In 2003 Mrs E entered into an arrangement known as a home loan scheme intended to reduce inheritance tax on her death. Broadly this involved setting up a trust and selling her home to the trust in exchange for a promissory note. She was permitted to remain in her home for the rest of her life. She assigned the note to the trustees of a settlement under which she was excluded from benefiting. The transfer of the loan note was a potentially exempt transfer and if she survived seven years – which she did – would fall out of her estate. On her death the property would still form part of her estate as she held an interest in possession in it but it would be matched by the amount owed to her trustees under the loan note.
HMRC challenged the arrangement and...
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