Commentary

I5.1259 Transfers of value linked with trustee borrowing—trustee borrowing

IHT, trusts and estates

I5.1259 Transfers of value linked with trustee borrowing—trustee borrowing

I5.1259 Transfers of value linked with trustee borrowing—trustee borrowing

What is trustee borrowing?

Trustee borrowing is where1:

  1.  

    •     money is lent to the trustees

  2.  

    •     an asset is lent to them

  3.  

    •     an asset is transferred to them and they assume a contractual (and not merely fiduciary) obligation, whether absolute or conditional, to restore or transfer that or any other asset to any person

These contractual obligations are referred to as 'loan obligations' throughout the provisions.

HMRC acknowledges2 that it is not unusual for the trustees of a non-resident trust to borrow money from a non-resident company which they control. It does not accept the argument that, in this situation, the trustees are effectively 'borrowing' from themselves and therefore outside these anti-avoidance provisions. HMRC considers that this is still a loan obligation, as are loans from the beneficiaries3; it is the use to which the borrowing is put and not where the borrowing is from that matters.

HMRC considers that money borrowed before these provisions came into force (ie before 21 March 2000) may still be treated as outstanding trust borrowing4and that where trustees are presented with a bill, for example for repairs to trust property, a genuine delay in payment does not convert this into a borrowing5.

In addition6, trustee borrowing includes informal overdrafts as well as formal loans, and the grant of a lease to the trustees is not considered to be the lending of an asset. However, the assignment of an existing lease to the trustees for a time shorter

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