Those who visit this website regularly will have noticed
that this topic appears frequently in the News section.
The advice that I have been able to give solicitors and
other professionals preparing IHT 400 forms and annexes for those
estates in some way concerned with the IHT treatment has frequently
led to expressions of surprise that the HMRC's published position
is so far from the legal position and the actual wording of section
43(2) ITA 1984 when read carefully and in full possession of the
terms used in the last paragraph of the subsection: the terms
"regulated by" and "governed by" being but two examples.
Action taken or perhaps better inaction deployed has led
to considerable "savings" in IHT on both usufruits created on the
death of the owner of a French immovable to the surviving spouse
either by will or under Napoleonic Code entitlement and also for
those remaining after a gift of the nue-propriété by parents
seeking to transfer part of their immovable wealth to their
children under French law.
I use the term "savings" despite the fact that there is no
reason to treat such a dismembrment as a rather more expensive
"settlement" whether pre-2006 or thereafter. The correct term would
be avoiding an overcharge following incorrect and tangibly
negligent advice from lawyers who appear not to know of what a
settlement as such consists, and are content to follow HMRC's
erroneous analysis in the IHT Manuals, from which HMRC is gradually
The point is that there is little point in not knowing
where you stand in relation to one of these simple property law
entitlements. If acting in ignorance, the estate of a
deceased propriétaire can find itself
entangled, entirely unnecessarily, in HMRC 's uneducated
trammels who conveniently forget, for example, that at the very
first instance a written disposition is required to create a
Together with a more senior member of Addington Chambers and an
ex Upper Tax Tribunal Judge, Adrian Shipwright, we are to publish
an article in a professional journal on this subject, which will
lay the foundation and the basis for a more public inquisition into
HMRC's views and errors.
I would suggest that time waits for no man's estate, and
that advice should be taken sooner rather than later so as to avoid
unduly enriching Her Majesty' Treasury with money to which it is
not entitled under the statute, and which HMRC has yet to prove any
satisfactory case to such an "outcome".
What is worrying is that some City law firms appear not to
have taken up these points, and are still advising clients not to
adopt such property arrangements, which are in fact perfectly safe,
if the law is read and what is more applied correctly. Fortunately
for those seeking advice, most of the partners responsible for
those historic errors appear to be retiring.