Scenario:
Testator dies in 2010. Will trust established with residential property worth £500k (this value is assumed to remain the same throughout), no related settlements, testator’s PCLT: Nil.
In 2016, trustees borrow £500k and use this in full to buy a BPR-qualifying AIM portfolio.
In 2019, trustees still have the above £500k debt, still own the residential property and appoint-out the AIM portfolio (worth £500k) to beneficiaries.
The trustees make no further appointments-out.
Analysis:
s.162B reduces the value transferred in 2019 to zero.
At the first 10-year anniversary in 2020, the £500k debt is still applied against the exit in 2019 such that the amount to be charged under IHTA84 s.64 is £500k and the sum to added under IHTA84 s. 66(5)(b) for the purposes of determining the rate of tax is zero.
At the 20-year anniversary, the exit in 2019 has fallen out of account such that the liability of £500k reduces the amount to be charged under IHTA84 s.64 to zero.
Do forum members agree?