Ken Dodd has last laugh with inheritance tax move

UK Inheritance Tax
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This week saw the passing of comic legend Ken Dodd, and while friends, family and fans mourn his loss, one of Dodd’s final actions could be interpreted as a final joke at HMRC’s expense.

Two days before his death the comedian married long-term partner Anne Jones, with whom he had shared his Liverpool home for the past 40 years.

While the couple were reportedly delighted to have finally tied the knot, the action also avoided a potential inheritance tax bill of up to £2.6m.

With Dodd worth an estimated £7.2m, without the marriage the estate could have been liable for a 40% rate of IHT, whereas assets can be passed between married couples free of inheritance tax on death.

The nil-rate band for inheritance tax is currently £325,000, while homeowners have a residence nil-rate band at £100,000 if the home is left to a direct descendant.

The case highlights the current gap between the ways that a “common-law partner” and legal joined a spouse or civil partner are treated when it comes to inheritance tax. The surviving spouse may inherit the entire estate tax-free (if they are UK domiciled), and they can also inherit any unused portion of the nil rate band and the residence nil rate band. Thus the survivor, on his or her death, will have a nil rate band of £650,000 plus a residence nil rate band of £200,000, which will increase to £250,000 on 6 April 2018.

Death, of course, is a significant tax planning event, as the new owner(s) of the estate gain a tax-free uplift in the base cost of the assets for capital gains tax purposes, as they acquire the assets at their market value at the date of death.

Ken Dodd: ‘Failed accountant’

Dodd is no stranger to the Revenue, having faced down a high-profile tax evasion case in 1989 presided over by Justice Brian Leveson, now perhaps better known for chairing the public inquiry into the ethics of the British press.

The comic was charged with 27 counts of tax evasion over 15 years totalling around £800,000, with the Inland Revenue’s chief investigator accusing Dodd of having undisclosed overseas assets, including bank accounts in Jersey and the Isle of Man, where he flew regularly to deposit undeclared cash.

Dodd was represented in court by famous QC George Carman, who during the case delivered the memorable line: “Some accountants are comedians, but comedians are never accountants”.

Following a three-week trial, Dodd was found not guilty, although tax experts were keen to point out that he settled in full with the tax authority, including penalties.

While Dodd was cleared of all charges by the jury, the case revealed some of the comedian’s eccentricities, including the fact that he had more than £300,000 worth of banknotes in his home stashed in wardrobes, cupboards and suitcases.

In the years after the case Dodd went on to make light of his experience, and in the following years often introduced himself onstage with the line: “Good evening, my name is Kenneth Arthur Dodd, singer, photographic playboy and failed accountant.”

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15th Mar 2018 12:13

Well... good for him!! He's had the last laugh over HMRC after all!

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15th Mar 2018 12:36

Quote:
The case highlights the current gap between the ways that a “common-law partner” and legal joined a spouse or civil partner are treated when it comes to inheritance tax.

Given that marriage was a religious institution, it could also be argued that it discriminates against athiests who see no point in enrolling in that particular institution.

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By Lural
to SteLacca
16th Mar 2018 12:57

‘Atheists’ do not have to prescribe to a religious ceremony in order to be married and therefore there’s no discrimination against non-religious marriages.

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to SteLacca
16th Mar 2018 12:06

Given that most people who marry are not religious, and many atheists marry, there is no discrimination.

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By ShayaG
to SteLacca
16th Mar 2018 13:21

A heterosexual couple who wanted a civil partnership did make this argument, and lost

https://www.judiciary.gov.uk/wp-content/uploads/2017/02/steinfeld-and-ke...

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to ShayaG
19th Mar 2018 11:01

Of course, heterosexual couples can have a civil partnership - the absurdity is that they have to be of the same sex.

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to SteLacca
19th Mar 2018 10:59

That's a very, very, very weak argument.

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15th Mar 2018 12:51

My favorite Doddy quip
''Self -Assessment, I invented that''

RIP

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15th Mar 2018 13:21

Given the circumstances the marriage clearly had nothing to do with tax!

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15th Mar 2018 14:21

These are pretty common e.g. see para 25 here:

http://www.bailii.org/ew/cases/EWHC/Ch/2011/3250.html

See also: https://archive.is/Vv3Gv

and "The wealthy elderly who marry younger members of their family " here: https://www.telegraph.co.uk/finance/personalfinance/tax/10745009/The-des...

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16th Mar 2018 10:09

Good - given that someone who has worked all their life, paid taxes and contributed to society is then hounded for further taxes while six foot under I'd delighted Doddy had the last laugh. I live approx 400 yards from his house so I may even walk past with the dog this evening and give him a final thumbs up from a local accountant!

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By mkowl
16th Mar 2018 10:08

It really is only ever tax deferred unless the surviving spouse gets herself a toy boy. For £7.2m I can make myself available

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By hiu612
16th Mar 2018 10:11

My first thought on hearing the news was slightly different - having married on Friday and died on Sunday, I hope he re-wrote his will on Saturday as the marriage may well otherwise render it void. In that instance the tax planning would be slightly less good looking.

(and didn't the joke go Ken Dodd paid the right amount of tax . . . DiddyF**k)

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16th Mar 2018 10:14

I wonder if civil partnerships were made available to mixed sex couples these last minute marriages would not be as necessary. I have a significant batch of clients who have been together for many years but don't feel marriage is for them. They have openly said they will only marry if they feel they are getting infirm and for tax reasons only. I expect even after IHT there would have been a substantial estate left but with some they could be faced with selling the home they have lived in together for many years.

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to Diana Miller
16th Mar 2018 11:03

Why would you need a "civil partnership"? These only made sense before same-sex marriages were legalised.
The law should now be passed that civil partnerships are abolished and existing ones are converted to marriage.

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to Joseph_odriscoll
16th Mar 2018 13:57

Because some of us do not like the idea of the institution of marriage- admittedly due to its historical associations. I do no feel inclined to sign up to something that would historically would have seen me "given away" and my assets becoming the property of a husband. I am however penalised for IHT etc because civil partnerships are not available to me.

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16th Mar 2018 10:19

Inheritance tax should be abolished or at least charged at a reasonable rate. After all in most cases the mojority of the assets are acquired from income after tax so why tax one again and cause so much grief at what has to be a terrible time for any family.

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to KIKISROSSIDES
16th Mar 2018 10:35

Agree with this it should be based on "capital gains" (ie untaxed income at date of death) wit ha healthy tax free allowance free to spouses as a roll over like IHT works now.

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16th Mar 2018 10:31

What a lovely day for stuffing a cucumber through your local vicars letterbox then calling him up and telling him the martians have landed.

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16th Mar 2018 10:43

Didn't Doddy also say he told the Inland Revenue that he didn't have to pay taxes because he earned his money at the seaside! [and not inland]

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to Malcolm McFarlin
16th Mar 2018 13:57

Malcolm McFarlin wrote:

Didn't Doddy also say he told the Inland Revenue that he didn't have to pay taxes because he earned his money at the seaside! [and not inland]

I've seen the Inland Revue - it's a terrible show.

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to Malcolm McFarlin
23rd Mar 2018 16:21

No you're thinking of Ali G who asked if it's called Inland Revenue, why do you have to pay tax in Brighton!?

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to I J Lessels
30th Mar 2018 17:57

No Doddy made the joke prior to Ali G. Google Ken Dodd and inland revenue and you will see the joke was Doddy’s.
Ali G probably nicked it off him

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16th Mar 2018 10:50

Two things to bear in mind - Ken Dodd’s estate may have no IHT to pay but the assets well add to his wife’s estate so unless she can do some spectacular IHT planning then he has just kicked the can down the road.
And of course he won’t get the main residence nil rate band as his estate is worth more than £2m on the face of it.

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to AmandaElliott
16th Mar 2018 11:42

But if Ken's estate paid IHT and his wife inherits the remaining assets, there may well be a further IHT bill "down the road" on the net assets she inherited; so that second IHT bill is effectively saved, isn't it?

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to matthew pennifold
16th Mar 2018 15:53

Sorry,not following your logic. Doddy’s eatate - no tax now. Wife’s estate increased by £7m, she dies and pays the tax on the combined does she not? Can well and truly down the road it seems.

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to AmandaElliott
17th Mar 2018 16:50

Yes, but you said he's just kicked the can down the road; whereas I think he has kicked the can down the road AND saved a load of tax as well.

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to matthew pennifold
17th Mar 2018 14:26

Pardon

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to SNOOPDOG
17th Mar 2018 17:16

It made sense to me. I just imagined the net estate (after potential IHT) of the wife under the two different circumstances (marriage or no marriage). Still I could be wrong!

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to AmandaElliott
16th Mar 2018 13:25

He could have gone to Germany and bought a load of letting properties, full IHT relief apparently.

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16th Mar 2018 11:01

Tax rules create unintended consequences. The more rules, the more consequences. The iniquity here is that unmarried surviving spouses or issue, often find they can't afford to remain in the family home after the tax bill is presented. In that sense it could be argued, if the marriage was to avoid inheritance tax then it it is a scheme and should be set aside. The old joke is that only two things in life are certain, death and taxes. So trust the taxman to square the circle!

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16th Mar 2018 11:17

Whether you marry or not is a personal decision but the state reconises that there is a sacrifice and helps out with CGT and IHT exemptions. If married however you have to pay income on jointly held assets in equal shares and lose the double cgt principle residence exemption whether or not you live together.

The state also benefits because many more couples who are married stay together than those that are not and the economic costs in my view are equaled ot.

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By keithas
16th Mar 2018 11:23

I could understand the objections to IHT more if it weren't for the situation with care home costs.
At the moment, for people under the IHT threshold, it's a lottery: you either pay 0% or 100%, depending on health and circumstances. In my opinion, it would make more sense to reduce the threshold drastically and use the money raised to pay for care home costs for everyone.
The current system results in a double whammy for the elderly with assets who require full-time care in their final years; not only do they have to fund their own care but, studies show that due to the clout of local authorities, they get charged at 10% below cost so that private clients have to pay 10% extra to make up for it.

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to keithas
16th Mar 2018 13:02

The proper solution is an insurance scheme. In the longer term medical science may solve the problem.

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By keithas
to listerramjet
16th Mar 2018 13:29

But, in the medium term, medical science is enabling people to live longer yet unable to effectively deal with problems such as dementia.
Insurance is a cost, and, with care home charges of around £50K p.a., a significant cost at that, even when spread over a longer period.
Faced with the option of paying a large insurance fee on top of a mortgage, or the money coming from my estate upon my death, personally, I'd choose the latter.

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to keithas
16th Mar 2018 15:36

I agree with keithas. Increase the IHT rate to 80% and put the extra money into healthcare support. The deceased won't mind. The beneficiaries would be the losers, but they are undeserving, and they would benefit from the new system in the long term.

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By DJKL
to keithas
17th Mar 2018 15:18

I think a few more people would not object if instead we scrapped IHT and instead introduced CGT on death with exemptions (holdover) re spouses/ civil partners.

I have always thought that the CGT exemption re a PPR were slightly perverse and discriminate against those whose assets are held within different asset classes.

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Some of the reasons why prudence and being proactive with your finance has to be well thought through.

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By mkowl
16th Mar 2018 13:14

I just think a major simplification would be CGT instead of IHT at time of death. You would keep the various reliefs for business assets so there is no requirement to dispose of them to pay a bill, main residence exemption to apply but could be capped, transfers to spouse per the Will no gain no loss. Investment type assets and chattels would be a deemed disposal at market value at death and tax payable but at 20% or 28%. It would stop the uplift to value on death but it would stop the anomaly between passing assets over in lifetime compared to at death. Never quite sure why part of a gain over the length of ownership of the asset should potentially escape tax. I would also charge a 5% levy on the value of every estate over £50,000 as a social care contribution (on all assets). It would mean no person has to pay during lifetime and it would be paid out of the estate before beneficiaries receive an inheritance

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16th Mar 2018 17:02

I have always found it wrong that we have a tax on death at all. Given all the unhappiness around that time, having to pay a significant portion of earnings to HMRC when they have already been taxed once just doesn't seem right.

Hopefully one day in the not to distant future it will be abolished

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17th Mar 2018 15:59

He was the number 1 uk entertainer loved by all ages. At 7pm the stage would light up and the comedian clown singer and ventriloquist would command the stage.
You could hear a pin drop as he delivered his swift one liner jokes and audience captivation would be unremitting.
To close the show he would sing 'absent friends ' which says the pathway of life is long and eventually it comes to an end - hence we note many people have left the arena of life. I am sure Ken was cognisant of his own mortality as he had lived 9 decades.
His talent was a pre ordained essence which he had worked on to make the performance impeccable.
I have never seen anything to equal his version of entertainment. It was magical gripping and his presence resonated love hope and happiness.
Bless you Kenneth Arthur Dodd. Sadly you are now my absent friend.
PS. I have sent Lady Anne Dodd a sympathy card.
We your fans are deeply saddened.

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17th Mar 2018 11:35

I tell my clients that there is no need for anyone to pay IHT so long as its planned for correctly and there is a will in place.

In Ken's situation you dont know what his wife will do - note there were no children which is the same for me so apart from bequests under the limit to niece and poss brothers if I still love them by then - the whole lot is going to do some good when I go as its all going to charity.

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By DJKL
to Jennifer Adams
17th Mar 2018 15:23

I have a client ( I just do accounts side) with a substantial estate who is looking for the same sort of route, x each to the nieces and nephew and the rest either to particular charities or , given the estate is a bit bigger than Ken's, create some form of charitable trust.

Suffice to say, given this sort of thing is well outwith my comfort zone, I have given a few ideas, some literature, and suggested they consult some better qualified professionals.

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By adjadj
to Jennifer Adams
19th Mar 2018 22:32

That what I thought

Then a relative died quite unexpectedly 21 months into a comprehensive IHT mitigation plan (which included EIS and AIM) and the estate ended up paying significant IHT.

The lesson learned here was be aware of what happens on an early death and be prepared for it (at a multitude of levels!)

The other tip I pass on is try to get your clients with joint assets that have been held for many years and carry significant capital gains to unwind them progressively over a few tax years

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By yannb
17th Mar 2018 15:57

Brian Leveson may be a judge now but he was prosecuting counsel for Inland Revenue against Ken Dodd.
The Revenue would not have levied penalties as it would have been considered double jeopardy; effectively trying him twice for the same offence. Ken Dodd would have paid tax and interest though.
In marrying Ken, Anne was entitled to become Lady Dodd and why not? The financial benefit is the same as any married couple.

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By tedbuck
19th Mar 2018 11:55

Doddy's best joke was

Politicians are like baby's nappies and need changing regularly for the same reasons.

How terribly true.

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19th Mar 2018 12:24

I remember the tax case very well especially because of the "beneficial" effect that it had for one of my firm's clients. At the time I was a partner in a small practice in south Manchester. Some time previously we had been approached by an acquaintance of one of my partners because he was having problems with his tax office over a claim to PPR relief. Eventually the Inspector agreed that relief was due.
When one of this client's friends found himself on the wrong side of the tax man he ended up with us to deal with matters. It was a classic case of the Inspector having obtained a piece of information and jumped to totally the wrong conclusion and not prepared to accept evidence to the contrary.
The same partner as before had been to at least one Commissioners meeting and was geared up for what was to be the final hearing where The Revenue would ram home there conclusions and demands. On the Wednesday the previously bumptious and stubborn Inspector telephoned most sheepishly almost begging to settle. We were happy to do so as it was clear that there was nothing in the case. It transpired that the Inspector found himself double booked. He was due in court on the same day, the Friday, to give evidence in Doddy's case and couldn't wriggle out. Justice? We certainly thought so and we enjoyed the irony.

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19th Mar 2018 15:15

Surely one of Ken's best one-liners:
'When income tax was first introduced, it was 2d in the £. I thought it still was.'
Tatty-bye, Ken.

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23rd Mar 2018 21:27

I have observed several coaches of people arrive at the Grand Theatre Blackpool at 6pm Sunday to see this great man and supreme entertainer. He would put bums on seats there for 5 consecutive Sundays during October into November. It would be the Blackpool Illuminations period but Ken would outshine the lights outside.The theatre would light up at 7pm and the atmosphere would be electric. I cannot believe I will never see his performance again. What a maestro - I am so delighted to have witnessed talent that can't be taught or learnt from a book. What are all his fans gonna do now. He filled theatres across the UK every week end.
His Diddy men, his puppet Dicky Mint are now all redundant. His drummer and keyboard player are redundant.
Anne his wife is bereft and we are all bereft.
What's money what's accountancy when we think of the one and only the greatest talent ever Sir Kenneth Arthur Dodd.

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27th Mar 2018 22:25

Liverpool Cathedral 5 miles from Knotty Ash at 1pm. A final goodbye to Kenneth Arthur Dodd. 28th March 2018.Wednesday.
Born 1927. Expired 2018. Aged 90
The best UK entertainer ever.

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