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In Mrs Elborne’s case, HMRC disagreed that her property, and the value of the loan debt, should be deducted from her estate for IHT purposes.
This decision was upheld by a first-tier tax tribunal, meaning the family now face a potential tax bill of 40pc.
However, it did not agree with HMRC that assets of the trust should be included in the estate, inflating its value and potentially doubling the tax bill.
A spokesman for HMRC said: “We welcome the first-tier tribunal’s decision, which confirmed our longstanding view that properties subject to these arrangements remain an asset of an estate on death and are subject to IHT.”
Mr Mooney said there was no “one-size-fits-all” when it came to home loan schemes. This means some families, instead of winding up the trusts, are instead “waiting to see what happens” when the person dies and HMRC assesses their IHT liability.
However, Jade Gani, of Circle Law, said the recent case shows that families who make no IHT saving and subsequently challenge HMRC’s decision could face “expensive and protracted litigation”.
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