Commentary

I3.401A GWR—The gift

IHT, trusts and estates

I3.401A GWR—The gift

I3.401A GWR—The gift

Meaning of 'gift'

For the gift with reservation (GWR) rules to apply, an individual must 'dispose of property by way of gift'1. The rules cannot be applied to 'persons', such as companies and trusts, who are not individuals. See below: 'Identifying the donor'.

There is no definition of gift in the GWR provisions and HMRC states that the word must be given its ordinary meaning2. This wording differs from the core definition of a transaction subject to inheritance tax, which is based on the concept of a 'transfer of value made by an individual'3.

A transfer of value is not necessarily a gift. It can be:

  1.  

    •     a 'disposition' which causes a fall in the value of the disponer's estate4, or

  2.  

    •     the failure to exercise a right, which causes the value of another person's estate to increase5, or

  3.  

    •     the exercise of trustees' power which causes a fall in the value of a beneficiary's estate6

The question arises whether a transfer of value, which is not a gift (within the ordinary meaning of the word), can be caught by the GWR provisions.

Where a transfer of value is not a gift

Where a transferor has voluntarily caused a fall in the value of his estate, perhaps by failing to exercise a right, it is difficult to argue that there was no donative intent in the transaction. However, where the transferor does not control the disposition, it can be argued that there is no disposal by way of gift and hence the

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