The Special Commissioners decision affecting the Axa discounted gift trust benefiting the taxpayer has been welcomed by Standard Life.
It found the issue around the lifetime gift made by the late Mrs Bower, who died five years after making the gift to a DGT, related to the age of the settlor at the point she made the gift.
HM Revenue & Customs have said someone aged 90 or over would receive little or no discount since they would be uninsurable.
The executors of the late Mrs Bower did not agree with that position and argued a discount should apply.
Standard Life estate planning specialist Julie Hutchison says: “This decision in favour of a life assurer’s discounted gift plan can be seen as a boost. It is a welcome vote of confidence in the general IHT principles behind discounted gift plans, since the decision notes that there was no question of the settlor being treated as having made a gift with reservation of benefit.
“I note however that the Special Commissioner did apply a different methodology in arriving at a revised discount, which reduced from £7,800 to £4,200, whereas HMRC had argued for a discount of just £250. We will be watching carefully for any HMRC appeal and consequent adjustment to the May 2007 Technical Note which HMRC issued setting out its preferred methodology for DGP, which has become the industry standard. This might have to be revisited and we will be liaising via the ABI to see how this is to be taken forward.”