Gifting share in home

Most gifts made during a person’s life are not subject to tax at the time of the gift. These lifetime transfers are known as ‘potentially exempt transfers’ or ‘PETs’. The gifts or transfers achieve their potential of becoming exempt from Inheritance Tax if the taxpayer survives for more than seven years after making the gift. There is a tapered relief available if the donor dies between three and seven years after the gift is made.

The rules are different if the person making the gift retains some ‘enjoyment’ of the gift made. This is usually the case where the donor does not want to give up control over the assets concerned. These gifts fall under the heading of ‘Gifts With Reservation of Benefits rules’ or ‘GWROBs’. A common example is where an elderly person gifts their home to their children (who usually live elsewhere) and continues to live in the house rent-free.

There is an interesting exception to the GWROBs rules that occurs when there is a gift of an ‘undivided shares of land’. This can happen when for example an adult child moves in with a parent and the parent transfers the home into joint ownership (usually a 50:50 split). Where the two people jointly occupy the property and share the outgoings then HMRC will accept that this is not a GWROB. However, the relief is not straightforward and HMRC will carefully examine such arrangements to ensure that they meet the necessary requirements for relief.

Planning note

If you are contemplating any of the arrangements set out in this post please call to clarify that no adverse tax consequences will occur as a result.

Posted in Inheritance Tax

Exeter Accountant MJ Smith & Co

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Client Portal Login

Forgot Password?

Latest News

The VAT concept of business

The VAT system is policed by HMRC and there can be heavy penalties for breaches of the legislation. There are …
Read More

What is domicile?

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong …
Read More

Outline of special rules for use of vouchers and credit tokens

HMRC’s Employment Income Manual is clear that there are special rules when an employee receives goods or services by reason …
Read More

Twitter Feed