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 lease to contain a full repairing covenant on the part of the son. The gift of the freehold took effect on 24th June 1955, but the lease did not take effect until 16th July, when it was not in its original form but contained, in addition, a covenant by the son to pay the tithe redemption annuity charged on the property. The father continued to live in the family home and to enjoy the property comprised in the lease, paying less than a rack rent, until his death in 1962. The Crown claimed estate duty on the father’s death in respect of the freehold, primarily on the ground that the lease back had prevented it from being enjoyed to his entire exclusion. The son argued that the father had given him the freehold subject to an equitable obligation to grant a lease back, and that the property disposed of accordingly consisted of the reversion expectant on the determination of the lease.
Held: If the son had been under an equitable obligation to grant the lease back, the property disposed of would have been the reversion. However, there was no such obligation, and the property disposed of was the freehold, which, not having been enjoyed to the entire exclusion of the father, was dutiable accordingly. ‘If I consider the matter in principle, it appears to me that if a donor D conveys property to a trustee T to hold upon trust as to some interest therein for a beneficiary B and as to the remainder of the property for the donor D himself, all that the donor has given to the beneficiary is the property shorn of the rights to be held in trust for D, all that the donor has given to the beneficiary is the property shorn of the rights to be held in trust for D. So that, for example,if in Lang v. Webb (1912) 13 C.L.R. 503 Mrs. Henrietta Lang had conveyed the land to a trustee upon trust to grant thereout a lease back to herself, and subject thereto to hold the various parcels of land upon trust for the sons absolutely, I do not think it could have been seriously argued that in each case the gift made by her was other than a gift of the reversion only. The case would be indistinguishable from Munro v. Commissioner of Stamp Duties (N.S.W.) [1934] A.C. 61, a decision of the Privy Council. Now, suppose that there is no intermediate trustee, but that B takes the property directly but burdened with the equitable obligation to grant the lease back. Does this make any difference? In my opinion, the answer must be in the negative. For in such a case, in very truth, B takes the property as trustee, and the coincidence in identity of B and T cannot make any real difference to the legal analysis.’ and ‘Now, both the speech of Lord Radcliffe [in St. Aubyn v. Attorney General] and the passages I have cited from Dymond’s Death Duties [15th ed., (1973), p. 358] are encrusted with the language of the statute with which I have not so far dealt, but I think it is quite plain from such speech and such comments that there is no legal impediment to regarding simultaneous transactions (e.g. conveyance and reservation of rent charge, conveyance and lease back) as only giving the donee the property as so charged in the one case, or the reversion expectant on the lease in the other case. Equity, of course, looks upon that as done which ought to be done, so that if there is an immediate equitable obligation upon the donee to grant a lease back, this can, in equity, be looked upon as if it had happened at the very moment of the conveyance itself.’
Judges:
Walton J
Citations:
[1974] 1 WLR 296
Statutes:
Jurisdiction:
England and Wales
Cited by:
Appeal from – 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 . .
Cited – Ingram 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: 19 May 2022; Ref: scu.182742