Life Policies: life policy linked with a loan and inheritance trusts: original scheme: legislation designed to counteract scheme
The scheme was considered to have all the hallmarks of a gift with reservation (GWR) (IHTM04071) - the transferor had made a gift but was deriving a benefit from it.
So FA86/SCH20/PARA5 (4) was introduced. This provides that if anyone makes a gift with reservation by way of settlement and then lends the trustees money whatever investment the trustees make with the loan monies will also be treated as part of the GWR property. This stopped the original scheme - because each arrangement involved a settlement under which the transferor was an object.