Historical schemes: Eversden, home loan and family debt schemes

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

Historical schemes: Eversden, home loan and family debt schemes
Eversden schemes
Home loan or double trust schemes
Family debt schemes

This guidance note considers some IHT planning schemes which were popular in the 1990s and early 2000s as a means of removing the value of the home from the taxpayer’s estate. The aim was to allow the property owner to remain living in the home without getting caught by the gift with reservation (GWR) provisions. They are now largely unworkable or unnecessary as a result of subsequent legislation.

See the Gifts with reservation ― overview guidance note.

Although the schemes are no longer recommended, tax practitioners will still encounter arrangements which were set up years ago. The guidance notes on historical schemes provide some background information on how the schemes worked and what their current status is.

See also the Historical schemes: Ingram and reversionary lease schemes guidance note.

Eversden schemes

These schemes involved the transfer of a property from one spouse to a life interest trust to the other, the terms of which provided that the first spouse was also a discretionary beneficiary on the death of the second spouse. They took advantage of:

•the general spouse exemption
•the fact that a lifetime gift into trust could (before 22 March 2006) create an interest in possession by which the holder of that interest was deemed to own the underlying capital, and
•the specific exemption from the GWR provisions which applied to transfers between spouses

IHTA 1984, ss 18, 49; FA 1986, s 102(5)(a)

In Eversden, a married woman transferred a 95% interest in a house to a trust with an initial life interest to her husband, after his death, by discretionary trusts for herself, the settlor, and her children. Her husband died in 1992 and on the settlor’s subsequent death in 1998 HMRC contended that