Hi all, looking for some advice with regards to GWROB as this is not my area of focus.
Donor (father) gifted 75% of the house to donee (daughter) over 10 years ago via declaration of trust. Both resided in said house.
House is a HMO and brings in income - so is generally a ‘shared’ house where the Donor does not have full access. Income has been split 25%/75% and tax on income declared in said proportions.
Donee paid most of the bills.
Just over a year ago Donee moved out of the property and was aware that even though 7 years had passed (for IHT PET reasons) it would still be classed as GWB as she was no longer residing at the property and the Donor was alive.
Donor and Donee created a tenancy agreement and Donor became a tenant in the house paying market rate -25% (as Donor still held 25% of the property).
Donor and Donee have carried out one review of rent.
Donee takes rent from Donor like any tenant and pays relevant tax on it.
At a high level - before I start digging deeper - does the above satisfy that there is no GWROB?
Seems a reasonable conclusion. However, I am not sure if you are being overly cautious. The donor retains 25% of the property so does he actually need to pay rent. Some calculations may be needed, but lets assume there were only four rooms, then the donor has not really reserved any benefit in what has been given away. If the donor now gifts 25% to the donee, then it is clear that a ‘fair’ market rent should be paid. If the donor say half the house, then I agree he should be paying market rent for the 25% that he uses, but does not own.
As the donor has never himself occupied there is no initial GROB. The donee ceasing to be resident does not affect this. The donor becoming resident will create a GROB but s102B(3)(b) FA 1986 will prevent that if “the donor does not receive any benefit, other than a negligible one, which is provided by or at the expense of the donee for some reason connected with the gift”. The rental arrangement should secure that.
The donor is not strictly a tenant but a co-owner so what he pays is not rent but equitable compensation though no doubt HMRC will try to tax it as income. He would be entitled in my view to occupy rent-free as co-owner, arguably with still an entitlement to 25% of the rents, but the actual arrangement seems much safer for GROB reasons as it avoids questions over whether it is proportionate to the space occupied, which it must be. Assuming the actual tenants pay market rents then strictly the donor could be entitled to occupy rent-free by ceding to the donee a share of the rents receivable proportionate to the space he now occupies and which cannot be let less his 25% share of that rent forgone.
Payment by the donee of all the bills does not create a GROB for the donor but may be a TOV by the donee! Should the donor get an income tax deduction for expenses he does not meet?
If the donee went back into residence s102B (4)(b) would apply if “the donor does not receive any benefit, other than a negligible one, which is provided by or at the expense of the donee for some reason connected with the gift”. A GROB would arise if the donee then paid the donee too much for the space occupied not too little!