Please explain the Phizackerley case and why the Special Commissioners and the Revenue did not accept the nil-rate discretionary trust in this case?
Warburton: Dr Phizackerley and Mrs Phizackerley were a married couple. Mrs Phizackerley had never worked. Dr Phizackerley provided all the funds for the purchase of the house. The house was purchased in joint names so Dr Phizackerley made a gift to Mrs Phizackerley at the time of purchase. At the time of drafting their wills, they severed their joint tenancy and became tenants in common, so allowing the half-share to pass under the wills. Mrs Phizackerley died, leaving £150,000 to a discretionary trust and the residue absolutely to Dr Phizackerley. The value of her estate on death was only £210,000. Her executors assented her property (share of the house) to her surviving husband absolutely who gave an IOU for £150,000 to the trustees of the DT. Dr Phizackerley subsequently died. His executors claimed a deduction for the debt of £150,000 (plus indexation) which was refused by HMRC. The reason for the refusal was anti-avoidance provisions in s103 FA 1986. The debt had been incurred by D
