In Malcolm Scott v HMRC (2015) TC04455 the FTT considered whether gifts of paintings by parents which then remained in their home were effective for Inheritance Tax (IHT) purposes. 


There were two groups of paintings: the first were (physically) given to Malcolm and his late brother Alastair by their parents (James and Olive) in 1985. Due to issues with removing the paintings from the family home, they were rehung there as:

  • neither brother had a permanent address
  • the family home was also their home
  • a later property that they obtained were not secure locations for valuable chattels.

The second group of paintings was a gift to the brothers from a great aunt who went into care. These were physically taken by their father on their behalf , over time some of the paintings were removed from the family home due to a dispute on how they should be divided.

The brothers were co-executors of their mother's estate and they disagreed about the IHT treatment. Alastair had been of the view that because the division of the paintings had not been agreed, at least some of them remained in Olive’s estate at the time of her death, and that the paintings removed in 2003 would constitute failed potentially exempt transfers, and should be subject to tax as well. Alastair was of the view that the paintings left by the aunt had never been taken by them (their father having taken possession of them) and so passed into his mother’s estate when their father died earlier.

Malcolm disagreed and was of the view that the parents had merely been holding the paintings on their behalf. The first group of paintings were physically delivered to him, and his father had merely acted on his behalf in appropriating and storing the second group. He felt his brother was confusing the concept of delivery with that of division of joint gifts.

The brothers submitted separate Inheritance Tax accounts to HMRC. Perhaps not surprisingly, HMRC agreed with Alastair’s view. Alastair then died, and HMRC issued a determination which took account of all the paintings. It pointed to a letter in 2001 from the parents referring the paintings as ‘ours’ in support of this.

Tribunal decision

The Tribunal stated that whether factual delivery had occurred in each case was a matter of English Law, and the second gift was on the basis of Scottish law. It accepted Malcolm’s explanation of the circumstances on the balance of probabilities surrounding the gift of the first group of paintings at face value, stating that it was not inconsistent with the making of a gift, and neither was the fact that the paintings remained in the family home under the particular circumstances.

In respect of the second group, it rejected the argument from HMRC that the father had taken delivery of the assets merely because he had physically removed them, concluding that he had acting on his sons’ behalves and that a gift was made in 1991. The paintings did not therefore form part of his estate, or the later estate of his wife.

The appeal was therefore allowed in part.


Advisers are used to directing clients to ensure no enjoyment of an asset is present following a gift unless a market rent is payable. In this case the tribunal had to first off establish whether there was a gift. In respect of some of the paintings, it was established that there was no gift and so IHT was due and it therefore did not matter whether there was a gift with a reservation of benefit


Malcolm Scott v HMRC (2015) TC04455