IHTM14152 - Annual exemption - Schemes to exploit annual exemption: transfer by sale

This scheme operates where

• the transferor sells property, usually a house, to the transferee
• the transferee either does not pay purchase price, or pays only part, instead the purchase price, or balance, is treated as a loan by the transferor to the transferee
• each year the transferor releases a part of the loan equivalent to the annual exemption (or funds a repayment of that amount).

In cases of this type you will need to establish

• the sale price and whether this was considered to be the full open market value
• whether the subsequent gifts by way of releases of the loan were legally effective, and
• by whom and on what basis the property was occupied between the sale and the death.

Your examination will enable you to consider the main questions arising

• is the sale within IHTA84/S10 (1) or a transfer of value (IHTM04024) ?
• are the annual gifts effective in general law?
• do the associated operations provisions (IHTM14821) apply?
• is there a claim under the GWR (IHTM04071) rules?

If the parties consider the sale price to have been the full open market value, refer to the District Valuer (IHTM23002) for an informal opinion of value as at the date of sale.

Take account of the terms of the loan. If repayment was deferred or it was repayable by instalments, consider the “future payments” (IHTM14871) instructions.

Bear in mind that under English law a full or partial release of a debt is not effective in law unless it is made by deed.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000) 

In Scots law, acceptilation is the technical term applicable when the creditor discharges his right without payment or performance. Following the Requirements of Writing (Scotland) Act 1995 s11 acceptilation may be implied from the parties conduct or correspondence or proved by any competent means. See the Stair Memorial Encyclopaedia Volume 15 para 873.