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 to his 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.
