Holiday Home and IHT (GWR)

Jona

Mum & Dad are buying a holiday home.
Want to add daughter as tenant in common (say 50% M&D, 50% daughter) as a gift to her for IHT planning.

So if they all want to use the property as a holiday home - is there any gift with reservation here?

On one hand if you do this with a home then M&D would have to pay daughter a rent to avoid GWR. But if M&D use hol home for a week, then daughter uses it for a week - they both owe each other the same rent, so net position is £0 due...........

On the other hand it is a holiday home and not let, so no rent due anyway?.........

Should they just do the whole thing via a Trust.....

Bit of a head scratcher - anyone come across similar?

Jona

Or am I over thinking this and it is simply a PET.

If they are giving the daughter the cash as a gift - the fact that the daughter chooses to jointly buy a property with it is neither here nor there....

benjaminfabi

I think the Ramsey principle would take effect if the gift was cash then a property was bought for M&D to enjoy.

But on your original point about both equitable owners having an equal opportunity to enjoy the property, this sounds perfectly acceptable without creating a GWR. I'm not an expert on it but they still own half of the property and therefore also half of the available rent free occupancy.

Jona

Thanks @benjaminfabi

Think I'll find a friendly local SETP practitioner to have a chat with.

arongunningham

Provided you all have use of the property and equally share the running costs, the Taxman will accept that there is no reservation of benefit and so not part of your estate for IHT. Once you have transferred the property into joint names you need to make sure expenses are shared.

source: http://www.westwaters.co.uk/post.html/40/An-IHT-efficient-gift-of-your-holiday-home

Jona

That is spot on, thanks @arongunningham

Oldhandnewhand

@Jona said:
Mum & Dad are buying a holiday home.
Want to add daughter as tenant in common (say 50% M&D, 50% daughter) as a gift to her for IHT planning.

So if they all want to use the property as a holiday home - is there any gift with reservation here?

On one hand if you do this with a home then M&D would have to pay daughter a rent to avoid GWR. But if M&D use hol home for a week, then daughter uses it for a week - they both owe each other the same rent, so net position is £0 due...........

On the other hand it is a holiday home and not let, so no rent due anyway?.........

Should they just do the whole thing via a Trust.....

Bit of a head scratcher - anyone come across similar?

I started to answer as if they already owned it and we "adding" her, you mean "include" from outset, the gift then isn't the property but the cash and the daughter buys her part and the gift is thus a PET, best documented, no GWR issue that I can see.

If they DO subsequently let it the income is, and to avoid any GWR contention, be split accordingly.

However take a look at: IHTM44000

Pre-owned assets: property in charge: land

The POA charge applies where the chargeable person occupies any land (‘the relevant land’) FA04/Sch15/Para 3(1), either alone or with other persons, and either the

disposal condition (IHTM44004), or
contribution condition (IHTM44005)

 IHTM44000 IHTM44005 

Pre-owned assets: property in charge: the contribution condition - land_____

"The contribution condition applies not only where the contribution provided by the chargeable person is directly used to buy the relevant land but also where the contribution is indirect as well. So, if the chargeable person provided all or part of the consideration for the purchase of property for another person and that person then sold that property and used the proceeds to purchase other land occupied by the chargeable person, the contribution condition is satisfied."_____

So unless it is a GWR you are under POAT. Except, they may be able to deduct a proportion if they have no access to say a bedroom/

It might be worth exploring an outright gift with the parents having no right of access.

"A person may be in occupation if they are storing possessions in a property - but only if they also had the right of access to the property to use it as they wished - "

amarshall

I love the way this forum kicks up topics that are unexpectedly relevant.

We've got a client who has just spent a weekend in her parents holiday home. My understanding is that the parents intend to gift the holiday home to our client and her sibling(s).

I need to revisit GWR & POAT!