S144 and claim for BPR within 2 years of death

The deceased left property he hoped would attract BPR to a discretionary trust. The value is substantial. For a number of reasons the executors do not yet have agreement as to the BPR claim, and the 2 years is running out.

Do members have experience in trying to expedite such a claim, short of chasing letters etc?

If no agreement is reached before the 2 years is up, an appointment to the widow will be necessary, outright or on a revocable life interest. She can then gift the property, or it can be appointed, to the children in the hope she will survive 7 years (as it is anticipated it will be sold before then-so no BPR on her death, unless the proceeds are invested in more BPR assets and she was entitled to BPR when the gift to the children is made).

This raises the risk of CGT on the gift/appointment (unless this can be held over if BPR is applicable,) and the widow may not survive 7 years, so it is far from ideal.

If it is necessary to go down either route, do members have experience as to whether HMRC may challenge the appointment/ gift, or the appointment on revocable life interests and appointment to the children, under GAAR or associated operations or other anti-avoidance measures, and say it was effectively an appointment to the children out of the trust for iht purposes, and should be taxed accordingly on the deceased’s death? Is one route less likely to be attacked than another?

Simon Northcott

This problem is not as uncommon as one might think. In marginal cases it can frequently take more than two years to agree with HMRC whether or not relief is due. You can do an appointment on discretionary trusts conditional on BPR being agreed with HMRC, but otherwise on revocable life interest trusts but that leaves things in limbo until there is agreement. And HMRC may lose interest in continuing the correspondence because then no tax is due either way. So if it is shares, you might want to have some appointed on discretionary trusts whatever the BPR position is.

I have known cases where assets have been appointed on revocable life interest trusts with the IPDI being revoked within months of the death and HMRC do not seem to object to this.

Malcolm Gunn

M B Gunn & Co Ltd