HMRC's loses inheritance tax appeal against Earl of Balfour
Taxman fails to convince judges that the late Earl of Balfour was not entitled to business property relief when he passed on his substantial holdings to his relatives
Taxman fails to convince judges that the late Earl of Balfour was not entitled to business property relief when he passed on his substantial holdings to his relatives
The taxman has lost a court battle to have relief which spares business
owners from inheritance tax when they transfer holdings to relatives withheld,
on a 2,000 acre estate which once belonged to World War 1 prime minister Arthur
Balfour.
His son, the 2nd Earl of Balfour, made arrangements to pass on his estate
before he died in 2003, but HM Revenue & Customs argued the Scottish estate
was not eligible for Business Property Relief.
However HM Revenue & Customs failed to convince the Upper Tier tax
tribunal to reverse a decision granting the tax breaks, which can give 50% or
100% relief.
Under Section 105 (3) of inheritance tax laws, a business or interest in a
business does not qualify for the relief if the business consists wholly or
mainly of operations which deal in securities, stocks or shares, land or
buildings or making or holding investments.
When Lord Balfour died on 27 June 2003, the estate included farms under the
control of his family, farms which had been let out since the 1950s, policy
parks, woodlands and sporting rights, twenty six let houses and cottages and
also two sets of business premises.
HMRC challenged the Balfour estate on this point, but the Upper Tribunal said
that the judge who heard the case at an earlier stage in the First-Tier tribunal
had made the right decision.
“We are satisfied that on the evidence before him, Judge Reid was entitled to
conclude that section 105(3) did not apply because Lord Balfour s business at
Whittingehame Estate did not consist mainly of holding investments, Upper tier
judges said.
“Having decided the questions raised by HMRC against them, we therefore
refuse
the appeal.”