Finance Act 1999

104Gifts

The following shall be inserted after section 102 of the [1986 c. 41.] Finance Act 1986 (inheritance tax: gifts with reservation)—

102AGifts with reservation: interest in land

(1)This section applies where an individual disposes of an interest in land by way of gift on or after 9th March 1999.

(2)At any time in the relevant period when the donor or his spouse enjoys a significant right or interest, or is party to a significant arrangement, in relation to the land—

(a)the interest disposed of is referred to (in relation to the gift and the donor) as property subject to a reservation; and

(b)section 102(3) and (4) above shall apply.

(3)Subject to subsections (4) and (5) below, a right, interest or arrangement in relation to land is significant for the purposes of subsection (2) above if (and only if) it entitles or enables the donor to occupy all or part of the land, or to enjoy some right in relation to all or part of the land, otherwise than for full consideration in money or money’s worth.

(4)A right, interest or arrangement is not significant for the purposes of subsection (2) above if—

(a)it does not and cannot prevent the enjoyment of the land to the entire exclusion, or virtually to the entire exclusion, of the donor; or

(b)it does not entitle or enable the donor to occupy all or part of the land immediately after the disposal, but would do so were it not for the interest disposed of.

(5)A right or interest is not significant for the purposes of subsection (2) above if it was granted or acquired before the period of seven years ending with the date of the gift.

(6)Where an individual disposes of more than one interest in land by way of gift, whether or not at the same time or to the same donee, this section shall apply separately in relation to each interest.

102BGifts with reservation: share of interest in land

(1)This section applies where an individual disposes, by way of gift on or after 9th March 1999, of an undivided share of an interest in land.

(2)At any time in the relevant period, except when subsection (3) or (4) below applies—

(a)the share disposed of is referred to (in relation to the gift and the donor) as property subject to a reservation; and

(b)section 102(3) and (4) above shall apply.

(3)This subsection applies when the donor—

(a)does not occupy the land; or

(b)occupies the land to the exclusion of the donee for full consideration in money or money’s worth.

(4)This subsection applies when—

(a)the donor and the donee occupy the land; and

(b)the donor does not receive any benefit, other than a negligible one, which is provided by or at the expense of the donee for some reason connected with the gift.

102CSections 102A and 102B: supplemental

(1)In sections 102A and 102B above “the relevant period” has the same meaning as in section 102 above.

(2)An interest or share disposed of is not property subject to a reservation under section 102A(2) or 102B(2) above if or, as the case may be, to the extent that the disposal is an exempt transfer by virtue of any of the provisions listed in section 102(5) above.

(3)In applying sections 102A and 102B above no account shall be taken of—

(a)occupation of land by a donor, or

(b)an arrangement which enables land to be occupied by a donor,

in circumstances where the occupation, or occupation pursuant to the arrangement, would be disregarded in accordance with paragraph 6(1)(b) of Schedule 20 to this Act.

(4)The provisions of Schedule 20 to this Act, apart from paragraph 6, shall have effect for the purposes of sections 102A and 102B above as they have effect for the purposes of section 102 above; and any question which falls to be answered under section 102A or 102B above in relation to an interest in land shall be determined by reference to the interest which is at that time treated as property comprised in the gift.

(5)Where property other than an interest in land is treated by virtue of paragraph 2 of that Schedule as property comprised in a gift, the provisions of section 102 above shall apply to determine whether or not that property is property subject to a reservation.

(6)Sections 102 and 102A above shall not apply to a case to which section 102B above applies.

(7)Section 102A above shall not apply to a case to which section 102 above applies.