Gifting 2nd property (holiday home) - GWROB

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I have a client interested in gifting their holiday home to their children. As it stands, the property has not been let commercially as a holiday let for many years and the  children and their families are the main users although my client does visit the property on occasion. 

I have considered several options (gifting to children directly, using a trust) and both IHT and CGT implications, all on the basis that there is absolutely no usage of the property by my clients going forward and I am satisfied with these calculations.

After discussing this further with the client, they've started mentioning that they may use the property on occasion after all, potentially with or without their children. New can of worms opened!

Whilst I understand the intentions behind GWROB/POAT I've always found it hard to separate what must be considered and when - with my narrow understanding being if it could be a GWROB this takes precendence over POAT. 

In this case, I think GWROB would apply as there is no recycled cash and it's the property they gifted that they would be benefitting from.

The question is then the value of the "rent" they would have to pay to avoid this being a GWROB. When I've Googled, there seems to be some debate as to what the rent charge would be - and whether this was just for the period it was actually used or it would be for the full annual rental value. 

My initial thought (worthless in tax, I know!) was that by paying a full market rate for any usage (as in the rate the public would pay for a similar break - £1,000 per week etc.) would remove the GWROB issues. However, when I've Googled there seems to be some debate as to whether this is sufficient and whether the full annual rental value would need to be paid, but I'm not sure as to where this view comes from.

Does anyone have any thoughts on what rent would be suitable?

For the avoidance of doubt, the children (donee) would theoretically have the right to say "no" to their parent but in practice would be unlikely to do so unless the property was already agreed to be let commercially on the dates requested (as mentioned previously, it's not currently let commercially but there is an appetite to do so by the children and they would be the recipients of any rent and do all the organisation etc.). 




Replies (3)

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By Justin Bryant
02nd Aug 2023 17:02

99% of what you read on Google will be wrong. If you consult a tax specialist they can advise on how to do this properly with no need to pay MV rent (no-one sensible does that).

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Replying to Justin Bryant:
By unsure_accountant
03rd Aug 2023 09:23

Justin Bryant wrote:

99% of what you read on Google will be wrong. If you consult a tax specialist they can advise on how to do this properly with no need to pay MV rent (no-one sensible does that).

Any nudge in the direction of how we get around the GWROB issue, then? I've worked in a practice previously with many private tax specialists and cannot recall ever seeing a way other than paying market rent to avoid GWROB issues, to the extent of legal obligations being put in place to facilitate this. You're benefitting from a gift you made unless you pay the rent and I can't see how this would ever not be the case.

As you can hopefully pick up from my post, Google isn't the source of any decisions - it's just useful to pick up previous discussions/articles on similar points to see if opportunities/pitfalls are still available. However, with GWROB the examples in guidance aren't at all helpful in this case (as they often aren't if there's anything "difficult" to consider).

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