HM Revenue & Customs v Bower (Executors of the Estate of) & Ors [2008] EWHC 3105 (Ch) (05 November 2008)

HM Revenue & Customs v Bower (Executors of the Estate of) & Ors [2008] EWHC 3105 (Ch) (05 November 2008)

The statutory hypothesis in section 160 of the Inheritance Tax Act 1984 requires that the hypothetical sale takes place in the real world, and does not permit the invention of hypothetical buyers where none exist. If an asset is not commercially saleable, only a nominal value can be attributed, and the Special Commissioner erred in law by inventing a market of speculators and calculating a value unsupported by evidence.

Citation
[2008] EWHC 3105 (Ch)
Parties
Claimant: Commissioners for Her Majesty's Revenue and Customs; Defendants: The Executors of the Estate of Marjorie Edna Bower & Others
Jurisdiction
England and Wales
Judgment Date
05 November 2008
Procedural Posture
Appeal / Judgment on Appeal From Special Commissioner
Outcome
Appeal allowed
Legal Topics
Inheritance Tax, Valuation of Property, Statutory Hypothesis, Open Market Value
Tax Law Trusts and Estates Inheritance Tax Valuation of Property Statutory Hypothesis Open Market Value

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Parties

Commissioners for Her Majesty's Revenue and Customs

Claimant

The Executors of the Estate of Marjorie Edna Bower & Others

Defendants

Procedural Posture

Appeal / Judgment on Appeal From Special Commissioner

Legal Issues

  1. 1 What is the correct method for valuing the right to a monthly payment under a trust for inheritance tax purposes under section 160 of the Inheritance Tax Act 1984?
  2. 2 Is it permissible to assume hypothetical buyers in the open market for the purposes of valuation when no real buyers exist?

Ratio Decidendi

The statutory hypothesis in section 160 of the Inheritance Tax Act 1984 requires that the hypothetical sale takes place in the real world, and does not permit the invention of hypothetical buyers where none exist. If an asset is not commercially saleable, only a nominal value can be attributed, and the Special Commissioner erred in law by inventing a market of speculators and calculating a value unsupported by evidence.

Court Disposition

Appeal allowed

Orders

  • Decision of the Special Commissioner set aside
  • Value of the right to monthly payments to be treated as nominal (£250) for inheritance tax purposes