Transfers were intended to reduce inheritance tax

Arrangements involving transfers of amounts into employee trusts to reduce inheritance tax were not reasonable courses of action the general anti-abuse rule (GAAR) advisory panel has concluded.

Here the deceased had put a large amount of money into a company she had set up. The company formed an employee trust and separately allocated shares to the deceased which were then gifted into the trust. The intention was that inheritance tax on the deceased’s estate would be significantly reduced because of the effect of IHTA 1984 s 28.

The panel said that setting up a company an employee trust and gifting shares to the trust for employee benefit are all reasonable steps but this case involved a gift of the shares to a trust which in effect had no beneficiaries beyond the family.

While it accepted that future employees could benefit the panel...