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First-tier Tribunal Decision concerning “Home Loan Scheme”, purported sale of house to interest in possession trust and section 2 of the Law of Property (Miscellaneous Provisions) Act 1989

Published: Wednesday 18 March 2020

Shelford and others v HM Revenue and Customs [2020] UKFTT 53 (TC)

Jonathan Davey QC has received judgment from the First-tier Tribunal (“FTT”) in an appeal concerning the correct inheritance tax analysis applicable in respect of a “Home Loan Scheme” (the “Scheme”) involving the purported sale of a house to an interest in possession trust. The purpose of the Scheme was to remove the value of the house from the estate of a particular individual for the purposes of inheritance tax, whilst enabling the individual to continue to live in the house rent-free for the rest of his life. The FTT held that the Scheme did not work. The FTT found (among other things) that the loan agreement and sale agreement forming part of the Scheme involved “mislabelling”, and that the arrangements did not amount to a valid contract for the sale of land as they did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The FTT therefore found for the Respondents and dismissed the appeal. Jonathan Davey QC acts for the Respondents (HMRC) with Thomas Chacko (Pump Court Tax Chambers). William Massey QC, Emma Chamberlain and Oliver Conolly (Pump Court Tax Chambers) act for the Appellants.

The full judgment can be read here.