VISCOUNT HOOD EXECUTOR OF THE ESTATE OF LADY DIANA HOODV
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
Lady Hood was the lessee of premises at 67 and 67A Chelsea Square, London SW3 (premises) which had been granted by Viscount Chelsea and Chelsea Land & Investment Company Ltd and Cadogan Holdings Company (Cadogan) on 21 September 1979 for a term due to expire on 25 December 2076 (head lease). By licence granted by Cadogan a reversionary sub lease of the premises was granted by Lady Hood to her sons on 19 June 1997 to commence on 25 March 2012 and to expire on 22 December 2076 (sub lease). Lady Hood as sub-lessor and her sons as sub-lessees respectively covenanted to perform and observe the same terms, covenants, provisos and conditions as were contained in the head lease as if they had been repeated in the sub lease. Lady Hood died on 15 March 2008 and by a notice of determination dated 13 June 2014 HMRC determined that the creation of the sub lease was a disposal by way of gift by Lady Hood of property subject to a reservation and that it therefore fell to be treated as property to which she was beneficially entitled immediately before her death. It followed that the estate was liable to inheritance tax on the value of her sons’ leasehold interest in the premises because it was deemed to be part of her estate on her death. The First-tier Tribunal rejected a challenge to the notice of determination by the estate on 2 February 2016. The estate appealed.