I should be grateful if you could please help me with the following scenario.
Our client transferred her property into a discretionary trust in 1996. Then, in 2016, we submitted the 10 year return stating that no IHT was due as the client continues to live in the property and therefore has a right to occupation and qualifying interest in possession, under Statement of Practice 10/79. The Revenue has since rejected our argument because we have not positively exercised, by deed, our power to permit occupation.
So far, we have quoted HMRC’s responses to queries raised by STEP & CIOT in 2007 (I’m unable to attach this but can forward to anyone or it can be accessed on STEP’s website) in which the Revenue confirmed it is not necessary for trustees to exercise their powers in writing before conferring an interest in possession, but they have refused to budge.
Instead, they have requested to see correspondence from 1996 which purports to support our argument, but unfortunately none is available. We have since submitted a retrospective trustee resolution, formalising the arrangement, together with a signed statement by the client confirming her intention to continue living in the property once transferred into the trust.
I imagine this is becoming more and more common and wondered if anyone has been successful in arguing their case?