Historical IHT schemes ― home loan and family debt schemes

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

This guidance note explains ‘home loan’ schemes and their variant ‘family debt’ schemes. These IHT planning schemes were popular in the early 2000s to remove the value of the main residence from the individual’s estate. The aim was to allow the property owner to remain living in the property without getting caught by the gift with reservation (GWR) provisions. Legislation introduced from 2003 began to progressively counter the tax benefits.

The creation of home loan schemes has not been a viable inheritance tax mitigation option for twenty years. However, tax practitioners will still encounter arrangements which were set up in the past. The guidance note provides background information on how the schemes worked and the current situation.

For other historic IHT planning schemes see the Historical schemes: Ingram and reversionary lease schemes guidance note and the Historical IHT scheme ― Eversden guidance note.

Home loan (or ‘double trust’) schemes

These schemes worked by means of two trusts as follows:

•
an individual would set up a trust in which

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