HM Revenue & Customs (HMRC) has lost a £600,000 inheritance tax (IHT) case after the Supreme Court ruled that a gift that was given to a charitable trust in Jersey was exempt from IHT.
The case involved an individual, Beryl Coulter, who gifted her UK estate to a Jersey trust upon her death, as per the wishes set out in her Will.
Ms Coulter died in 2007, at which point her estate, which was valued at £1.8 million, was passed to a trust in Jersey to build homes for the elderly.
HMRC stated that if the trust was based in the UK then it would be exempt from IHT, but because it was based in Jersey, it did not qualify for an exemption.
The trustees appealed multiple rulings that stated that Ms Coulter’s estate must pay £567,000 in inheritance tax, with the case brought to the Supreme Court.
The Court of Appeal had previously ruled that the restriction to UK charities was justified because of the need for “effective fiscal supervision”, with no agreement at the time for the UK and Jersey to cooperate.
The Supreme Court considered whether Jersey was a third country under the EU’s core principal that states there should be no barriers to freedom of movement of capital, as well as whether HMRC’s interpretation of the IHT rules was correct.
The ruling that Jersey was a third country was acknowledged, therefore the Supreme Court found that the freedom of movement rules must be applied.
The court found that HMRC’s decision to charge IHT at 40 per cent was not justified.
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