Irwin Mitchell Brought Case To Supreme Court On Behalf Of Executors Of Jersey Woman’s Will

The Supreme Court has today ruled that a gift by will to a charitable trust subject to the law of Jersey is exempt from inheritance tax.

Representing executors of the will in question, Irwin Mitchell brought the Routier & Venables v HMRC challenge to the Supreme Court after the Court of Appeal had ruled that a restriction to UK charities was justified by the need for “effective fiscal supervision”, because, at the time, there was no agreement for mutual assistance between the UK and Jersey.

HMRC’s interpretation was based on a case called “Dreyfus” which came before the Supreme Court’s predecessor, the House of Lords, in 1956.  The House of Lords decided that the word “charity” could apply only to bodies of persons or trusts established in the United Kingdom.

Irwin Mitchell have successfully appealed a High Court judgment and two Court of Appeal judgments that the executors of Mrs Coulter’s estate, Peter Routier and Christine Venables, must pay nearly £600,000 in inheritance tax on the estate given to a charitable trust in Jersey.

Upon Mrs Beryl Coulter’s death in October 2007, her UK estate, valued at £1.8m, went to a trust to build homes for the elderly in Jersey. HMRC agreed that if this were a trust governed by UK law it would be free of inheritance tax, but claimed that Mrs Coulter’s Jersey-based trust did not qualify.

The Supreme Court deliberated on two key issues: first, whether Jersey was a ‘third country’ under the EU’s core principle that there should be no barriers to freedom of movement of capital, and secondly, if Jersey was indeed a ‘third country’, whether the HMRC’s restrictive interpretation of the inheritance tax relief was justified.

The Court of Appeal’s ruling that Jersey was a third country was affirmed, so that the principle of free movement must be applied. The Supreme Court went on to overrule the Court of Appeal’s second finding that HMRC’s restriction was justifiable; they agreed with Irwin Mitchell that it was not right to apply a restriction and that Mrs Coulter’s gift was indeed exempt from inheritance tax.

Expert Opinion

“We have finally, and successfully, reached the end of what has been a long story.

“The executors of Mrs Coulter’s will challenged their liability for inheritance tax, because they believed that it constituted an unlawful and unjustifiable restriction on the free movement of capital between European Union member states and third countries, and that Jersey was a third country for these purposes.

“The Jersey Government supported our argument. Mrs Coulter lived in Jersey and we considered that the inheritance tax exemption for trusts that are clearly charitable should apply in Jersey as it does in the UK.

“HMRC has for many years interpreted the charity exemption for a gift to a trust for charitable purposes as requiring the trust to be subject to the jurisdiction of the UK courts. The Supreme Court has confirmed our view that HMRC were wrong.

“So, after a long fight, Mrs Coulter’s estate is free of tax and can all be used for the elderly in her Jersey parish, exactly as she wished. We are grateful to the judges for hearing our clients’ case and pleased that they have now ruled in our favour.” Anthony Nixon - Partner