Family Debt Scheme


(Simon James Northcott) #1

H sells his half of house to W, H allows the price to go unpaid and an IOU is signed by W, debt not repayable until after second death, and H assigns the benefit of the debt to a trust or to children.

Have any members had any experience of these schemes being challenged by HMRC?Similar to the Home Loan/double trust scheme, I assume HMRC would take a similar view, that it is subject to POAT (the house) and a GWROB (the debt) and also possibly s103 Finance
Act 1986 so the debt is disallowed.

I believe it was a scheme proposed in 2005 in response to POAT by Chris Whitehouse and Emma Chamberlain, who did not then believe it was subject to POAT or a GWROB. Since then we have GAAR, and I believe Chris Whitehouse thought it probably would be caught
by GAAR.

What is the experience of members. I am looking at one made in 2015.

Simon Northcott


(Paul Davidoff) #2

With apologies for the poor quality, I have copied (or tried to copy) below an extract from the notes of a STEP tax conference in London in 2011 which I think covers the point (albeit pre-GAAR). I am afraid I cannot remember who was presenting - I have only saved this particular extract. I suspect that HMRC will look to apply GROB rules.


Paul Davidoff
New Quadrant Partners Ltd