Mrs Pride was the principal beneficiary of a family property trust immediately before her death in October 2016. The case raised a number of questions about the correct interpretation of IHTA 1984, sections 49 (Treatment of interests in possession) and 175A (Discharge of liabilities after death) and of FA 1986, sections 102 (Gifts with reservation) and 103 (Treatment of certain debts and incumbrances) – Pride v HMRC  UKFTT 316 (TC).
The long judgment included the following conclusions:
- “Viewed realistically, the loan notes were a debt incurred by the property trust.”
- “By operation of s49(1), the loan notes were to be treated as a debt incurred by Mrs Pride.”
- The loan notes were not an incumbrance.
- “We find that the extent of the abatement of the liability represented by the loan notes should be 100%, given that the whole of the consideration given for the loan note debt consisted of property derived from Mrs Pride.”
- “The tribunal has jurisdiction to determine the substantive issue.”
- “If we are wrong in our conclusions about s103, such that s103 does not apply to abate the loan note liability to nil in determining the value of Mrs Pride’s estate immediately before death, then s175A would apply to the same substantive effect i.e. the loan note liability may not be taken into account in determining that value.”
- “The loan notes were enjoyed by children’s trust to the entire exclusion of Mrs Pride and any benefit to Mrs Pride, from 31 October 2009 to 31 October 2016.”