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Viscount Hood, executor of the estate of Lady Diana Hood v CRC, Upper Tribunal (Tax and Chancery Chamber), 7 July 2017
Gift with reservation of benefit
Lady Hood was the lessee of the head lease on premises in London. In 1997 the property was sub-let to her sons. The sub-lease included repairing covenants. She died in March 2008. HMRC said the sub-lease was a gift with reservation of benefit (FA 1986 s 102) and was liable to inheritance tax. The First-tier Tribunal dismissed the taxpayer’s appeal.
The Upper Tribunal decided the gift by Lady Hood of the sub-lease was the gift of the whole sub-lease. The benefit of the covenants entered into by her sons was one she received back from them and not carved out of the estate which she granted to them. Her sons did not have possession of the property to the exclusion of any benefit to Lady Hood. The existence of the covenants was therefore a benefit and brought the property within s 102.
The judge...
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