ABSTRACT
Failure to take tax liability into account may lead to a negligence action, but there is no general duty on solicitors to ensure that a client or estate pays as little tax as possible. IHT is payable primarily by the personal representatives, but also in certain situations by trustees or residuary beneficiaries. In Daniels v Thompson (2004), the Court of Appeal held that no liability to the estate in negligence would arise in relation to IHT, however, because the inadequate advice was given to the testator, who could never have paid the tax: that liability fell on her estate after her death. This decision has been much criticised. In Rind v Theodore Goddard (2008) it was suggested that it justified the beneficiaries claiming for the amount by which the advice reduced what they received from the estate. Mason and Others v Mills & Reeve (2012) was a more complex case, where the allegation was first of all that solicitors drafting a will negligently failed to advise the testator to delay selling shares until after an elective heart procedure, or just to advise fully. On his death, the transfer gave rise to IHT liability of about £1,000,000. Had he kept the shares, a combination of Business Property Relief and Capital Gains Tax uplift on death (see 14.4.4) would have saved a great deal of tax liability. The children’s claim failed, including on appeal to the Court of Appeal, with Lloyd LJ in the High Court saying that he realised however that they would feel ‘ill-served by the legal profession’. The solicitors were specialists, and they could have been clearer about the limitations of their advice, especially as some of the children were unsophisticated in tax matters, or could have suggested the clients took advice from accountants: these could all have produced a better result. But the court held that the solicitors’ duty depended on all the circumstances: the heart procedure was not obviously risky, and it was not obvious what the deceased would have done had he not sold his shares as he did, so the solicitors were not liable to the beneficiaries.
