Can executors make negligible value claims?

In Exec of Mr Jeffrey Leadley v HMRC TC04007 the tribunal examined who could make negligible value claims in respect of share losses on death.

The taxpayer had invested £50,000 in the shares of two companies and made a loan of £334,784 to another company. Both had become valueless.

He was served with notice to file a tax return for 2009/10 but he died in a motoring accident before he could complete his return

His executors filed his 2009/10 return and they claimed relief for £40,000 of the loss on the shares was set against income arising under s 131 Income Tax Act 2000 which allowed a capital loss recognised under s 24 Taxation of Chargeable Gains Act 1992 to be set against income. The remaining loss of £344,784 was carried forward.

The dispute:

(a) Was the executors’ s 131/ s 24 claim for the loss on the shares to be relieved against against income arising in 09/10 valid?

(b) Could the executors make a claim, relying on s 253 TCGA (relief for loans to traders), to carry forward against capital gains in future years the loss on the loan?

HMRC’s case was that the appellants, as executors, were incompetent to make either claim.

The tribunal found that as a matter of common law the personal representatives of a deceased person become the owner of the deceased’s assets at the moment of his death. Any income arising on those assets after that date is the liability of the personal representatives because it is their income.

The FTT decided that:

On point a) His personal representatives, the executors stand in the shoes of Mr Leadley and so could make a claim in the 09/10 return which returned Mr Leadley’s chargeability to tax.

On point b) there is no provision to enable a s 253 claim by Mr Leadley (or, as in this case, executors representing him) to be used against the executors’chargeability: any carry forward under s 253 failed.

Comment

This case has been overturned by the Upper Tribunal.

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