We were approached by our client who’s father had passed away. He made a substantial lifetime gift to his daughter to assist in purchasing a property.
The father was living in the property rent free, so a benefit might have been retained from the gift. This could have potential costly IHT implications or a hefty income tax charge by falling foul of anti-avoidance legislation.
We researched to establish whether the gift fell within the ‘Gift With Reservation of Benefit’ legislation or the ‘Pre-owned asset’ rules.
It was determined that the transaction fell within the ‘Pre-owned asset’ rules, however it was likely subject to an exemption as the rental value was de-minimus.
This provided clarity to our client that no reporting was required in respect of the transaction and IHT or income tax was not payable.
For further piece of mind, we recommended the client obtain an external valuation of the rental value.
ETC Tax is happy to advise on Inheritance Tax, please do get in touch
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