Case law and Business Relief in the Court of Protection

Below, we examine key cases where BR has been permitted as part of tax planning strategies implemented by deputies or attorneys:

Re P [2010] EWHC 1592 (COP)

• Background: In this case, the deputy applied to the Court of Protection for approval to restructure P's estate to reduce inheritance tax (IHT) liabilities. The estate was valued at approximately £3.2 million, which included significant assets subject to IHT. The proposed restructuring aimed to take advantage of tax reliefs, including BR, to minimise the estate’s tax exposure.
• Outcome: The court approved the restructuring, recognising that tax-efficient planning could be part of acting in P's best interests.
• Significance: This case established that the Court of Protection is willing to approve tax planning measures where it can benefit P's estate, provided they are reasonable and proportionate. 
  

Re J [2016] EWCOP 44

• Background: The estate in this case was valued at £1.8 million, and the deputies sought approval for tax-efficient strategies to reduce the IHT burden. The application included proposals to utilise BR on qualifying assets. The court considered whether such measures aligned with the P's best interests, balancing the financial benefits against their immediate needs.
• Outcome: The court ruled that tax planning could be considered part of prudent financial management, approving the measures to preserve the estate and reduce tax liabilities.
• Significance: This case reinforced the principle that financial considerations, including tax planning, are integral to acting in P's best interests.

Re G (TJ) [2022] EWCOP 39

• Background: The estate in this matter was valued at £4.5 million, with a significant portion exposed to IHT. The deputies proposed tax planning measures, including utilising BR on qualifying business assets, to reduce the overall tax liability. The court examined whether the proposed actions were proportionate and in P's best interests.
• Outcome: The court approved the measures, recognising that preserving the estate through tax-efficient strategies was a legitimate objective that aligned with P's financial interests.
• Significance: This case highlighted the court’s willingness to balance immediate needs against long-term benefits, approving BR as part of prudent estate management.

Re GM [2013] EWCOP 34

• Background: In this case, the Court of Protection considered whether a deputy had failed to act in the best interests of P by neglecting to take steps to mitigate tax liabilities, in this substantial estate. The deputy had not sought approval for tax planning measures that could have IHT exposure.
• Outcome: The court criticised the deputy for failing to act prudently, highlighting that tax planning is a legitimate aspect of estate management.
• Significance: Deputies/attorneys should be alive to the prospect that not taking effective steps to mitigate tax might result in them being on the wrong end of a claim by disappointed beneficiaries.

Re Various Lasting Powers of Attorney [2019] EWCOP 40

• Background: This case involved multiple estates under lasting powers of attorney (LPAs), with values ranging from £750,000 to £2.5 million. Attorneys sought approval for tax-efficient strategies, including the use of BR, to minimise IHT liabilities on qualifying assets. The court considered whether these strategies were reasonable, proportionate, in P's best interests.
• Outcome: The court allowed the use of tax-efficient strategies, provided they did not disproportionately affect P's access to funds or conflict with their immediate needs.
• Significance: This case demonstrated that BR can be an effective tool for tax planning under LPAs, as long as the strategy is supported by professional advice and aligns with P's best interests.

Practical Considerations

• Deputies must provide evidence that the assets meet the criteria for business relief under the Inheritance Tax Act 1984.
• The court may require proof that the tax planning strategy, including BR, is supported by professional advice.
• Deputies should clearly explain how the proposed strategy benefits P and complies with the best interests standard.
• Ensure that the application aligns with the details required and set out in Practice Direction 9E.
• Reviewing opportunities to save tax should be a routine part of discharging a deputy/attorneys duties to act not only in the best interests of P but their wider beneficiaries (given the body of case law where the court has approved efficient tax planning).

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For more information or advice, please contact our Court of Protection team.