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Where Taxpayers and Advisers Meet

IHT and rental property

ainaedil
Posts: 61
Joined: Tue Jul 27, 2010 4:24 pm

IHT and rental property

Postby ainaedil » Wed Jul 29, 2020 8:54 pm

I have assets well above IHT tax limit including a rental generating property.

I want to exclude this property from my estate while retaining rental income received every month as it is the only source of income for me now.

I want to leave that property to children when I pass away avoiding IHT charge?

Is this possible ?

AGoodman
Posts: 1057
Joined: Fri May 16, 2014 3:47 pm

Re: IHT and rental property

Postby AGoodman » Thu Jul 30, 2020 9:21 am

You won't be surprised to hear that no, you can't remove it from your estate but still receive the income. This is called a reservation of benefit.

You may be able to do something such as sell it to your children at an undervalue but leave the payment outstanding so they would receive the rent and the monthly/qtrly/annual payment you would receive (from them) would actually be repayments of the debt they owe you.

That has all sort of ramifications (not least you have lost a major asset and you're reliant on your children) so you need to take proper specific advice. It would not remove the property from your estate entirely. The price reduction you give them would only leave your estate after 7 years (as a potentially exempt transfer) and there could be SDLT and CGT consequences.

maths
Posts: 7904
Joined: Wed Aug 06, 2008 3:25 pm

Re: IHT and rental property

Postby maths » Sun Aug 02, 2020 3:25 pm

Disagreeing with AGoodman is a risky business.

However, it is possible to retain rental income whilst having given away the underlying let property without incurring a reservation of benefit charge.

FA 1986 s102B(3).

Basically, donor must not occupy the property and the donor must not give his/her whole interest (ie 100%) in the property (eg could give say 90%/95%). But can retain all the rental income.


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