Determinable life interest schemes – the end of Eversden?

When the Revenue appeal in CIR v Eversden 2003 STC 822 was dismissed by the Court of Appeal, the Court acknowledged Revenue protestations that the way was being opened to widespread tax avoidance. Carnwath LJ felt however, that the law was clear and that if a remedy were required, the Revenue would have to seek it from Parliament (See “From the Courts” on p. 4 of the June issue of Trusts and Estates). In “From the Revenue on p5 is the text of a Press Release announcing that a new clause of the Finance Bill is to be tabled, to counter the effect of the Court of Appeal decision.

In its favour, it may be said that the new clause appears to be narrowly focused. It does indeed seem to be limited to ensuring that the Reservation of Benefit provisions may apply in defined circumstances where a spouse exempt gift is made by means of a settlement without applying the reservation of benefit rules to all gifts between spouses. Inevitably, the new clause is somewhat complex with a convoluted deeming provision requiring the gift to be treated as made after the interest in possession has ceased. It is perhaps unfortunate that the new clause will only receive Parliamentary Scrutiny at the Report Stage of the Finance Bill, before the whole House of Commons, rather than the more detailed scrutiny by the Standing Committee.