RNRB "friendly" Trusts do they really exist?

There are a number of solicitor practices promoting asset protection trusts and claiming that RNRB will still be available.
They are generally all settlor interested IIP trusts , income payable to settlor for life. It is accepted that they are GROBs.
In an attempt to preserve the RNRB I have seen a number of different courses of action stipulated on the death of the Settlor so that sufficient assets pass to a linear descendant, ranging from a simple gift over to linear descendant to much more complex arrangements.
It appears to me however that the initial GROB is to the Trustees of the settlement and will automatically fall foul of s8j(6) regardless of the subsequent gifts to lineal descendants.
Have they overlooked this or am I missing something ?

Roland Borriello
Northwood Banks & Co Ltd

Although a residence subject to a GROB is considered to be within the estate and capable of being a Qualifying Residential Interest, it only qualifies as “inherited” if the lifetime disposal was made to lineal descendants (not to trustees) (s.8J(6)(b)).

The Downsizing Provisions might have saved the situation but they would not apply in relation to the property transferred to the trustees since the rules require that the deceased have a “qualifying former residential interest”. This is defined in s.8H and requires the deceased to have disposed of a residential property interest, but s.8H(4D(a) states that:

“a person is to be treated as not disposing of a residential property interest in a dwelling-house where the person disposes of an interest in the dwelling-house by way of gift and the interest is, in relation to the gift and the donor, property subject to a reservation within the meaning of section 102 of the Finance Act 1986) (gifts with reservation)”

Tobias Gleed-Owen
Hewitsons LLP

For what it is worth, I agree with your analysis.

Paul Davies
Clarke Willmott LLP

I’m not aware of the details of any promotion of asset protection trusts but am struggling to see how the RNRB may be in point.

There is clearly a GWR but on the settlor’s death the person inheriting under the trust will not be the same person to whom the original gift was made as required under s8J(6). Hence, no RNRB.

Malcolm Finney

You are missing nothing - I administered an estate last year which had one of these trusts within it as a GWR. My view was RNRB would not be available, but I provisionally claimed RNRB at the executors request and tried various arguments with HMRC who rejected the lot.

Interestingly I declared the CLT value rather than the GWR value (disclosing in the additional info on page 15 that the CLT was also a GWR which would have a higher value). HMRC accepted the CLT value, so we did save a little IHT that way.

Alex Stanier
Allan Janes LLP


Was this not an oversight on the part of HMRC given (as I. understand it) under SI 1987/1130 the greater of the two IHT amounts is payable ie HMRC have no discretion to choose between the two calculated values?

Also wrt the IHT on the CLT due to death if paid by the PRs such IHT wouldn’t be covered by the s 211 indemnity which would be the case had the IHT paid been in respect of the GWR?

Malcolm Finney

Well I certainly haven’t read that, so you might be right! The only piece of commentary I could find at the time (which I sadly have been unable to find since although it was somewhere on Kessler’s website) stated that where there are 2 possible ways to calculate IHT as a result of a CLT being a GWR, HMRC will provide 2 calculations and have discretion as to which they’ll ask to be settled. It was on that basis I submitted the CLT valuation but with full disclosure that the GWR value was higher.

Alex Stanier
Allan Janes LLP