Those listening to the debates on 3rd September 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, Dr Gilbert, later Baronised in the true
Labour tradition, in fact made noattempt 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.
The change from the equivalent defintion in s.36 FA 1969 Finance
Act to the current one in Schedule 4 cluse 1 to FA 1975 and s.43(2)
ITA 1984 was simply not commented upon.
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 either Mr. Key or Mr. Davidson of HMRC
has attempted to harden the Manual up as a final bastion by using
the term "fiction". I understand advice might now have been taken
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 further afield to
Europe and elsewhere, 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 any principle of
illegitimacy by non-disclosure, or otherwise.
What 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 which entirely contradicts the IHT
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 point more clearly than I can. The only
legislative pretogative that Parliament has is provided for by the
law, not by Parliament which itself is a creature of the law of the
nations making up the United Kingdom. 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
jurisdiction over foreign immovable properfty, as distinct from
movable property on the basis of what is in effect a fiction which
it has generated itself.