Phizackerley

Another failed IHT scheme, and yet another waste of reams of paper will now follow.

The planning undertaken by the deceased and his wife involved the use of the nil rate band discretionary trust IOU scheme, oft promoted to the middle England sector.

Why did it fail ? Because the planning neglected to take account of s. 103 FA 1986 which, in brief, prevents the deduction of a debt in calculating an individual’s estate chargeable to IHT where that debt can be matched up with an earlier gift by the individual.

This will come as no shocking surprise to many; section 103 has long been identified as an area of concern to those with the profile of the Phizackerleys and, despite the endeavours of James Kessler QC in representing the taxpayer at the Special Commissioners, one finds it difficult to accept that a man possessed of such colossal intellect as Mr Kessler privately believes his own arguments were anything more than a try on.

Leaving aside those who will have been flogged a dud scheme, often at premium cost, and who now face having to start over with their estate planning, there remains the wider issue, over who is doing what to whom, and why ?

Peter Twiddy, in his time as head of CTO, made no secret of his distaste for the implementation of complex schemes involving elderly peoples’ homes, and most particularly the questionable sale of packaged schemes to those who are susceptible to buying into media driven IHT concerns without having more than the faintest idea what they are really doing (and let’s face it, usually with no small measure of morally dubious encouragement from their offspring).

Whilst the motives of the Revenue in pursuing such schemes are, in part at least, laudable, one has to wonder whether the CTO would be better employed in lobbying their paymasters for a sensible change in the law. A worthwhile hike in the IHT nil rate band would remove the demand for these schemes and could be easily paid for by a restriction in the ridiculously generous, and unmerited, capital gains tax rules for principal private residences.

This distaste has little, if anything, to do with the tax at stake; which is but a tiny, tiny drop in the very big ocean which is the Treasury's coffers. Rather, it is directed at the inppapropriate and unprofessional actions of those advisers who are often too readily willing to take advantage of the elderly and fearful.