Commentary

I3.737 Exemption where the gift with reservation rules apply

IHT, trusts and estates

I3.737 Exemption where the gift with reservation rules apply

I3.737 Exemption where the gift with reservation rules apply

There is no pre-owned assets charge on land, chattels or intangible property where the gift with reservation (GWR) provisions apply for inheritance tax purposes, or would apply but for certain specified provisions, to:

  1.  

    •     the relevant property, or

  2.  

    •     other property which derives its value from the relevant property and whose value, so far as attributable to the relevant property, is not substantially less than the relevant property1

Where the GWR provisions apply for inheritance tax purposes, or would apply but for certain specified provisions, to property which derives its value from the relevant property and whose value, so far as attributable to the relevant property, is substantially less than the relevant property, the pre-owned assets charge is reduced by such proportion as is reasonable to take account of that fact2. This is achieved by a proportionate reduction in the appropriate rental value (land), the appropriate amount (chattels) or the chargeable amount (intangible property), recognising that a pre-owned assets charge should not apply to any part of the value that is still deemed to be within the estate under the GWR provisions, or would be but for the specified provisions referred to.

This exemption for property that falls within the GWR provisions is fundamental to the concept of the pre-owned assets charge, and recognises that the charge should not penalise taxpayers in respect of their enjoyment of property that is still deemed to be included in their estate under the GWR provisions, or

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