Gift of an undivided share in land FA 1986 s102A

My clients bought several buy to let properties at open market value more than 10 years ago in the names of their daughters and have from the outset received the rent from these properties. My reading of FA 1986 s102A suggests that the clients made a PET but no GROB and the properties have now fallen outside their estates for IHT purposes. Have others successfully argued this with HMRC?

Guy Birtwistle
Fishers Dewes

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If the gift was after 9 March 1999 s102 FA 1986 cannot apply, and the position is governed by either s102A or s102B.

S 102B is for gifts of share in land and there is no reservation of benefit under that section if the land concerned is let.

S102A is for other kinds of division of rights over land (reversionary leases for example), and it is arguable that equally it does not apply if the land is let. The notes in the annotated Finance Act 1999 suggested this to be so. It refers to a enjoying a right in relation to all or part of the land, which seems apt to describe rights over the land, rather than the rent produced by letting the land. There seems no reason why let land should be excluded from the scope of s102B but not s102A.

Malcolm Gunn

M B Gunn & Co Ltd.


Many thanks. I have now found some Chris Whitehouse notes from a recent course and I agree that it appears that under s102B(3)(a) my clients made a PET but no reservation of benefit because they do not occupy the land. As they purchased the properties in their daughter’s name there was no CGT (which will be the daughter’s problem in due course).
Guy Birtwistle
Fishers Dewes

S102B(3) only prevents a reservation of benefit from occurring if “an undivided share” of an interest in land is gifted. That is not the case here.

For s102A purposes is not the receiving of 100% of the rental income the enjoyment of “some right in relation to…the land” ?

Malcolm Finney