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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: gifts with reservation (GWRs): the reservation: continuation of reasonable commercial arrangements

The continuation of existing reasonable commercial arrangements in the form of remuneration and other benefits for the donor’s services in a business entered into before the gift does not amount to a reservation provided the benefits are in no way linked to, or affected by, the gift.

What is ‘reasonable’ will depend on all the facts but, broadly, you should test this by reference to what might reasonably be expected under arm’s length arrangements between unconnected parties.

If, however, as part of the overall transaction, including the gift, new remunerative arrangements are made you will need to examine all the facts to determine whether the new package amounts to a reservation ‘by contract or otherwise’.