CGT implication

Hi All

I have been asked to give my view on whether there is prospect of success in the following scenario to circumvent CGT. However, it doesn’t sit well with me and I would be grateful for the views of others.

'Wife owns a holiday home which would have a huge CGT liability if sold. Suggestion is to gift the home to the husband entirely as spousal transfers are tax exempt. It isn’t even being suggested that it be transferred into joint names to make use of both exemptions, mainly because husband is gravely unwell.

I don’t believe reservation of benefit has been raised with wife and the expectation is she will continue to have use of the property during husband’s life.

Husband is expected to predecease wife so he then leaves his entire estate to her on death, where she re-inherits her former holiday home at the CGT uplift and thereafter gifts it outright asap to children. Assuming she survives the gift to children by the usual 7 years the property is also then IHT free.

I am concerned about transparency etc amongst other things, and approached an Accountant for their view, but the only response was “there are pitfalls and potentially it could fall within the General Anti-Abuse Rule (GAAR)”.

I wonder whether it could also trigger an issue with POAT?

Obviously the gift would be a GROB for IHT during husband’s lifetime but would that impact the CGT or the DOD uplift?

I look forward to hearing from those who will be far more in the know about CGT than me!

Jennifer Howell
J L Howell - Estate Planning Solicitor

Regarding specifically the CGT point only, section D19 of the GAAR refers to this type of scenario i.e., where one spouse makes gifts to the other who is likely to pass away first to make use of the tax-free uplift on death, as being ‘a reasonable course of action’. Therefore, I believe this is acceptable and will not fall foul of any GAAR. Would be interested to hear other member’s thoughts and as you mentioned there are other tax consequences.

Ihsan Ali
I Will Solicitors Ltd


As a former FCA I recognise the Accountant’s advice. Clients of mine once had a hugely expensive 50 page due diligence report on a share acquisition from a Big 4 firm which ended with the disclaimer that nothing in it could be relied on.

To be fair the Accountant here is not being unreasonable about whether the proposed action will be seen as being doubly reasonable. The GAAR comes very close to being a determination of heresy which in earlier days was tested by some unpleasant methods with unpredictable results.

The first step is the adviser’s self-protection. Professional bodies (modern Matthew Hopkins) claim the right to regard advice on the GAAR as being on a par with advice on evasion or lawful avoidance that offends the fastidious conscience. I myself refused to take their arrogance seriously but not many advisers would be so prepared to forfeit their membership or livelihood by prioritising client service. I see no reason why these organisations should not be approached to opine in advance on the proposed advice. Whether they have the capacity to respond to scale is an issue but they have asked for it. Failure to respond in time may disable them from adverse reaction later.

I believe it behoves them to differentiate advice from participation in and promotion of client proposals. But do they actually accept and recognise the distinction? The SRA pronouncement hints that if a client activity is found to be abusive per GAAR or PCRT the adviser might, with hindsight, be open to disciplinary action. The retrospectivity of the second-guessing of the adviser is intolerable.The SRA deal with the consequences of a solicitor advising that a scheme is abusive but not at all with the opposite. There is significantly a link to the ethics helpline. They do not mention the decision in Hurlingham Estates Ltd v Wilde & Partners [1997] STC 627 and a solicitor’s obligation in principle to advise a client on tax. This can be overcome by a retainer disclaimer but a wholesale withdrawal will leave clients without advice (as with Legal Aid). Probably no one cares in either of the two fields.

The second step is to advise the client forthrightly on all the downsides of the proposed action including non-legal effects e.g on reputation. My business clients were highly adept at this evaluation, incorporating tax as just one factor in their risk assessment. My private clients were usually not adept, as generally unused to the operation. A written note on what advice was given, confirmed by the client, seems essential, a long standing practice in relation to any solely verbal discussions with HMRC.

As regards your particular problem I agree with Ihsan Ali. Deathbed planning has always been undertaken although your client might not wish to take on the GAAR in an extreme situation. Failing the GAAR does not invalidate completed transactions. It involves HMRC having the right for tax purposes only to impose the fictional most reasonable alternative and to tax that instead. It does not reverse the non-tax consequences.

In 1975 there were “General Franco” schemes involving contrived IHT planning based on his impending decease. I do not believe these would now escape the GAAR, or the SRA’s auto-da-fe, or possibly even worse for some, the Woke Police.

Jack Harper

There would be no GWROB during H’s life after W’s gift, as this does not apply where a gift has the benefit of the spouse exemption.

There would potentially be a GWROB if W uses the house after her later gift to the children.

Simon Northcott

I don’t believe this would be a GROB as it’s an exempt transfer (s.102(5) FA 1986)

Andrew Goodman
Osborne Clarke LLP

Hi Jennifer,

Like most clients we have to deal with they seem to know who’s going die and when! A huge downside should Mr need LTC is he now has substantial asset to pay for it.

Why does Mrs just retain property and leave to kids on her death. CGT uplift applies. Doesnt make any sense.

GAAR does not apply. Agree with Ihsan.


HM Revenue and Customs (HMRC) General anti-abuse rule (GAAR) guidance.
Section D19. Page 53.

You could perform this transaction on his death bed. Capacity maybe an issue.

Agree with Simon. No GROB. POAT cant apply. One or the other.

Richard Bishop

I don’t follow why the wife’s “full” capacity matters (D.19.8.1). What is “full”? Any views on why any donee of a declaration of trust needs to have capacity for beneficial ownership of a gift to vest in them? The donee may well not be able to disclaim. Is that relevant? A just and reasonable counteraction can include a transaction not taking place.

Also in D.19.6.5 HMRC is supposed to have set out its position in its manuals. I can’t find the capacity point there at all. The statutory exemption in s207 (5) requires HMRC to have “indicated its acceptance” of a relevant “established practice”. No method is prescribed. And anyway it only “might” indicate the arrangements are not abusive.The conclusion in Part D19.7.1 is that of HMRC approved by the Panel so the green light applies to every transfer in D19 including one, subject to “full” capacity, on the day of death and seems definitive so no “might” about it

HMRC say its acceptance does not have to be published: D2.3.1. It can be secret therefore. There is no advance clearance. Does anyone know how to determine the existence and content of an unpublished HMRC practice? Does the taxpayer have a legitimate expectation of its disclosure?

Clients of mine were furious to learn in correspondence after much expense that HMRC had a totally secret SDLT practice that a “dwelling” had to have certain highly specific kitchen facilities for food, upheld on review. The appeal was dropped.

A meeting was held on 11 June 2018 on the subject of s 116 FA 2003 (‘residential property’). HMRC, the Welsh Revenue Authority, and Revenue Scotland attended as well as representatives of the Stamp Duty Practitioners Group and the Chartered Institute of Taxation. The minutes were later published with official approval. They contained no reference at all to the practice.

An apology was forthcoming on 13.09.19: "HMRC have acknowledged that this is causing problems for some of our customers and, as we have recently received a number of queries of this nature, we have taken action to draft detailed guidance on the definition of a dwelling for SDLT purposes, and are looking to publish this as soon as possible. If you would like HMRC to notify you when this guidance becomes public, please let me know. "

It has still not been published in SDLTM, despite numerous updates. Why not?

Jack Harper