Tribunal: Experienced advocacy is best
The need to engage an experienced advocate was stressed in the judge’s summing up in a recent Tribunal case.
The case involved a pension policy held in a discretionary trust at the time of the policyholder’s death. HMRC were arguing that her failure to take retirement benefits when diagnosed with a terminal illness diminished her estate and was subject to IHT. The estate was representated in court by independent financial advisers who had no prior experience of such advocacy.
The trust was established in 1995 shortly before the deceased took out a pension plan under which she could take her retirement benefits at any time between her 50th and 75th birthdays.
If she died before drawing her pension, the value of the benefits would pass into the trust. She died, as a result of terminal cancer, in 2003 without taking any pension payments from the plan.
HMRC issued a determination charging inheritance tax, on the basis that the deceased had made a transfer of value for the purposes of IHTA 1984, s 3(3) by not drawing her pension under the plan. In their view she had made a deliberate decision not to do so which led to her own estate being reduced, but thereby increasing the value of the discretionary trust.
Her personal representatives appealed saying that the deceased had omitted to draw the pension because she did not require it. Had she known about the effect that would have, i.e. a charge under s 3(3), she might have taken advice to avoid it. She had not therefore made a disposition to the trust.
The First-tier Tribunal judge said that any omission is taken to be deliberate unless it is established by the disponor or the personal representatives that it was not. The burden of proof in this respect lies with the executors, not HMRC.
The judge was satisfied that the deceased had made a conscious decision not to take her pension benefits when she reached 60.
Her omission in this respect had to be treated as made as the date of her death and to have been deliberate. The deceased’s estate was diminished by the value of the pension because she had not drawn any benefits. It followed that, under the terms of the trust, the omission to take the benefits personally resulted in the benefits being paid to the trustees.
The judge agreed that inheritance tax was due. The taxpayers’ appeal was dismissed.
The judge said that, given the complexity of the case, it would have been appropriate for the executors to have appointed counsel or an equivalently experienced person to represent them.