IHT charge not a head of damages

Claim excluded in negligence action arising from death of parents

News, 16 December 2005

Two daughters have had a claim for inheritance tax charged on prior gifts following their parents' sudden death in an accident, dismissed by the Court of Session.

Catriona Mackintosh and her sister are suing the executors of Philip Morrice following a road accident which caused the death of their parents Charles and Evelyn Mann. Within the seven years before they died, Dr and Mrs Mann had made substantial cash gifts to each of their daughters which became subject to a tax charge when they died.

In their action the daughters tried to recover an equivalent amount as part of their damages on the basis that but for the accident, their parents would have survived beyond the seven year cut off point for an inheritance tax charge.

Dismissing this aspect of their claim, Lord Carloway ruled that to the extent that it was made by the daughters as executors, it failed because in Scotland an executor was regarded as in the deceased's shoes. But for there to be a liability to inheritance tax, the deceased must have died and so the claim was not something that had vested in their parents before transmitting to the daughters as executors.

Nor did it fall within their claim as individuals for loss of support. "In this case," he said, "what is claimed as loss of support is a sum equivalent to the diminution in the values of the estates which the pursuers would have obtained as residuary legatees but for the deaths. Such diminution is not capable of being classified as support to the pursuers which would have been given by the deceased... It is not, and presumably cannot be, asserted that, but for the deaths of the deceased... a sum equivalent to the ultimate increased level of inheritance tax would have been provided as support during the deceased's lifetimes." That claim therefore had to fail also.

Lord Carloway's opinion can be viewed at http://www.scotcourts.gov.uk/opinions/2005CSOH167.html .