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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Legal background: the concept of beneficial ownership (England, Wales & Northern Ireland)

The concept of beneficial ownership, as distinguished from strict legal ownership is fundamental in English law and its origins lie in medieval times, when an injured party could only obtain redress if their complaint came within the scope of an existing writ. Such writs were often very limited and inflexible and did not always provide a remedy. In such cases petitions could be addressed to the Chancellor, complaining that the particular circumstances fell outside of the ordinary mechanism, and another way was sought. The Chancellor would then attempt to give (or withhold) relief to the petitioner according tohis own sense of right or wrong. These decisions eventually developed into a body of law known as equity, distinct from the existing common law.

From this arose the distinction between equitable and legal ownership, where equity would allow the use and benefit of property, usually land, to be held separately from the legal ownership. In those times for instance, it might be that land was given to A on his undertaking to hold it for the use and benefit of B, whilst B was, say, away on a crusade.The common law did not recognise any relationship between A & B and thus gave B no protection. In these circumstances the Chancellor would interfere to compel A to hold the land for the exclusive use of B. Whilst he could not say that B was the owner, A was, all the benefit of the land was given to B, with A simply remaining the owner of the legal title.

The inheritance tax charge is concerned with the property to which a person is beneficially entitled. In English law, this includes property which a person owns either legally or beneficially. In Scots law, it is only property that a person owns legally.