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HMRC internal manual

Capital Gains Manual

Death and Personal Representatives: Valuation of assets at date of death and associated liaison with Specialist PT-IHT: Ascertained values: Valuation of assets: ascertained values: gifts with reservation

IHTM14301 explains that there is a gift with reservation (GWR) when on or after 18 March 1986 an individual (IHTM14312) disposes of any property by way of gift and either

  • the donee does not assume bona fide possession and enjoyment of the property at or before the beginning of “the relevant period” or
  • at any time during “the relevant period” the gifted property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise.

The relevant period is the time ending at the donor’s death and beginning

  • seven years before the death, or
  • if later, the date of gift.

IHTM14590 explains that the special rule for GWRs (IHTM04071) is that you can charge tax on

  • the value of the initial lifetime transfer, or
  • the value of the transferred asset at the date the reservation ceased (usually the date of death).

IHTM14303 explains that the GWR rules are fictitious treatments created only for the purposes of preventing IHT avoidance. They do not affect the actual devolution of the property in real life, so the gifted property does not actually pass on death under the will or intestacy, neither was any gift actually made at the time the reservation ceased.  Therefore the date of acquisition of the asset for Capital Gains is the occasion of the gift, and the base cost of the asset is its market value on that date, subject to any adjustments required for example for hold-over relief for business assets under TCGA1992/S165.