Those listening to the debate last night in the House of Commons
will recall an interesting discussion on the principle of
legitimacy. That was also evoked by Lord Sumption in the latest
Reith Lecture in his discussion earlier in the afternoon
about power, its exercise and the law.
Taking that point further, I have long been concerned about the
fact that no analysis of the scope of application of the definition
of a settlement to foreign immovables was made in Standing
Committee A in 1975, or in the later Scottish Proper Liferent
amendment, despite the question having being raised generally at
§1735. Whilst it was permissible to override the land law of a
nation within the United Kingdom,in this case Scotland, it
certainly was not outside it, without conquest or settlement. The
Government spokesman in fact made not attempt to warn the Committee
as to any intention of HMRC to override the common law restriction
on Parliament and for that matter on the Courts having no
jurisdiction to adjudicate settlements, fictional or otherwise over
foreign immovable property rights where there was no trust.
That is a blatant breach of the common law principle of
legitimacy, as HMRC are either extending the effect of s.43(2) ITA
beyond what Parliament actually intended ad was able to do, or
worse deliberately obscure their intention to override the common
law, upon which their supremacy in national matters depends, as set
out ably by their Lordships in Philipson-Stow to which I have
referred in an earlier post.
Whilst certain experts decided to use the French treaty as a
mechanism fo avoiding dry succession, using the French facility to
defer payment of the French succession duty on a usufructuary right
granted under a succession, enabling a credit against a deemed
settlement assessment in the UK, that was discriminatory in
relation to any lifetime gift of a nue-propriété of an immovable to
children, one example. Is what only amounts to a tolerance in
interpretation now to be converted into an opaque form of parallel
Again that is hardly "legitimacy" if that was Parliament's
intention rather than a falsehood by omission from or by HMRC or
The usufruit issue is apparently being taken to the First
Tribunal, and Mr Davidson of HMRC has attempted to harden the
Manual up as a final bastion by using the term "fiction". I
understand he has now taken advice from a Treasury lawyer on the
latest wording of the manual having abandoned his previous view on
the second phrase of the first sentence of the last paragraph
referring to administration.
HMRC's view appears to have been strengthened earlier, by views
from city firms seeking to impose a fictional fiscal structure
within the succession duty treaty with France. Given the change to
the relevant property régime the view proffered is no longer
tenable or workable.
I stress that the treatment of a usufructuary dismemberment
inter vivos or on death is perfectly assessable as a division of
property into separate rights at law, with an extinction at nil
vale of the usufruit on death, rather than their inequitable
conversion into movable equity by the Revenue.
Perhaps the Revenue have been misguided into believing that in
levelling the playing field in Scotland, where the Parliament has
fiscal jurisdiction over property rights to Europe and further
afield, where it has none, was permissible in the same manner as
their current crusade on contractors, ably repulsed by Keith
Gordon. However, neither Parliament nor the Courts have any
jurisdiction to impose settlements on foreign immovable rights and
property by way of fiction, whether under principle of legitimacy
by non-disclosure, or otherwise.
Whjat is even more questionable is the difference in treatment
of the Scottish peoper liferent, the nearest Brotish
equivalent, as a pure real property right rather than a
personal life Interest in the Capital Gains legislation.
What Brexit has done, and it is about time, is to have shown
that pure political power cannot be easily equated with the law.
Lord Sumprion makes that poin more clearly than I can. The only
legislative pretogative that Parliament has is provided for by the
law, not by Parliament whic is a creature of the law.
Parliament is necessarily bound by the limits of the Common law and
its capacity to be judicially enforced. It is not capable of
functional enforcement in France and the executive, i.e. HMRC
cannot legitimately construe a statute to have effect outside
the jurisidction over foreign immovable properfty, as distnct from
movable property on the basis of what is in effect a fiction which
it has generated itself.