Commentary

I3.406 GWR—Statutory exceptions

IHT, trusts and estates

I3.406 GWR—Statutory exceptions

I3.406 GWR—Statutory exceptions

Exception for actual occupation or enjoyment for full consideration

The main GWR provisions in FA 1986, s 102 are supplemented by provisions in FA 1986 Sch 20 which deal with particular circumstances. These rules include two exceptions to the general rule that a gift, which is not enjoyed to the entire exclusion of the donor, is subject to a reservation of benefit.

The first exception applies to a gift of an interest in land or a chattel. If the donor retains or assumes:

  1.  

    –     actual occupation of the land

  2.  

    –     actual enjoyment of an incorporeal right over the land (for example, sporting rights or a right of way), or

  3.  

    –     actual possession of the chattel,

it is disregarded if it is for full consideration in money or money's worth1. In addition, there will probably be no pre-owned assets income tax charge on the property.

HMRC accepts that full consideration is given if there has been a bargain negotiated at arm's length by parties who are independently advised and which followed the normal commercial criteria in force at the time it was negotiated2. Full consideration for the occupation of land would include provision for appropriate rent reviews. See I3.159 for full consideration for the grant of agricultural tenancies.

This exception requires actual occupation or enjoyment, so that constructive occupation, as where the donor has given up actual occupation to a tenant to whom he has lawfully sublet, will not do. Moreover, there is no relief for partial consideration and none in relation

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