Routier & Anor v Revenue And Customs

For the inheritance-tax charity exemption, property is not held on trust for charitable purposes only merely because the trust’s purposes are charitable under UK law. The trust must also be subject to the jurisdiction of the United Kingdom courts. This requirement applies to both limbs of section 23(6) of the Inheritance Tax Act 1984. A foreign-law trust therefore falls outside the exemption, even where its purposes are accepted to be exclusively charitable. A power in a deed of variation to amend the trust does not itself alter the dispositions, and equity cannot treat the necessary variation as made where the power was not exercised.

The appellants, executors of Beryl Coulter’s will, appealed HMRC determinations that the residuary gift to the Coulter Trust did not qualify for inheritance-tax exemption. Mrs Coulter was domiciled in Jersey, and the trust was governed by Jersey law. Its purposes, and those of Jersey Hospice Care, were accepted to be exclusively charitable according to UK law.

After her death, the appellants executed deeds of variation, including a power to amend the trust so that it complied with section 23 of the Inheritance Tax Act 1984. The trust’s proper law was later changed to English law, but no variation was made within the relevant period to give that change retrospective effect under section 142. The issues were whether section 23(6) required a UK link for the second limb and whether the deeds of variation achieved that result.

1. Appeal dismissed. The residuary disposition did not qualify for the charity exemption in section 23 of the Inheritance Tax Act 1984.
2. The reasoning of the Court of Appeal in Camille and Henry Dreyfus Foundation Inc v Inland Revenue Commissioners [1954] 1 Ch 672, upheld by the House of Lords in Camille and Henry Dreyfus Foundation Inc v Inland Revenue Commissioners [1956] AC 39, applied to section 23. The expression “held on trust for charitable purposes” requires both UK law charitable purposes and a trust subject to the jurisdiction of the United Kingdom courts.
3. Section 23(6) is a definition provision, while the operative exemption is in section 23(1), which refers to property given to “charities”. That context reinforces the UK-link requirement. The two limbs distinguish between exclusively charitable bodies and property held for exclusively charitable purposes; they do not create a wider geographical scope for foreign trusts.
4. Section 142 did not give retrospective effect to the later Proper Law Variation. The wording of the earlier deed conferred a power, not a duty, to amend the trust. It did not itself change the will trusts. The equitable maxim that equity regards as done what ought to be done could not cure the failure to exercise the power.
5. The trust remained governed by Jersey law for the relevant purposes and did not satisfy section 23(6).

The judgment states that permission was given for the appeal to be brought in the High Court rather than before the First-tier Tribunal, pursuant to section 222(3)(b) of the Inheritance Tax Act 1984. No earlier judicial decision is identified.