Gift with reservation of benefit (GWR or GROB) definition

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IHT—gifts with reservation of benefit

IHT—gifts with reservation of benefit History of the gift with reservation (GWR) regime The old capital transfer tax regime contained no rules concerning the reservation by a transferor of any benefit out of a gift they made and the loophole was widely exploited. For example, people would transfer property or land to someone else but still live in that property. However, under the inheritance tax (IHT) regime, new rules came into effect from 18 March 1986 in order to counter the abuse (at the same time as the introduction of potentially exempt transfers). Many arrangements were devised over the years to enable donors to give assets away but still retain the benefit. This practice led to the Finance Act 2004 introducing an income tax charge on benefits received by the former owners of property, referred to as the pre-owned assets charge (POAT). What is a gift with reservation of benefit? Under section 102 of the Finance Act 1986 (FA 1986), where an individual disposes of any property...

Historical IHT planning schemes

Historical IHT planning schemes Introduction The core legislation found in the Inheritance Tax Act 1984 (IHTA 1984) and the former capital transfer tax regime contained an oversight. There was nothing to prevent an individual seeking to reduce exposure to inheritance tax (IHT) on death from making a lifetime gift (with the hope of surviving at least seven years) while continuing to have the use or enjoyment of the gifted asset. Under the legislation, it was therefore possible for an individual effectively to give away their home for IHT purposes while continuing to occupy it. The gift with reservation of benefit (GWR or GROB) provisions introduced by section 102 and Schedule 20 to the Finance Act 1986 (FA 1986) were designed to close this loophole. Where the GROB provisions apply, the gifted (or in some cases, substituted) property is generally treated as remaining part of the donor’s estate for IHT purposes while the donor continues to benefit. The provisions can apply if (among other things) an individual...

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The deceased gifted her main residence (Property A) to her son during her lifetime along with some cash. She later moved out of the property and her son, using the cash gifted to him, bought a new property (Property B) in his name for her to live in. We understand that the residence nil rate band (RNRB) is not available in respect of Property B but is there any scope to claim the RNRB in respect of Property A under the downsizing rules?

The deceased gifted her main residence (Property A) to her son during her lifetime along with some cash. She later moved out of the property and her son, using the cash gifted to him, bought a new property (Property B) in his name for her to live in. We understand that the residence nil rate band (RNRB) is not available in respect of Property B but is there any scope to claim the RNRB in respect of Property A under the downsizing rules? It has been assumed for the purposes of this Q&A that the gift of cash was made after 5 April 1998; that the deceased, on death, did not hold a qualifying residential interest; and that at all relevant times, the deceased was resident and domiciled in the UK. Consideration should be given to whether the gift with reservation of benefit (GWR or GROB) rules and the pre-owned asset tax (POAT) regime apply to the scenario described in this Q&A. Gift with reservation/Gift with...