Mother M owns a valuable one bed pied-a-terre in London. M wants to gift a % to daughter D. M has CGT losses to cover potential gain arising. Property has never been main residence of M
M and D will share outgoings on an ownership pro rata basis. Both will occasionally occupy.
It seems unlikely that FA86/S102B(4) will apply as HMRC do not accept this usage as "occupying". Full annual rent is £R pa
On what basis does M have to pay D rent to avoid this being a GWR?
i) R
ii) gifted % of R
iii) daily usage on basis of short term rent
iv) some other basis ?
Replies (10)
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Ooh I love an exam question, especially an IHT one. (Multiple choice so only 2 points forfeit if I get it wrong?)
(i) would definitely do it, so marks for that (the question didn't ask what was the minimum M would need to pay).
IIRC, (ii) is in accordance with HMRC guidance, so does that get me my marks too?
(iii) is the interesting one. It meets s102(1)(b), I'd say, but s102(1)(a) looks much trickier. To my mind, that test is not being met. So... I'm saying not (iii).
(iv) - well, obviously, if (ii) is right, so are many other arrangements, eg gifted % times 2, or plus £10, or....
So... all given answers seem correct [they satisfy ss1a], except (iii).
There is a other possibility - it's a trick question. Montrose says that HMRC does not accept the use as 'occupation'. So
either s102B(3)(a) means there's no GWR [I'm not comfortable with that reading, but it seems that the "except" in ss2 is accepted as meaning that s102 is excluded when either s102B(3) or (4) is satisfied - even though that's not what it actually says]
or s102B(3)(b) can never be satisfied so the GWR cannot be avoided.
Either way, the answer becomes (v), none of the above.
Why does s102B not apply? Did an individual dispose, by way of gift on or after 9th March 1999, of an undivided share of an interest in land?
This is weird. You mention Sch20 para6(1)(a), but...
- s102B applies
- so s102C applies
- s102C(4) in turn applies Sch20 to this Act, apart from paragraph 6
- so does that mean that para6(1)(a) is disapplied? [Why?!]
- and does that in turn mean that the GWR cannot be avoided?
Interesting question, Montrose. I'd be intrigued to know the final conclusion.
I'm not comfortable with that reading, but it seems that the "except" in ss2 is accepted as meaning that s102 is excluded when either s102B(3) or (4) is satisfied - even though that's not what it actually says.
It's not what s102B says - but it is what s102C(6) says.
I used to know all this stuff... really is use it or lose it, with tax.
Tax Dragon wrote:
I'm not comfortable with that reading, but it seems that the "except" in ss2 is accepted as meaning that s102 is excluded when either s102B(3) or (4) is satisfied - even though that's not what it actually says.
It's not what s102B says - but it is what s102C(6) says.
I used to know all this stuff... really is use it or lose it, with tax.
Stop talking to yourself.
It's not good for your mental health.
It's not good for your mental health.
Thanks, Fluds, it's sweet that you care.
Can't be all bad though. I was going to do a bit of IHT revision over the weekend. But the sun came out.
So I haven't moved on from where I left off - that if para6(1)(a) doesn't apply (and it appears not to), what is there to prevent a GWR?
I'd be intrigued to know the final conclusion.
Was there one?
I note example 1(b) in IHTM14332 suggests that "her receipt of rent from him would constitute bona fide possession and enjoyment". Which sounds helpful, but is the language from s102 (the relevant part of which does not apply). As you have noted, s102B (which applies instead) replaces that requirement with one of occupation - and receipt of rent (even lots of rent) is not occupation.
As I see it, the question remains.