I have a new client wishing to consider IHT planning options. The bulk of his wealth is tied up in BTL properties. Some of those properties are owned in his sole name the others are owned by Ltd companies for which he is the sole director/shareholder.
I would be grateful for any thoughts on the IHT implications of the following:
If an undivided beneficial share of the properties owned personally are gifted into trust and my client retains a right to the income under the terms of the trust by way of an IIP, is it a GROB or does the relief offered by s102B still apply?
If shares in the Ltd companies are gifted into trust and my client retains a right to the income derived from those shares under the terms of the trust by way of an IIP, is it a GROB?
I’m confident the answer to question 2 is yes but I am more undecided on question 1.
Thank you Malcom.
What do you suppose is the rationale for the concession offered by s102B?
If the donor owns a 50% beneficial share and gifts the whole 50% he owns, I assume s102B can still be relied upon in the same way even though the donor holds no beneficial share following the gift and still receives 100% of the income?
I think it’s worth noting that there are two separate exemptions from GWR treatment under FA 1986 s102B, namely, s102B(3) and (4).
(3) requires donor does not occupy the property whereas (4) requires joint occupation by donor and donee. As donor will not occupy the rental properties (3) is the relevant subsection (not (4)).
Subsection (1) refers to “… gift… of an undivided share of an interest in land”. I take this to mean the gift cannot comprise 100% of the donor’s interest ie must be less than 100% thereof.
Yes, it would be s102B(3) that is applicable. I take your point re subsection (1) and the implication that a share must be retained by the donor.
I wonder if reliance on s102B in the context of rental properties has been successfully argued with HMRC. Can’t help but feel this is something that may come within the remit of the GAAR.