Double trust scheme

The settlor of a double trust scheme, involving a loan repayable only after his death, has died.

  1. He elected under iht500 for the GWROB rules to apply to avoid a POAT charge. There appears to be an argument that as he had a qualifying interest in possession under trust 1, the election is ineffective for iht purposes, as it does not apply to assets in which he had a beneficial interest in possession. hmrc and Tolley do not appear to agree this is a runner-has anyone had success with this argument?

  2. Even if the iht 500 election is ineffective for iht, hmrc are of the view there would have been a GWROB in the loan and/or the house, so POAT probably does not apply anyway. I understand they are running a test case-is this happening and is there a result yet?

  3. Should the PRs say there is no GWROB, while having to reveal the scheme as iht 403 asks about details of any iht500 election, and then apply for clearance? If they do, will they get it, or will hmrc simply say they cannot give it as there is no conclusion in their case.

  4. Would the PRs be safer to lodge iht on the worst case scenario of the whole house being subject to a GWROB, on a without prejudice basis to avoid future penalties and interest.

  5. Any general comments/advice/experience would be appreciated.

Simon Northcott