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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: gifts with reservation (GWRs): settled property: introduction

In their application to settled property, the gift with reservation (GWR) instructions (IHTM14301) need extending to cover situations where:

  • the gift or disposition brings to an end the donor’s interest in possession in settled property
  • the gift is by way of settlement, or the donee settles the property received from the donor.

Termination of interest in possession

The disposal or termination (whether by surrender, release or otherwise) of an interest in possession (IHTM04084) in settled property presents special problems. This is because it was difficult to determine who made the gift in such circumstances - the life tenant or the trustees?

FA06/S156, Sch20 inserted S102ZA into FA86. his section deems the disposal of an interest in possession which arose before 22 March 2006 to be a gift by the life tenant, but only where an interest in possession comes to an end on or after that date.

It also applies to the disposal of a qualifying interest in possession after 21 March 2006 which arises under an immediate post-death interest, a disabled person’s interest, or, a transitional serial interest.

It was also extended to an interest in possession which falls within IHTA84/S5(1)B by FA10/S53(1),(8) but only where the life tenant became beneficially entitled to the interest on or after 9 December 2009.

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Gifts by way of settlement

The instructions in the following pages all concern the application of the GWR rules to gifts by way of settlement. There are also separate tracing (IHTM14401) instructions.

For gifts on or after 18 March 1986 on the trusts of a settlement made before that date, see the earlier instructions (IHTM14311).