The Bower case judgement is likely to affect a number of trust arrangements claiming a discount on IHT from HMRC. Last year, HMRC won its appeal on the case, but the appeal notes have only just been released.

The case concerned a 90-year-old man who set up a Discounted Gift Trust and claimed a discount on the tax payable, which the special commissioner had agreed would be £4,200. The judge changed this to a token £250, and the effect on the tax saving was that an additional £1,580 of tax would be payable. In itself not very exciting or particularly big news, but it is the principle that HMRC is pursuing here. Unless there is a further appeal, then we will see significant changes to the discount rules shortly.

In the real world, trusts already in place with discounts agreed are likely to be unaffected, but cases going forward are likely to get a lower level of discount, which is exactly what HMRC wants.