IHT – Tribunal rules on reciprocation
A recent case heard by the Special Commissioner examined whether a person who had renounced his entitlement to a legacy had done so in exchange for money or money’s worth.
The case concerned a widow and her child from a previous marriage (the deceased’s stepson). The stepson was left a legacy of £665,000 free of inheritance tax by his father.
The dispute centred on the stepson who renounced his entitlement to the legacy and was then given £1million by his mother. She contended that this was an unrelated gift whilst HMRC contended that this payment was in return for her son renouncing his legacy.
Correspondence from the mother’s solicitor was ultimately of benefit to HMRC in this case and demonstrated a causal link between the renunciation of the bequest and the subsequent £1 million payment from mother to son.
The appellant and her son were found to have given evidence that was incredible and unreliable. The Special Commissioner dismissed the appeal and ruled that the disclaimer of the legacy was made for consideration in money or money’s worth and the determination of HMRC would be confirmed.