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HMRC internal manual

Inheritance Tax Manual

Gifts with reservation: other qualifying property

Although the nature of the property at the date of gift is relevant for Agricultural Relief (IHTM24000) and Business Relief (IHTM25131), ‘qualifying property’ within IHTA84/S227 (2) is less restrictive. If the property is subject to a reservation at the time of the donor’s death, it is deemed to be property to which they were beneficially entitled and will therefore form part of the donor’s estate. As this is taxable under IHTA84/S4 (1) as a transfer made on death, IHTA84/S227 (1)(a) will be satisfied in respect of any gift with reservation (GWR) (IHTM04071) ‘qualifying property’ within IHTA84/S227 (2). 

If under the Double Charges Regulations (IHTM14691) the potentially exempt transfer (PET) (IHTM04057) produces the higher amount of tax, the GWR will be reduced and the conditions (IHTM30251) as they relate to PETs will apply.