For a transfer under a will to be exempt from inheritance tax because it was to be “held on trust for charitable purposes” within the meaning of section 23(6) of the Inheritance Tax Act 1984 the relevant trust had to be subject to the jurisdiction of the United Kingdom courts.

Rose J so held, in dismissing the appeal of the taxpayers, Peter Routier and Christine Ann Venables, being the executors of the estate of Beryl Coulter, deceased, against a determination by the Revenue and Customs Commissioners that the disposition in the will of the residue of the estate to a charitable trust (“the Coulter trust”) was liable to inheritance tax because the trust was governed by Jersey law. The judge had given permission for the appeal to be brought in the High Court rather than before the First-tier Tribunal by order dated 19 November 2013, pursuant to section 222(3)(b) of the 1984 Act.

Section 23 of the Inheritance Tax Act 1984 provides: “(1) Transfers of value are exempt to the extent that the values transferred by them are attributable to property which is given to charities.… (6) For the purposes of this section property is given to charities if it becomes the property of charities or is held on trust for charitable purposes only, and ‘donor’ shall be construed accordingly.”

ROSE J said that section 272 of the 1984 Act provided that “charity” and “charitable” had the same meanings as in the Income Tax Acts. In 2007, at the time of Mrs Coulter’s death, that meaning could be found in section 989 of the Income Tax Act 2007 which defined a charity as “any body of persons or trust established for charitable purposes only”. There was no definition of “charitable purposes” in the 1984 Act or the Income Tax Acts so the words had their English common law meaning which would be referred to as “United Kingdom law charitable purposes” though such purposes could be fulfilled by work carried out entirely overseas. The definitions in the Charities Act 2006 had only come into force on 1 April 2008, after Mrs Coulter’s death. Section 23(6) of the 1984 Act, read in conjunction with section 989 of the 2007 Act, could be read as having two limbs: (i) the first limb exempted a transfer if the property became the property of any body of persons or trust established for charitable purposes only; (ii) the second limb exempted the transfer if the property were held on trust for charitable purposes only. The reasoning of the Court of Appeal in Camille and Henry Dreyfus Foundation Inc v Inland Revenue Commissioners [1954] 1 Ch 672, as upheld by the House of Lords [1956] AC 39, applied to the wording of section 23 of the 1984 Act. The Coulter trust did not qualify for exemption under either limb of subsection (6) because it was not governed by United Kingdom law but by Jersey law. One had to bear in mind that section 23(6) was only a definition section. The primary exempting provision was subsection (1) which referred only to property given to charities. The word “charities” as defined in section 989 of the Income Tax Act clearly imported the requirement that the trust be governed by the law of some part of the United Kingdom as it referred to bodies established for charitable purposes. The expression “held on trust for charitable purposes” in section 23(6) required not only that the charitable purposes be United Kingdom law charitable purposes but that the relevant trust be subject to the jurisdiction of the United Kingdom courts as well.