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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: exemptions: reservation of benefit in share of interest in land

Where the chargeable person disposes of a share of their property, and both the donor and donee occupy the property, sharing the outgoings, a reservation of benefit does not arise by virtue of FA86/S102B(4) (IHTM14360). This exclusion from charge is carried into the POA legislation by FA04/Sch15/Para11(5)(c). Note that whilst FA86/S102B(4) only applies to gifts made on or after 9 March 1999, the POA charge is specifically disapplied no matter when the disposal takes place.

Such disposals are normally outside both the reservation of benefit and POA charges. If, however, the contribution made by each person is not commensurate with their respective enjoyment of the property, a POA charge may arise.