Fwd: Gift of property subject to reservation and nil rate band

Clients wish to part gift and part sell their home to their son but are not moving out until they find a flat to purchase Because, until they vacated, the gift would therefore be subject to a reservation, they had decided to defer making the gift until they were ready to move. However, given the reduced SDLT on the consideration element up to 31st March they are considering the sale and gift now , recognising there would be a GWR until they move out, so that the 7 year period will not start to run until then.
It is likely therefore that the potential double IHT charge would apply if the gift became chargeable, given the PET and what would be a deemed transfer shortly thereafter. Double tax relief would apply, but it is not clear whether, assuming values were the same, there is any difference in the amount chargeable to IHT ie would the deemed transfer also carry the nil rate band relief for the donors or would the prior ( but still technically ‘chargeable’) PET absorb the NRBs, given that it is taken into account, and not discounted as such, although it is deemed to be reduced to nil for IHT purposes under the double tax relief
Michael Jepson
M J Consultants

Hi Micheal,

My understanding is: the (part gift) transferred property remains in the donor’s taxable estate and and is subject to IHT, the lifetime transfer is chargeable if death occurs within seven years (this element reduces).

A possible solution is for the parents to pay a ‘market rent’ for the short period while they move to the flat, this would erdicate the issue.

Richard Bishop