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

Mr Davey submitted that the FTT erred in its interpretation of and approach to Rossendale.

Mr Davey submitted that the FTT had erred in underestimating the “acute potency” of the purposive construction which is required in the light of the recent and powerful statements in Rossendale and Altrad, drawing attention to:

The Supreme Court in Rossendale had considered the operation of the ratings legislation and drawn a distinction between the “normal” situation and “unusual” circumstances, concluding that in the latter situation the person “entitled to possession” was not the person with the legal entitlement under the lease. Mr Davey submitted that the home loan scheme was “a transaction that does not appreciably affect [her] beneficial interest except to reduce [her] tax” (citing the oft-cited passage in Gilbert v Commissioner of the Inland Revenue [1957] 248 F 2d 399, which had been cited in both Rossendale and Altrad), and it is legitimate and necessary to keep in mind that Parliament cannot have intended that s49(1) was to be construed as providing passage for such an avoidance scheme. In a “normal” case, the person treated as beneficially entitled to property is treated as having incurred the trust liabilities; but in the unusual circumstances of this avoidance scheme, this should not include a liability such as the Note – it is one element of a scheme created solely to remove the value of the Property from the estate for inheritance tax purposes.

Mr Davey thus disagreed with the FTT’s conclusion that one can’t reach the conclusion that HMRC is contending for by a process of statutory construction, submitting that this underestimates the potency of the process which the Ramsay vein of authority, most recently articulated in Rossendale, entails.

Mr Bradley submitted that HMRC’s approach was overly ambitious; Rossendale had emphatically confirmed that the Ramsay line of cases represented an application of general principles of statutory interpretation, and that there was no basis for being able to read s49 as contended by HMRC. He further submitted that it is not clear which words in s49(1) HMRC purport to be construing – it does not refer expressly to liabilities at all.

Mr Bradley also emphasised that HMRC’s case on this issue necessarily depends on the factual allegation that the Life Trustees had no purpose in issuing the Note other than diminishing the value of the property in which Mrs Elborne’s interest in possession subsisted. Ascertaining purpose involves an inquiry into the subjective intentions of the relevant actor; yet, as this allegation had not been made even in HMRC’s amended statement of case, the Appellants had no opportunity to adduce evidence from Mr Woolfe (the sole surviving Life Trustee) as to his subjective intentions and accordingly it is too late for HMRC to pursue this allegation now.