Kingston Smith were engaged to provide inheritance tax planning advice to Mr and Mrs Robin, who had terminal medical conditions, in early 2003. They wished to ensure that as much of their property should be available to support the survivor and, following the death of the survivor, their disabled daughter. Mr Chadda, who was a partner at Kingston Smith, discussed strategy at a meeting with Mr and Mrs Tobin based on utilising their inheritance tax nil rate bands, which would require them to make new wills and (in case of a beneficial joint tenancy) service of a notice of severance in relation to Park House Farm (Park House). Mr Chadda attended when Mr and Mrs Tobin signed their wills at Park House on 30 July 2003. A notice of severance was not signed at that time because they were still waiting to hear from the bank (which held the title deeds) as to how Park House was held; when it became apparent in early August 2003 that it was held as a beneficial joint tenancy, a notice of severance was prepared and Mr Chadda went again to Park House and a document was signed by Mr and Mrs Tobin. On 29 September 2003 Mr Tobin died and a trust of £255,000 (which was the upper limit of the nil rate band) came into effect; it was then agreed to transfer the trust’s share of Park House into the sole name of Mrs Tobin subject to her estate being indebted to the trust. Mrs Tobin died on 28 July 2007 and her estate repaid the loan, which was applied together with other funds towards the purchase of a new property for her disabled daughter. When, however, Kingston Smith claimed a deduction against the value of the estate by reference to the debt of £255,000, HMRC requested evidence that Park House was not held as a joint tenancy, rather as a tenancy in common, since property passing by survivorship could not be treated as a trust asset under the Will. Kingston Smith asserted that the notice of severance had been signed but its whereabouts were unknown. HMRC did not consider that the burden of proof as to severance of the joint tenancy had been satisfied and, on 8 August 2012, issued notices of determination that the full value of Park House was to be taken into account in ascertaining the value of Mrs Tobin’s estate for the purpose of inheritance tax. On 9 January 2013 the notices of determination were upheld on review. On 5 February 2013 the executors appealed.
Held (allowing the appeal)
The question whether written notice of severance was given must be examined on the balance of probabilities and, in arriving at conclusions on the basis of the totality of the evidence, the inherent probabilities and improbabilities of the events in question must be reviewed in the context of the evidence as a whole. It was necessary to rely on secondary evidence in the absence of the original document, for which purpose all of the circumstances needed to be taken into account. Whilst there was a preference in case law for joint tenants to be able to sever their joint tenancy, intention alone was not sufficient; there had to be some form of action which demonstrated that such intention was being carried into effect. The weight to be be attributed to the draft notice of severance was not inconsiderable. On the balance of probabilities, the document which Mrs Tobin was seen to sign when Mr Chadda came to Park House in August 2003 was the notice of severance, and this had already been signed by Mr Tobin. Following Mr Tobin’s death the inheritance tax account for his estate was prepared on a basis entirely consistent with the joint tenancy having been severed and correspondingly inconsistent with treatment of Mr Tobin’s interest in Park House as having passed to Mrs Tobin by survivorship. With the benefit of hindsight, it was clear that if the legacy to the Nil Rate Band Trust was to be fulfilled, the liquid assets in Mr Tobin’s estate would not have been sufficient – the only basis on which that legacy could be completely fulfilled would have been by a severance of the joint tenancy in Park House. Accordingly, at the date of her death Mrs Tobin was not beneficially entitled to the whole of Park House as her interest therein was subject to an obligation to pay £255,000 to the Nil Rate Band Trust. As a consequence, the obligation to pay that sum fell to be included in the liabilities to be taken into account in determining the value of Mrs Tobin’s estate for the purposes of inheritance tax. Alternatively, there was sufficient evidence to demonstrate a severance of the joint tenancy by reference to a mutual agreement, or a mutual course of conduct, by Mr and Mrs Tobin.Judgment JUDGE JOHN CLARK: Decision  The appellants appeal against notices of determination by the respondents (HMRC) dated 8 August 2012, upheld on review dated 9 January 2013, that Mary Bridget Tobin (Mrs Tobin), who died on 27 July 2007, was beneficially entitled to a property and that the full value of that property was …