In an IHT home loan scheme, as the liability under a promissory note fell to be abated by the consideration for the note, the amount of the liability under the note should be abated to nil.

Summary

In an inheritance tax (IHT) home loan scheme, as the liability under a promissory note fell to be abated (under FA 1986, s 103) by the consideration for the note (i.e., the value of the property on disposal), the amount of the liability under the note should be abated to nil.

Background

In November 2003, an individual (VE) entered into a home loan scheme for IHT purposes and disposed of her residence to the trustees of a settlement in which VE had an interest in possession (the ‘Life Settlement’) in exchange for a promissory note issued by the trustees of the Life Settlement. The promissory note was subsequently gifted by VE to the trustees of a settlement under which she was excluded from