Commentary

I3.419 GWR—Tracing changes to the property given

IHT, trusts and estates

I3.419 GWR—Tracing changes to the property given

Gifts with reservation—the tracing rules

I3.419 GWR—Tracing changes to the property given

The supplementary GWR provisions in FA 1986, Sch 20 include a set of rules for tracing a gift with reservation which has changed ownership or which has been exchanged or altered after the original gift. The rules are relevant to determining whether the reservation still exists and on what value a tax charge arises on the donor's death or earlier cessation of the reservation.

The basic principles set out under the heading 'Substitutions and accretions' are as follows:

  1.  

    (a)     where the donee of a gift with reservation no longer has possession and enjoyment of the original property, any property received in substitution for that property is treated as if it were comprised in the original gift1

  2.  

    (b)     these rules do not apply to gifts with reservation which become settled property, or to gifts of a sum of money2

  3.  

    (c)     property received in substitution includes benefits received as consideration for the original property and property received in pursuance of a right to acquire property3

  4.  

    (d)     where the donee has made a gift of the original property and received no consideration, he is treated as still having possession and enjoyment of the original property (unless he gave it back to the donor)4

  5.  

    (e)     where the original gift with reservation is an interest in property which is extinguished by another interest held by the donee, he is treated as still having possession of the original interest5

  6.  

    (f)     where the original gift

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial