Glowacki (deceased) v HMRCC [2007] UKSPC 00631

WTLR Issue: December 2011 #115

Personal representatives of GLOWACKI (deceased)




By her will dated 8 February 2001, Gwendoline Enid Glowacki (Mrs Glowacki) gave her entire estate to her husband, Tadeusz Marian Glowacki (Mr Glowacki), subject to the payment of £25,000 to her sister Mrs McElney. Mrs Glowacki died on 21 March 2004 and Mr Glowacki died on 21 June 2004. Under his will, in the event that occurred, Mr Glowacki gave 6 Moore Walk, Myton Grange, Warwick (the property) to Mrs McElney and divided his net residuary estate equally between Mrs McElney as to one half and Mrs Wells, Mrs Minash and Mr Johnson (the nieces and nephew of Mrs Glowacki) as to the other half. By a deed of variation (deed) dated 23 December 2004, the beneficiaries purported to vary the disposition of Mrs Glowacki’s estate in respect of the property under s142 of the Inheritance Act 1984 (Act) as if she had in her lifetime and immediately before the transfer deemed to be made under s4 transferred the property to Mrs McElney but added a proviso that if the effectiveness of the variation was challenged by the Revenue, and either no appeal was made or any such appeal was dismissed, then such variation should be deemed to have been without effect. The deed also included a gift of £230,000 to Mrs Wells, Mrs Minash and Mr Johnson in equal shares. By a notice of determination dated 21 November 2005 the Revenue stated that the effect of the deed, having regard to the provisions of s142 of the Act, was that the benefit of the nil-rate band of inheritance tax was to be set first against the value of the property in priority to the legacy of £230,000 when computing the tax payable on Mrs Glowacki’s death. Mrs Wells and Mrs Minash, who were the personal representatives, appealed against that determination, contending that the effect ofthe deed was by virtue of s17(a) of the Act, to remove the property from the estate since a variation, to which s142(1) of the Act applies, was not a transfer of value for the purposes of inheritance tax and, therefore, the nil-rate band of charge was used up by a combination of the £25,000 legacy to Mrs McElney and the deemed £230,000 legacy to Mrs Wells, Mrs Minash and Mr Johnson.


Section 142(1) of the Act applied to ‘the property comprised in [the deceased’s] estate immediately before his death’ and a variation within para (a) contemplated a change in the way in which that property devolved as compared with how it would otherwise devolve as a result of his death. The Act has to apply ‘as if’ the variation had been effected by the deceased because tax was charged by reference to the deceased’s death on the basis that his property devolved on the varied basis and not as actually occurred on death. The natural corollary of this was that any variation must reflect a change in the actual disposition of a person’s estate that would have occurred at the time of the deemed transfer of value under s4 of the Act. The deceased was deemed to have made a transfer of value of his whole estate immediately before his death and the beneficiaries of that deemed transfer were entitled to vary the dispositions that the deceased had actually made as a result of his death. Section 142 of the Act did not operate to remove property from a person’s estate so that it was no longer subject to the deemed transfer of value under s4 of the Act. It may be that particular variations allowed property to devolve in a way that would benefit from exemptions and reliefs not otherwise taken advantage of and so operate to reduce the tax payable on death but the words in parenthesis ‘(whether effected by will, under the law relating to intestacy or otherwise)’ were limited to dispositions, whether by act of parties or operation of law, which took effect on the death of the deceased. It did not include substituting a disposition that purportedly took effect otherwise than on death. Accordingly, the deed was ineffective as a variation within s142(1) of the Act to transfer the property to Mrs McElney and, consequently, the ‘variation’ purported to be made was, as a result of the proviso, of no legal effect since it was predicated on the basis that it had a certain tax effect. The deed itself did not fail; only that ‘variation’ failed. It followed that the tax was to be calculated on the basis of the dispositions made under the will as varied by the inclusion of a deemed £230,000 legacy under the deed.


JUDGMENT Introduction [1] Mrs Melinda Jane Wells and Mrs Carol Anne Minash (the appellants), in their capacity as the personal representatives of Mrs Gwendoline Enid Glowacki (deceased) (Mrs Glowacki or ‘Gwen’) appeal against a determination under s221 Inheritance Tax Act 1984 (the Act) dated 21 November 2005. Mrs Glowacki died on 21 March 2004 and …
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Counsel Details

Leolin Price CBE QC
(Ground floor, Ten Old Square, Lincoln’s Inn, London, WC2A 3SU, tel 020 7405 0758, e-mail, instructed by Ian Burr & Co (Refuge House, 148-150 Parade, Leamington Spa, Warwickshire, CV32 4AG, tel 01926 451818) for the appellant.

Colin Ryder, instructed by the solicitor to HM Revenue & Customs, for the respondent.

Cases Referenced

  • Rothwell v IRC [1988] STC 195, 1 WLR 834

Legislation Referenced

  • Finance Act 1978, s68
  • Inheritance Tax Act 1984, ss 1, 2, 3, 4, 5, 7, 17, 142, 221 & 224
  • Special Commissioners (Jurisdiction and Procedure) Regulations 1994, reg 21
  • Taxation and Chargeable Gains Act 1992, s62