Peter Phillips, Stacey Phillips and Janice Phillips The Executors of Rhoda Phillips Deceased v Her Majesty's Revenue & Customs

Facts

Mr Philip Phillips, a valuer and estate agent, began in business in the 1950s and by his death on 22 March 2000 owned shares in eight related family companies, among them P P Investments Limited, an unquoted company established in 1958. His shares passed to his widow, Mrs Rhoda Phillips, who died on 27 June 2001, her property passing to her executors, Mr Peter Phillips, Miss Stacey Phillips and Miss Janice Phillips. By April 1989 P P Investments Limited held at least eighteen investment properties, but with the family estate agency company, Philip Phillips & Co Limited, making losses, Mr Philip Phillips decided in July 1989 to sell all of them — four to third parties and fourteen to the estate agency company for £450,000, £150,000 of which was left outstanding as a loan — and that the company would thereafter make no further property investments but would become "a banking arm for in-house transactions". Since 1989 the company made only loans, almost all to related companies, unsecured and repayable at will, at 2.5% above base rate. The Revenue issued a Notice of Determination on 7 October 2005 that the deceased's 245,000 shares were not relevant business property under section 104 of the Inheritance Tax Act 1984, having regard to section 105(3). The executors appealed.