Action of IHTA1984 s.162B


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.


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?

Hi Paul

I have no technical basis for my comments below but it does all seem a bit contrived. I wonder if there is some anti-avoidance rule that will catch it. Also, is this really what the trust is for. How is the interest on the loan paid? If from someone related to family and no interest is it arguably a further settlement (what are terms of loan)? Does it put the house at risk? Who lives in the house? Is this all really good for the beneficiaries?


Sara Spencer | Trust Manager

Sara Spencer Ltd, 8 Kingsway, Harrogate, HG1 5NQ

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