“This is a case about the meaning of life” was the dramatic opening to a recent First-tier Tribunal (FTT) judgment in the case of Lexgreen Services Ltd v HMRC¹. Whilst decisions in tax disputes rarely deal with such fundamental questions, the judgment here explored whether a corporate entity could constitute a “live” settlor for the purposes of s.201(1)(d) Inheritance Tax Act 1984 (IHTA) in the context of assessing liability for a trust’s 10-year anniversary charge under the relevant property regime. The judgment considered interesting questions of statutory interpretation, concluding (perhaps unsurprisingly) that a corporate settlor, if incorporated and active during the relevant period, does indeed “have a ‘life’’’. As such, the case provides helpful confirmation that corporate settlors can be liable for 10-year anniversary trust charges.

The case is a lead case (under Rule 18 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009) on the question of whether a company that has made contributions to a trust is liable for any inheritance tax (IHT) arising on the trust’s 10-year anniversary. Decisions under Rule 18 are generally binding on stayed cases involving the same point of law, so this is an important decision.

Background and facts

The appellant, Lexgreen Services Limited (Lexgreen), established a remuneration trust (with the assistance of Baxendale Walker) in 2005 with a Jersey-registered company as trustee. Over time, Lexgreen contributed sums to the trust totalling around £6m. The trust’s 10-year anniversary fell in 2015, crystallising an IHT charge under s.64 IHTA of around £150,000. 

Lexgreen refused to pay the charge. This was based on the argument that s.201(1)(d) IHTA, which determines who can be liable for certain IHT charges, could not apply to a corporate settlor. This was on the basis that the section attributes liability as follows (own emphasis added):

The persons liable for the tax on the value transferred by a chargeable transfer made under Part III of this Act are…(d) where the transfer is made during the life of the settlor and the trustees are not for the time being resident in the United Kingdom, the settlor. 

The judgment

Lexgreen argued that “life” (in the context of s. 201(1)(d)) takes its “ordinary meaning” and refers to “the period between birth and death of a living thing”. Lexgreen submitted that a company is not alive in this sense and so cannot be liable under s.201(1)(d). 

After establishing the main principles of statutory interpretation – including “that the words of the statute should be interpreted in the sense which best reflects their ordinary and natural meaning and accords with the purposes of the legislation” - Lexgreen looked to apply these in the context of IHTA, arguing that IHT was a tax “fundamentally concerned with life and death”.

However, despite Lexgreen citing various statutory instances supposedly supporting its argument, the judge found that none of the relevant sections clearly showed an intention by the draftsperson to exclude corporate entities from their scope. 

Similarly, HMRC’s case revolved around the argument that the starting point for interpreting s.201(1)(d) was the word “settlor”, and that this is a defined term that clearly includes corporate entities (see s.44 IHTA). HMRC further argued that the intention of s.201(1)(d) is that where tax is due, it is collected, and if the draftsperson had wished to limit the section’s remit to individuals alone (excluding corporates), they could have expressly done so. 

On weighing up the arguments, the judge concluded that “the notion that IHT is ‘fundamentally concerned with life and death’ is perhaps reaching a little too far”. Rather, IHT is a tax levied on transfers of value. Broadly, the judge concurred with HMRC’s arguments, and, on the point of statutory interpretation, agreed that if the draftsperson had intended to exclude corporate settlors from the scope of s.201(1)(d), they could have done so explicitly.

Although the judge stated that “There is no need to settle existential questions of when life begins and ends…in order to determine this case”, he held that in the case of a company, it is “perfectly possible to interpret the phrase ‘during the life of the settlor’ as meaning “at a time when the settlor is a live company”. By this, he meant that a UK company incorporated and registered with Companies House would be “alive” for present purposes. As such, given that Lexgreen fulfilled these criteria at the relevant date, it was held that it was liable for the 10-year charge.

The judgment therefore makes it clear that a corporate settlor can be liable under s.201(1)(d) for IHT arising on the 10th anniversary of a trust, provided that the company is “alive” at the time of the relevant transfer. Additionally, the decision provides helpful confirmation for what the term “alive” means in a corporate context.

Concluding remarks

The fact that this is a lead case on the issue in question indicates that there have been several other cases on the same or a related point (presumably exploring similar arguments) that have been raised recently. However, the conclusion reached by the FTT, essentially following a purposive approach to the legislation, is perhaps not unexpected. 

Interestingly, the decision is limited to the interpretation of s.201(1)(d) in the context of 10-year anniversary charges, although one might well assume that the analysis could apply more broadly to other IHT charges within the scope of s.201(1)(d) (for example, trust exit charges). It should also be noted that, presumably prompted by this litigation, the Finance Act 2025 amended the “general interpretation” section of IHTA (s.272) to provide that “a reference in this Act to a settlor's being alive…is to be read, in relation to a settlor who is a body corporate, as a reference…to the body's being in existence...”, with the explanatory notes stating that “this clarifies the existing law”. However, this change only applies to transfers into trust post-5 April 2025 so the FTT’s judgment in Lexgreen will remain relevant for pre-6 April 2025 transfers.  

¹ [2025] UKFTT 01019 (TC)