How a millionaire’s gift to his disabled son triggered a £6m inheritance tax bill

After a sporting accident left their middle child severely brain damaged and unable to walk, Olaf and Kristina Rogge moved to the countryside for a fresh start. But they could not have foreseen the predicament they now face: they must pay £100,000 a year for the rest of their lives or leave their disabled son to pay millions of pounds in death duties.

Mr Rogge, 72, a retired investor, has now gone to the High Court in an attempt to reverse a series of payments made into trust to buy a house for the benefit of his son. He said he would never have done this had he fully understood the fiendishly complex inheritance tax (IHT) rules.

The Office of Tax Simplification, a governmentappointed adviser, recently recommended a radical overhaul of the system to improve understanding of the levy.

The couple’s problems began after they spent more than £15m to buy and develop a manor house close to the Hampshire market town of Alton. A wing of the house was specially designed to cater for the needs of their son, Stefan, who suffered serious brain trauma during a game of polo in 2009 at the age of 18, leaving him with sight, speech, memory and balance problems.

Most gifts are exempt from IHT if the person who makes them lives for seven more years, and gifts made into a trust for the benefit of a disabled person are exempt from the tax. However, the tax relief did not apply in this case, as Mr and Mrs Rogge

were judged to be benefiting from continuing to live in the property. They unwittingly triggered a little-known tax trap that requires them to pay a market rate of rent on the property for the rest of their lives or risk burdening their son with a £6m IHT bill, with the trust taxed at a rate of 40pc. Court documents say the couple would have to pay an estimated £100,000 a year in rent to the trust if they wished to stay in the property – around £3m over their lifetimes. Their children, as trustees, would have to pay income tax on this rent at 45pc, costing them more than £1.4m, the documents say. Rules on “gifts with reservation of benefit” state that gifts will not qualify for tax relief if the giver continues to benefit from the asset that has been handed down. Mr Rogge said: “I never understood the gift with reservation issues and the fact that my wife and I would have to pay full market rent to occupy a property we had purchased. If I had understood this I would never have agreed to the house being transferred into trust.” Mrs Rogge, 61, said she was “shocked” and “disturbed” by the realisation and that, after conversations with her adviser, she had thought the trust would be completely exempt from IHT. Rachael Griffin of Quilter, a wealth advice firm, said the rules were like “something from a fictional society rather than a modern-day tax system”. The IHT to be paid if the Rogges fail to pay £100,000 in rent each year for the rest of their lives You have less than a month to claim any outstanding compensation relating to the mis-selling of payment protection insurance (PPI).

Two years ago, the City watchdog, the Financial Conduct Authority, set a deadline of Aug 29 2019 for new claims to be submitted.

In May, the most recent month with available data, people who had been mis-sold PPI received £350.7m in compensation.

This brings the total payout since the scandal emerged to £35.7bn. However, one legal expert in the area claimed that this number should be a third higher, as billions remained unclaimed from banks, credit card companies and loan providers.

Financial companies systematically mis-sold PPI alongside mortgages and loans during the Nineties and 2000s.

The insurance was supposed to pay out in the event that the policyholder lost their job, became ill or died. However, few checks were ever made against customers’ other policies, leading to many people being sold cover they already had elsewhere.