Quick IHT Valuation Query

[Strong Gale]

Father in 1995 gifted a half share in his house to daughter. He continued to live there until death in 2010, and paid no rent to daughter. Daughter moved in with him in 2008 to help care for him, having not lived there previously.

A clear GWRB, but how is the valuation for IHT dealt with? If daughter had bought the house jointly with her father, there would I assume be the usual 50% less 10% for joint ownership vagaries valuation applied to his half share (and if she'd bought it with him, there would be no GWRB issue).

However, does that customary valuation point apply:

(a) to the valuation of deceased's half share owned at death and/or
(b) to the valuation of the value of the gifted half share, as at 2010 values?

In summary, what will go in the IHT400- the full value of the property, or two half shares each discounted by 10%? On a house worth £200k, this'll mean either £200k, or £180k.

[Anthony Nixon]

This is a tricky one.

I think the reservation of benefit ended when daughter moved in with father in 2008.

If I am right, there was a deemed PET by father at that time.

I also think (but cannot be 100% sure) that that means that he is treated as making a gift of a half share out of the whole at that time, which has to be valued on the loss to the donor basis.

Since he was left with 50%, which ought to be discounted by 15% rather than 10%, the value of his PET would be 57.5% of the value in 2008, with 42.5% of today’s value taxable in the estate. 15% is the appropriate discount for a half share of property where there is another joint owner (the daughter in this case) who has the right to live at the property thanks to TLATA 1996.

I’d be interested to know if others agree.

Anthony Nixon CTA TEP Solicitor
Partner, Thomas Eggar LLP, Southampton and Chichester
anthony.nixon@thomaseggar.com
023 8083 1224