and s102(1)(b) alternative requirements, but s102(1)(b) has two (alternative) limbs. The first limb applies if gifted property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor. The second limb applies if gifted property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of any benefit to the donor by contract or otherwise. Whilst HMRC’s submissions mainly addressed the second limb of s102(1)(b), they relied in the alternative on s102(1)(a) or the first limb of s102(1)(b) applying.