After the Upper Tribunal decided in favour of the Elborne family, I wrote about the old IHT double-trust home loan scheme and HMRC’s unsuccessful attempts to prevent the £1.8 million promissory note from reducing the value of Mrs Elborne’s estate.
The Court of Appeal has now unanimously dismissed all ten grounds of HMRC’s appeal in Mark Elborne & Ors v HMRC [2026] EWCA Civ 894.
Sir Launcelot Henderson’s conclusion could hardly have been clearer:
“In simple language, I consider that the scheme worked.”
The result is important, but so is the route by which the Court reached it.
First, the Court treated the Life Trustees’ liability under the Note as an incumbrance on the trust property under IHTA 1984, s162(4). Following Halabi, the trustees’ right of indemnity gave them a proprietary interest in the trust property. The liability therefore reduced the value of that property for IHT purposes.
Secondly, s49 did not transform the life tenant into the trustees for every statutory purpose. It brought the settled property into Mrs Elborne’s IHT estate, but it did not attribute the trustees’ debt to her personally. Taken to its logical conclusion, HMRC’s argument would have made her both creditor and debtor under the Note.
The gift with reservation arguments also failed.
Mrs Elborne’s continued occupation of the Old Rectory arose from her life interest, not from the Note given to the Family Trustees. Her occupation did not interfere with the Family Trustees’ enjoyment of that Note.
Nor could a broad appeal to Ramsay and anti-avoidance purpose supply something missing from the statutory language. The arrangements had real legal consequences, including the seven-year survival risk attached to the gift of the Note.
There is one important qualification.
The Court did not endorse the Upper Tribunal’s alternative conclusion on the property-derived condition in s103. It left that question open for a case in which it affects the outcome.
This is a victory concerning historic legislation, not an invitation to dust off a 2003 planning scheme. The Court itself points to the 2006 changes and the later DOTAS and GAAR regimes.
My earlier article, covering the background and the Upper Tribunal decision, is here:
https://taxbarristeruk.com/the-loan-arrangers-part-two-home-loan-is-where-the-heart-is/
So, after the FTT, Upper Tribunal and Court of Appeal… for HMRC at least, home (loan) remains where the hurt is.