Revenue

Inheritance tax - transfer of assets to trustees - amount of value transferred reduced by rights conferred by general power of appointmentMelville and others v Inland Revenue Commissioners: CA (Lords Justice Peter Gibson, Kay and Arden): 31 July 2001In 1994 the taxpayer, to minimise liability for inheritance tax and defer capital gains tax, transferred assets to trustees to hold on discretionary trusts.The settlement conferred the right on the taxpayer as settlor to direct the trustees after 90 days to transfer the whole trust fund to him absolutely.His appeal against notices of determination made on the basis that in ascertaining the amount of value transferred, the right reserved to him was not 'property' forming part of his estate for tax purposes and was to be left out of account was upheld by Mr Justice Lightman [2000] STC 628.

The Crown appealed.Michael Furness QC (instructed by Solicitor of Inland Revenue) for the Crown.

Edward Nugee QC (instructed by Salans Hertzfeld & Heilbronn HRK) for the taxpayer.Held, dismissing the appeal, that the Inheritance Tax Act 1894 imposed liability on the value transferred by a chargeable transfer; that by section 3(1) of the Act a transfer of value was a disposition made reducing the value of a person's estate; that by section 5 a person's estate was 'the aggregate of all property to which he is beneficially entitled' and by section 272 except where the context otherwise required, 'property' included rights and interests of any description; and that the valuable right reserved by the taxpayer enabling him to require his trustees to revest in him the settled property was 'property' within the section 272 definition so as to cause the amount of the value of the assets transferred to be heavily discounted.