A ‘property rich but cash poor’ aristocratic family with links to royalty have won a court fight to save their ancestral estate, after an inheritance tax ‘mistake’ left them facing a £1.2m bill.
The Fortescue family, who are based at the Boconnoc Estate in Cornwall and are descended from the 19th century prime minister who abolished slavery in Britain, were facing having to break up their ancestral home after the blunder.
The estate, which is steeped in history that saw it serve as a house of refuge for both Charles I and Charles II, was purchased by the family in 1717 and paid for by the sale of the famous Pitt Diamond.
In 2000, Elizabeth Fortescue and her husband Anthony embarked on a 12-year multimillion-pound renovation project to restore the main manor house to its former glory, and preserve the estate for future generations as a luxury wedding venue.
But after her husband was found shot dead on the estate in 2015, Ms Fortescue made a terrible mistake while trying to secure the estate’s legacy for her daughter Clare.
She had inherited a life interest in the trusts in which the family estate is held, and wanted to pass the properties, valued at around £4.4 million, to Clare while minimising the amount of inheritance tax due.
After taking advice, she attempted to release her interest to her daughter, which would mean this was exempt from inheritance tax as long as Ms Fortescue lived for seven more years.
But despite having been given correct tax planning advice initially, there were blunders in the process she actually followed, the court heard.
A High Court judge has now granted permission for the process to be reversed, allowing the aristocratic family to avoid the ‘grave and unintended tax consequences’ caused by the blunder.
The family will now have to take the correct steps if they wish to avoid the bill for good.
After her husband’s death in 2015, Elizabeth Fortescue (pictured) made a terrible mistake while trying to secure the estate’s legacy for her daughter Clare
Anthony Fortescue was found dead on the estate in 2015, having sustained a gunshot wound to the head (Pictured with wife Elizabeth)
The Fortescue family, who are based at the Boconnoc Estate in Cornwall and are descended from the 19th century prime minister who abolished slavery in Britain, were facing having to break up their ancestral home after the blunder
The error left the family facing having to break up the centuries old estate by selling properties in order to meet the £1.2m tax bill.
It came after the death of High Sheriff Mr Fortescue, who was found shot in the head on the 7,500 acre estate in 2015.
An inquest heard he had suffered with bouts of psychotic depression since the 1980s, but had never spoken of suicide. A coroner recorded an open verdict, saying they could not rule out that his death was accidental.
Ms Fortescue’s barrister, Oliver Conolly, told Deputy Master Joanna Lampert: ‘It’s crystal clear this was a clear mistake. This was [a] conscious thought process that this was an exempt transfer and that was clearly mistaken.
‘There’s no way in which this can be seen as artificial tax avoidance. This is plain vanilla tax mitigation gone wrong.
‘This is an estate which has been in the family for a long time. A huge amount of time and effort has been spent by Elizabeth and her late husband restoring the historic building and putting it on a stable footing. The restoration of the main manor house took 12 years.
‘This is not a trust which is swimming in cash. It is Elizabeth who made the mistake. If she had known the effect, she would never have done it.’
Saying the bill threatened the future of the estate, the barrister told the judge that ‘to pay £1.2m in tax, the trusts would have to sell properties’, adding it was a ‘terrible blow’.
The judge, allowing Ms Fortescue’s claim, said the mistake had created ‘an unintended tax consequence.’
‘Elizabeth was advised that if she released her interest in [the trusts] it would be potentially exempt [from inheritance tax] after seven years,’ she said.
The error was made while Ms Fortescue was attempting to pass her life interest to her daughter Clare (pictured)
The diamond (pictured), which became known as the ‘Pitt Diamond’ or ‘Regent Diamond,’ is a 140 carat-plus stone which ended up mounted in the crossguard of Napoleon’s sword and is now on display in the Louvre
‘It appears that the advice was right, but that the process used to give effect to it was both wrong and unnecessary.
‘She believed that no inheritance tax would be payable on the released properties provided she survived seven years. That belief proved to be mistaken. Instead, they gave rise to a 20 per cent tax charge.’
She said the error was ‘particularly grave because the estate has been the subject of careful arrangement in order to create a lasting legacy’.
‘It would be difficult for the estate to meet the inheritance tax bill whilst protecting the future of the estate,’ said the judge, concluding that it would be ‘unconscionable’ for the error not to be rectified.
‘I shall make an order that the deeds of release be set aside and that the deeds of advancement are invalid,’ she said.
Clare Fortescue, who along with the trustees of the family trusts were the defendants in the action, did not oppose the making of the orders sought by her mother.
The Fortescues are descended from a nephew of William Wyndham, Lord Grenville, who as Whig prime minister stamped out the British slave trade in 1807.
Grade-II listed Boconnoc House was built in the 18th century, beginning in 1721 by Thomas ‘Diamond’ Pitt, ex-Governor of Madras, using the proceeds of the sale of a giant Indian diamond.
The diamond, which became known as the ‘Pitt Diamond’ or ‘Regent Diamond,’ is a 140 carat-plus stone which ended up mounted in the crossguard of Napoleon’s sword and is now on display in the Louvre, valued at £60m.
It was originally stolen from a murdered slave before being bought by Pitt.
Thomas Pitt’s great-great-granddaughter and heir Anne Pitt – a cousin of William Pitt the Younger – later married William Wyndham, Lord Grenville, who as prime minister was famous for abolishing the slave trade.
On her death in 1864, the estate was bequeathed to George Matthew Fortescue, the son of Lord Grenville’s sister, Hester, and it has remained in the Fortescue family ever since.
The Boconnoc Estate itself dates from the Domesday Roll of 1086 and is said to have been used by Charles I who hid in one of the bedrooms – now known as the King’s bedroom – during the Civil War. It was later also used as a safe haven by Charles II.
The estate, surrounding the River Lerryn, includes the largest landscaped deer park in Cornwall and is the home of the Boconnoc Cricket Club.
The renovation of the manor won several accolades, including the Historic Houses Association/Sotheby’s Restoration Award.
