The First-tier Tribunal have considered the case of Hall and Lopez as trustees of the Raboni estate v HMRC [2023] UKFTT 32 (TC).
Mrs Raboni had died and her will had granted Mr Boggia the right to live in her house until his death. There was no alternative provision made for Mr Boggia in the event of this gift failing. There was a small liability to IHT and there were insufficient funds in the estate to pay this. Rather than selling the house to pay the IHT the residuary beneficiaries decided to pay the IHT out of their own funds.
Mr Boggia lived in the house until his death, at which point HMRC assessed IHT on the grounds that he held an interest in possession.
It was contested that as on Mrs Raboni’s death there had been insufficient funds to pay the IHT and retain the property the interest in possession conferred on Mr Boggia in her will had failed. There was no alternate provision for Mr Boggia so he had no rights to the property on his death.
It was held that if the residuary beneficiaries had not voluntarily chosen to pay the IHT they could have compelled administration of the estate and HMRC could have compelled the payment of the IHT. The only option in these circumstances would have been to have sold the house denying Mr Boggia an interest in possession.
Mr Boggia therefore did not have an interest in possession and no IHT was due in respect of the property on his death.
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08691.html
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