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There has been much inheritance tax 'doom and gloom'
subsequent to a media storm about a tax case known as Phizackerley. This case
was about an Oxford don, Dr Patrick Phizackerley, and wife Mary who used their
home as part of their inheritance planning in their wills, using a standard
trust mechanism. The two of them owned the house, and on Mrs P’s death her
half share was left to a “nil rate band” discretionary trust in her
will. The trustees later transferred it to Dr P, who signed an IOU to say that
he owed the trust the equivalent value of the half share.
Unfortunately HM Revenue and Customs (HMRC) applied
anti-avoidance rules that had been introduced in 1986 and refused to allow the
executors to deduct the IOU from the estate of Dr P when he died. They were
able to do this because all the assets used in the structuring had originated
from Dr P alone and he was the sole financial contributor to the family. The
facts of the case were very unusual and it is not going to be
appealed. |
