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Mrs Pride died in October 2016. She had been the principal beneficiary of a family property trust established in 2002. This was a complex arrangement, but broadly, the trust held a property, had indemnified loan notes to the effect that the trust was the debtor, and held two investment bonds.
The executors argued that the value of the loan notes should be deducted from the deceased’s estate for inheritance tax. HMRC said the loan notes formed part of Mrs Pride’s estate immediately before death.
The First-tier Tribunal analysed the arrangements and concluded that although the debt could, as a matter of principle be taken into account, its value was nil. Therefore inheritance tax was payable on the value of the assets in the trust without any reduction for the debt.
The taxpayer’s appeal was dismissed.
