In re Nichols, deceased: CA 2 Jan 1975

The father, Lord Nichols, gave property to his sons who then leased it back to him. On the father’s death the revenue claimed duty.
Held: Goff LJ: ‘Having thus reviewed the authorities, we return to the question what was given, and we think that a grant of the fee simple, subject to and with the benefit of a lease back, where such a grant is made by a person who owns the whole freehold free from any lease, is a grant of the whole fee simple with something reserved out of it, and not a gift of a partial interest leaving something in the hands of the grantor which he has not given. It is not like a reversion or remainder expectant on a prior interest. It gives an immediate right to the rent, together with a right to distrain for it, and, if there be a proviso for re-entry, a right to forfeit the lease. Of course, where, as in Munro v. Commissioner of Stamp Duties (N.S.W.) [1934] A.C. 61, the lease, or, as it then may have been, a licence coupled with an interest, arises under a prior independent transaction, no question can arise because the donor then gives all that he has, but where it is a condition of the gift that a lease back shall be created, we think that must, on a true analysis, be a reservation of a benefit out of the gift and not something not given at all.’ Having referred to the gift of the freehold and the material estate duty provisions, and then stated the three problems thereby posed: ‘whether all that was given was the beneficial interest in the estate shorn of the benefit of the rights and interests of the donor under the lease back, in which case, prima facie, the gift must fall outside the statutory provision, or whether the gift was of the whole beneficial interest in the property, in which case it is not disputed that the lease back must have prevented the son from assuming bona fide possession and enjoyment immediately upon the gift to the entire exclusion of the father, and also whether the covenants in the lease are such that in any case the son cannot be said to have assumed such possession and enjoyment to the entire exclusion of any benefit to the father by contract or otherwise within the meaning of the section.’ There were two unanswerable reasons why the case was caught by the statutory provision, i.e. the full repairing covenant on the part of the son and his covenant to pay tithe redemption annuity.


Russell and Cairns LJJ and Goff J


[1975] 1 WLR 534


Finance Act 1894 2(1)(c)


England and Wales


Appeal fromIn re Nichols, deceased ChD 1974
The father, Lord Nichols, in 1954, decided to make a gift of his family home and the surrounding estate to his son, aged 22. The father was to transfer the estate and the son would immediately lease the bulk of the property back to the father, the . .
CitedAttorney General v Earl Grey QBD 1898
. .
CitedAttorney General v Earl Grey CA 2-Jan-1898
The court considered the effectiveness of a gift from father to son for estate duty purposes, where the revenue said that the father had reseved an interest in the land to himself. The conveyance to the defendant donee contained the following . .
CitedGrey (Earl) v Attorney General HL 1900
The donor conveyed land to his son by way of gift but reserved an annual rentcharge during his life which was charged on the land conveyed and which his son covenanted to pay (together with the other liabilities of the donor), and retained the right . .
CitedRe Cochrane 1905
(High Court of Ireland) The court considered the effectivenmess of a gift with a reservation to the donor, distinguishing Earl Grey: ‘The limitation of this annuity, although prior to the gift, was, as well as being charged on the land, secured by . .
CitedMunro v Commissioner for Stamp Duties PC 1933
In 1909, the deceased orally agreed with his six children that he and they would carry on the business of graziers on land owned by him as partners under a partnership at will. In 1913 the deceased transferred by way of gift the freehold interest in . .
CitedCommissioner of Stamp Duties of New South Wales v Perpetual Trustee Co Ltd PC 1943
The Board consideerd the application of the retention of benefit rules. Lord Russell of Killowen said: ‘the entire exclusion of the donor from . . enjoyment which is contemplated . . is entire exclusion from . . enjoyment of the beneficial interest . .
CitedOakes v Commissioner of Stamp Duties of New South Wales PC 1953
A father made a gift of land in favour of himself and his four children in equal shares but then retained wide powers of management for which he reserved the right to charge remuneration.
Held: The donor was entirely excluded from the . .

Cited by:

CitedIngram and Another v Commissioners of Inland Revenue HL 10-Dec-1998
To protect her estate from Inheritance Tax, the deceased gave land to her solicitor, but then took back a lease. The solicitor then conveyed the land on freehold on to members of her family.
Held: The lease-back by the nominee was not void as . .
Lists of cited by and citing cases may be incomplete.

Inheritance Tax

Updated: 16 May 2022; Ref: scu.182741