Introduction
Recent HMRC case law has been another reminder that inheritance tax and trust planning is becoming increasingly technical and increasingly scrutinised.
A number of recent decisions show HMRC continuing to challenge artificial or aggressive structures, while the courts are also taking a fairly pragmatic approach to how tax legislation should actually operate in practice. For clients considering inheritance tax planning, the cases are useful reminders that the detail matters and that arrangements which look effective on paper can create unexpected consequences later.
What is Inheritance Tax?
Inheritance Tax is a tax on the estate of someone who has died, including their property, money and possessions (2.). It can also become relevant during a person’s lifetime, particularly where gifts or trusts are involved. This is why inheritance tax advice is not simply something to think about when administering an estate; it can form an important part of succession and estate planning much earlier.
In the UK, the rules contain a number of thresholds, exemptions and reliefs, and the position can become more complicated where trusts, overseas assets, lifetime gifts or charitable giving are involved. The recent cases below show just how quickly those complications can become significant.
How Does Inheritance Tax Work?
At a basic level, the value of an estate is considered against the available inheritance tax thresholds, exemptions and reliefs. The standard nil-rate band is currently £325,000 (1.) and the standard rate of inheritance tax is 40% on the part of an estate above the available threshold. A residence nil-rate band of up to £175,000 (2.) may also be available where a qualifying home passes to direct descendants, subject to the relevant conditions and tapering rules.
There can also be a reduced 36% rate on some assets where at least 10% of the net estate is left to charity (2.). That reduced rate is particularly relevant to one of the recent decisions considered below, which demonstrates how carefully the rules can be applied in practice.
So, how much is inheritance tax? There is no single figure that applies to every estate. The amount depends on the value and composition of the estate, the available allowances and exemptions, any lifetime gifts, trusts, charitable gifts and the individual circumstances involved.
Death Tax vs. Inheritance Tax
People sometimes search for “death tax” when trying to understand how inheritance tax works. In England and Wales, Inheritance Tax is the relevant UK tax and is the term used by HMRC. It is not simply a tax triggered by death in isolation: lifetime transfers, trusts and the way assets are structured can all affect the eventual position.
Recent HMRC Cases
Bhaur vs. Equity First Trustees
In 2023, Bhaur v Equity First Trustees showed the courts taking a firmer line on highly artificial tax planning arrangements. The family attempted to unwind transactions on the basis of mistake after the structure created significant tax consequences, but the court found the arrangements were inherently risky and declined relief.
Lincoln vs. HMRC
In 2024, Lincoln v HMRC confirmed that foreign assets inherited in Malta still formed part of the UK IHT estate because the deceased was deemed UK domiciled. The case is another example of how overseas assets are often not as “outside the UK tax net” as many assume.
JTC Employer Solutions Trustee Ltd vs. Garnett
Also in 2024, JTC Employer Solutions Trustee Ltd v Garnett involved employee benefit trust structures which unexpectedly created very substantial IHT liabilities. The court ultimately allowed rescission and also criticised aspects of HMRC’s procedural handling of the matter.
D Marks vs. HMRC
In 2024, D Marks v HMRC demonstrated how carefully the 10% charitable threshold rules are interpreted. Attempts to revisit earlier trust appointments in order to secure the reduced 36% IHT rate were unsuccessful, with the tribunal siding with HMRC.
Lexgreen Services Ltd vs. HMRC
And in 2025, Lexgreen Services Ltd v HMRC saw a company argue it could not fall within legislation referring to transfers made “during the life of the settlor” because, technically, a company is not “alive”. The tribunal rejected that argument and confirmed a corporate settlor could still face relevant property charges on a 10-year anniversary trust charge.
What Can We Learn From These Cases?
Taken together, these cases reflect a wider trend: structures that may once have appeared clever or technical are now being examined far more critically, particularly where they produce unusual tax outcomes.
They also show that inheritance tax UK rules cannot always be considered in isolation. Domicile, trusts, charitable giving, corporate structures and the history of earlier transactions can all change the position. What appears to be a relatively straightforward estate planning decision can therefore become much more technical once the wider facts are taken into account.
Common Inheritance Tax Misconceptions
One of the recurring themes is the danger of assumptions. Overseas assets are not automatically outside the UK inheritance tax net. A tax planning structure cannot necessarily be unwound simply because it later produces an undesirable result. Equally, charitable and trust rules can depend on precise statutory requirements rather than the broader intention behind the planning.
That does not mean inheritance tax planning should be avoided. It means the planning needs to be considered carefully, with a clear understanding of how the arrangements are intended to work both now and in the future.
Inheritance Tax Advice and Planning Ahead
For clients and advisers alike, it is another reminder that going early with succession and IHT planning is usually far easier, and far cheaper, than trying to repair things later once disputes, domicile questions or trust complications arise.
Good inheritance tax advice should look beyond the headline tax rate. It should consider the estate as a whole, the client’s objectives, family circumstances, trusts, lifetime gifts, charitable intentions and any assets held outside the UK. Where more complex arrangements are being considered, taking advice before transactions are put in place can help identify risks that may otherwise only become apparent much later.
Written by Veronica Boboc, with additional research by Denmin Moore.
Last Updated 17 August 2026
Reference
- Inheritance Tax thresholds and interest rates – GOV.UK https://www.gov.uk/government/publications/rates-and-allowances-inheritance-tax-thresholds-and-interest-rates/inheritance-tax-thresholds-and-interest-rates
- How Inheritance Tax works: thresholds, rules and allowance https://www.gov.uk/inheritance-tax/gifts
- Inheritance Tax – thresholds – GOV.UK https://www.gov.uk/government/publications/inheritance-tax-thresholds/inheritance-tax-thresholds
