Tribunal allows trustee's appeal in inheritance tax case

In Accuro Trust (Switzerland) SA v HMRC [2025] UKFTT 464 (TC), the First-tier Tribunal (FTT) held that when a non-UK domiciled individual added assets to an offshore trust and later became UK-domiciled, assets deposited after becoming UK domiciled remained 'excluded property', for the purposes of inheritance tax (IHT).

Background

A settlement known as the Tiodab Trust (the Settlement) was established in Switzerland in September 1992, by a settlor who was not domiciled in the UK. On the 6 April 2005, the settlor became deemed domiciled in the UK and, subsequent to this event, added a substantial amount of cash to the Settlement.

In 2012, Accuro Trust (Switzerland) SA (the Trustee) reviewed the trust's 'property' to pay a ten-year anniversary charge. Cash added to the Settlement after the Settlor became deemed UK domiciled, was considered 'relevant property' and not 'excluded property', due to section 48(3) (as it then was), Inheritance Tax Act 1984 (IHTA). A ten-year anniversary charge of £1.7m was paid to HMRC.

Two years later, after reviewing the payment, the Trustee changed its view and requested a repayment of the anniversary charge from HMRC, under section 241, IHTA, on the ground that the classification of the Settlement's funds as 'relevant property' was a mistake. HMRC relied on section 255, IHTA, to refuse the Trustee a repayment on the basis the Trustee had paid the tax 'on a view of the law then generally received or adopted in practice'. The Trustee appealed to the FTT.

FTT decision 

The appeal was allowed. 

In determining the appeal, the FTT considered the meaning of section 48(3), IHTA, and the interpretation of 'at the time the settlement was made'. If the property in question was part of the Settlement at the time it was made, then it would be subject to IHT. 

HMRC argued that 'at the time the settlement was made', includes both the time when a settlement is originally constituted and the time when it is further constituted when any further property is transferred to it i.e. in March and April of 2006, a year after the Settlor became deemed UK domiciled. 

The Trustee argued that the time the Settlement was made was the date when the Settlement was first created as a matter of trust law i.e. September 1992, 13 years before the Settlor became domiciled in the UK. 

In the view of the FTT, the words 'at the time the settlement was made' could not be understood to mean each and every time a settlor deposits property into a settlement.

The FTT also rejected HMRC's argument that the property should not qualify as excluded property on the basis that it was made and accepted on a view of the law then 'generally received or adopted in practice'. The FTT concluded that, taking into account practitioner evidence, HMRC's view of the law was not 'generally received or adopted in practice'. 

Comment 

Although the law was  changed in July 2020 (by Finance Act amending section 48(3), IHTA), to provide that the excluded property test is the domicile of the settlor at the time the property became comprised in the settlement, this decision provides some clarity for trustees considering pre-July 2020 cases. It is surprising that HMRC chose to fight this case and will be interesting to see if HMRC seek permission to appeal the FTT's decision to the Upper Tribunal. 

The decision can be viewed here.