In a Court of Appeal judgment, Sir Launcelot Henderson concluded that Ms Elborne and her advisers had “succeeded in implementing an ingenious scheme”.
He said the scheme worked because it predated changes in anti-avoidance legislation. Home loan schemes no longer work.
Nick Porter, of Buckles Law, called it a “landmark decision” and a “rare win” for taxpayers over HMRC.
He said: “This decision could potentially affect thousands of families in a similar position, and advisers with clients who used these arrangements, or who are facing HMRC challenges to them, should take note.”
Mike Warburton, The Telegraph’s tax columnist, said: “HMRC never liked these schemes and came up with several grounds of attack. I believed that they worked at a technical level but warned that they carried a risk of attack, which proved to be the case.
“The big problem was that it was seldom worthwhile for executors to challenge HMRC, given the high cost of a court action compared with the tax involved. So HMRC tended to win the cases by default when the executors backed down.”
Inheritance tax is charged at 40pc on assets over the nil-rate band of £325,000, or £1m for a couple who own their home and leave it to their descendants. Gifts made more than seven years before the giver’s death are not subject to inheritance tax.
HMRC chased Ms Elborne’s family for inheritance tax in 2017, arguing the home loan scheme did not work. In 2023, the dispute reached the First-tier Tribunal, which found that the family owed up to 40pc tax on the £1.8m property.
Both sides then appealed to the Upper Tribunal, which ruled in favour of Ms Elborne’s executors. The executors’ successful appeal saved the estate an estimated £700,000 in tax.
