First, thank you BD, AR and AG for being so willing to engage with me in this discussion. I greatly appreciate that, and your time.
I'm not refusing to listen to "received wisdom" from anyone here, because I know that in this field I have no knowledge myself.
Rather, I'm simply reading what the words in TCGA92 and HMRC Tax Manual actually say, and thinking aloud, and seeing where that goes.
Yes, I am being challenging, because in my experience that is one of the best ways to break new ground, in any field.
I agree 100% that, if the trustees held any other property, and leased it to a wholly unconnected party, PPR under s225 would not apply.
I agree 100% that, if it is established in law, or precedent, that the occupier *must* be a beneficiary, then PPR will not apply in our case.
Sansom & Another v. Peay confirms that if there is entitlement to occupy under the terms of the settlement, PPR is allowed under s225.
In the Samson case, the person occupying was a beneficiary of the trust, and occupation was a beneficiary's right under the trust.
I agree HMRC will certainly wish to argue that the person with an entitlement to occupy must be a beneficiary of the trust.
But is that position supported by law or precedent?
So I ask, what are the minimum necessary and sufficient conditions for "entitlement to occupy under the terms of the settlement"?
Is it *actually* necessary that the relevant occupier must be a beneficiary of the settlement?
I agree that this seems to be a common assumption, but where do I find such necessity stated?
HMRC Tax Manual (at CG65406) clearly says there can be valid "terms of the settlement" other than in the formal written trust deed.
--- Quote ---
"Section 53(1)(b) Law of Property Act 1925 requires that:
A declaration of trust respecting any land or any interest therein must be
manifested and proved by some writing signed by some person who is able to
declare such trust or by his will.
The section requires only that the trust must be evidenced in writing. There is
no requirement that the trust is created in writing. In many cases there is a
deed but the formalities of section 53(1)(b) will be met by a letter or other
document signed by the settlor. The letter or document must satisfy the three
certainties listed above. The evidence in writing does not have to date from the
time the trust was created. Written evidence can be dated any time before the
property is sold.
--- Unquote ---
Wagstaff & Another v HMRC confirms that an entitlement to occupy can be evidenced by relevant actions rather than in writing.
The Wagstaff case was a constructive or implicit trust, as there was no evidence at all in writing, but only in the parties' actions.
But in our present case there is plenty of evidence in writing that the parents' entitlement to occupy was always intended.
The following documents, taken together as a whole, evidence the clear intent for an entitlement to occupy the trust property:
(i) Settlors’ and solicitors’ extensive correspondence before the settlement, Mar-03 to Sep-05
(ii) Settlement Deed, 20-Sep-05
(iii) TR1 from settlors (100%) to nominees (settlors & one other), 20-Sep-05
(iv) Assignment of property (60% share) from settlors to trust, 21-Sep-05
(v) Direction given to nominees by trustees (60%) & settlors (40%), to grant a lease to settlors, 21-Sep-05
(vii) Lease agreement, granted by nominees to settlors, 22-Sep-05
(viii) Leasehold Title, granted for a term of 10 years, for a Premium, 22-Sep-05
(ix) TR1 from nominees (100%) to settlors (40%) & trustees (60%), 25-Sep-05
(x) Settlors’, solicitors’ and trustees’ correspondence subsequent to the settlement, Sep-05 on
(xi) Licence to Occupy, granted by trustees to settlors, dated 22-Sep-15 (& subsequent annual renewals and rent reviews)
These documents, taken collectively, show the parents' entitlement to occupy was always an inseparable term of the settlement.
It just didn't get written down in the trust deed, is all.
I assume, because the solicitor wished to avoid anything that might suggest the settlors might also be beneficiaries of the trust.
HMRC Tax Manual (at CG65407) clearly says that people who are co-owners with the trustees will have an entitlement to occupy.
Taken at face value, this seems to be be a useful additional string to the argument.
But then HMRC seem to go on to consider such co-owners only in terms of their also being beneficiaries of the settlement.
Yet, as with other references in CG65400-65407, "occupier must be a beneficiary" seems to be assumed rather than established?
CG65406 implies entitlement can be established & formalised, today, by executing a deed to say this was always the intention.
And, of course, specifying explicitly that such entitlement was always dependent upon full market rent being paid at all times.
In summary, this would be the route I am considering:
(1) Establish a body of contemporary documentary evidence showing there was always intention for an entitlement to occupy
(2) Formalise the details of that intention in a deed properly executed now by settlors & trustees
(3) Claim PPR under s225 when the property is sold
(4) Argue in front of the First Tier Tribunal, if that proves to be necessary
Unless someone can show me where HMRC's "occupier must be a beneficiary" assumption is established in law or precedent?