The son of the taxpayer, who was the beneficiary of his own life insurance policy, likely died in 1998 when he was abducted by Angolan rebels, but this was never conclusively established. In 2002 the insurer paid the £100,000 principal amount insured to the taxpayer, plus an additional amount £36,425.97, which the Tribunal determined was interest. A grant of letters of administration for the estate did not occur until 2005.
Subsection 59(1) of the Income and Corporation Taxes Act 1988 (UK) provided:
Subject to subsections (2) and (3) below, income tax under Schedule D shall be charged on and paid by the persons receiving or entitled to the income in respect of which the tax is directed by the Income Tax Acts to be charged.
The Tribunal found that the interest was not chargeable income to the taxpayer. The administration of her son's estate had not even been commenced, let alone completed. If her son were alive, the taxpayer would have no entitlement to the interest. If he were dead, then all beneficial interests would be in suspense, pending the grant of letters of administration - and after such grant, the next of kin (the taxpayer and her husband) had no proprietary interest in any asset comprised in the unadministered estate (para. 70). Accordingly, the taxpayer had no entitlement to the interest, and it was not chargeable under s. 59(1).