Double trust home loan scheme | Are you affected?
The double trust home loan scheme was a popular way of planning to save inheritance tax (IHT) back in 2002/03. By arranging a sale from a homeowner to a trust for their own benefit, a debt for the unpaid purchase price could reduce the value of the home liable to IHT.
It is only in the last couple of years that cases on these schemes have reached the tax tribunals. HMRC has won twice (on different grounds) at first tier tribunal (FTT). The upper tribunal (UT) has now overturned last year’s HMRC victory at the FTT in the Elborne case.
We suspect that many of these schemes still exist and will come to light as the original homeowners die. Of course, it has long been impossible to create further schemes of this kind. A lot have been cancelled in recent years and HMRC have tried to make it fairly easy for taxpayers to give up. But it will be worth delaying any concession to HMRC now.
We believe HMRC will almost certainly take this to the Court of Appeal in the next year or so. As the differing conclusions from FTT and UT show, the decision there could go either way.
HMRC invoked a number of alternative arguments to attack the schemes in correspondence with taxpayers. Both FTT and UT have now found that all but one of those arguments were wrong.
The only point on which the FTT found in HMRC’s favour was the deductibility of the debt incurred on the sale by the original homeowner. The FTT said that that debt was not deductible because it should be deemed to have been incurred by the homeowner (see s103 of Finance Act 1986). The UT has overruled this, saying that there is no deeming in these circumstances since the debt was incurred by the trustees of the trust to which the home was sold.
If you are affected, do get in touch with Anthony Nixon. If you would like to
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