Back in May 2025, we discussed the Upper Tribunal's decision in Elborne v HMRC [2025] UKUT 00059 (TCC), in which a dispute concerning the purported "home loan scheme" resulted in a significant victory for the taxpayer.
At the time, HMRC (rather unsurprisingly) sought permission to appeal. Given the complexity of the issues involved and the substantial inheritance tax liability at stake, we wondered whether the case might ultimately find its way before the Supreme Court.
However, on 13 July 2026, the Court of Appeal handed down a decisive judgment in favour of the taxpayer. Not only did it dismiss HMRC's appeal in its entirety and uphold the Upper Tribunal's decision, but it also gave little encouragement to HMRC should they wish to purse the matter further.
A quick recap of Elborne v HMRC
By way of illustration, please see the diagram below (for further detail, please see our previous article linked here:
Step 1 – Mrs Elborne sold her property to a Life Settlement in exchange for an unsecured debt (effectively an ‘IOU’).
Step 2 – Said ‘IOU’ was gifted to the Family Settlement.
Step 3 – Mrs Elborne needed to survive 7 years from the date of the ‘gift’ for the value to pass free of Inheritance Tax (IHT) on her death (which she did).
Step 4 – on her death, Mrs Elborne’s Executors reported the IHT due on the basis that the full value of the ‘IOU’ was deductible.
The Problem: HMRC challenged this assessment on the basis that said ‘IOU’ was not a valid debt for IHT purposes.
The Result: Mrs Elborne’s Executors took HMRC to the Tax Tribunal and, as they say, the rest is history!
HMRC’s Appeal
HMRC set out not one but 10 grounds of appeal, contending that the Upper Tribunal had erred in law in overturning the initial determination by the First Tier Tax Tribunal and had misapplied or misunderstood the existing authorities.
HMRC also revisited the argument that the arrangement in contention gave rise to a ‘gift with reservation of benefit, a point explored in our previous article. The Court of Appeal was similarly unpersuaded by this line of argument.
In reality, the Court of Appeal did not create any new law. Rather, it reaffirmed and clarified what the law always was. Having considered each of HMRC's grounds of appeal, the Court rejected them all and endorsed the Upper Tribunal's analysis.
Whilst it is theoretically possible for HMRC to seek permission to appeal to the Supreme Court, the Court of Appeal's comprehensive treatment of the issues leaves little obvious room for further challenge. As matters stand, it appears doubtful that the Supreme Court would consider the case raises a point of law of sufficient public importance to warrant another appeal.
The judgment therefore represents a substantial victory for taxpayers. Not only does it provide welcome certainty in an area that has generated considerable litigation, but it also reinforces the principle that HMRC cannot simply disregard genuine liabilities because it dislikes the tax consequences that follow.
Would it work today?
One of the more interesting observations made by the Court of Appeal was that the success of the Elborne arrangements was very much a product of their time. The planning pre-dated both the Disclosure of Tax Avoidance Schemes (DOTAS) regime and the General Anti-Abuse Rule (GAAR) introduced by the Finance Act 2013, allowing the Elborne team to take advantage of the inheritance tax treatment of life interest settlements in a way that the Court acknowledged was both effective and, in its own words, "ingenious".
Whilst the Court ultimately confirmed that the arrangements worked under the law as it stood at the time, it is unlikely that the same result could be achieved today. The anti-avoidance landscape has changed significantly in recent years, with HMRC now equipped with a range of legislative tools designed to challenge arrangements of this nature. As such, the real significance of Elborne lies not in resurrecting historic tax planning opportunities, but in the Court's clear affirmation that taxpayers are entitled to rely on the law as enacted and that HMRC cannot simply disregard legitimate arrangements because it dislikes the tax outcome they produce.
If you have concerns about a historic IHT planning arrangement or are acting as an executor where such an arrangement is involved, Laytons' Private Wealth & Philanthropy team can advise on the implications of the Court of Appeal's decision and the appropriate next steps.
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Disclaimer: This publication is provided by Laytons LLP for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to your regular contact at Laytons LLP or Laytons’ Private Wealth & Philanthropy team.