I4.415 Anti-avoidance in deeds of variations
When formulating and drafting a variation to take advantage of IHTA 1984, s 142(1), the parties must try to ensure that HMRC will not be able to invoke the principles enunciated in cases such as W T Ramsay Ltd1 (see I2.203) in relation to it.
A father dies leaving his estate to his children, causing an IHT charge. His children enter into a deed of variation redirecting property to their mother (the surviving spouse) to take advantage of the spouse exemption (see I4.225). This is on the understanding that she later passed the property back to the children by a potentially exempt transfer which would not be chargeable to IHT if she survived for seven years.
HMRC could contend either that extraneous consideration had been provided for the variation (see I4.418), or that the whole arrangement was a series of transactions designed with the principle aim of avoiding tax. It seems that HMRC does consider that Ramsay can apply in an IHT context and, in cases where property is redirected to a spouse, enquire as a matter of course whether before the variation there was any discussion between