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Where Taxpayers and Advisers Meet

7 year rule and gift

vik2001
Posts: 61
Joined: Sat Nov 17, 2012 2:24 am

7 year rule and gift

Postby vik2001 » Sun Jan 19, 2020 1:07 pm

If a gift was made of part of a property as joint tenants in 2016. 4 years later the tenancy was severed into tenants in common. Does the 7 year rule start again?

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: 7 year rule and gift

Postby maths » Sun Jan 19, 2020 2:18 pm

As joint beneficial tenants you would for tax each own 50% ie a gift of 50% occurred.

If on a subsequent simple severance to tenants in common each would again own 50%.

In which case no gift arose following the severance and the 7 years runs from the original gift only.

If however, at the time of severance you gave a further % (eg 10%) so you then owned 40% and donee owned 60% you would have made two gifts. One the 50% and a second of 10%.
This would mean two PETs and two separate 7 year periods.

vik2001
Posts: 61
Joined: Sat Nov 17, 2012 2:24 am

Re: 7 year rule and gift

Postby vik2001 » Sun Jan 19, 2020 2:36 pm

Thanks maths

Reason i asked, in regards to FA86 /S102B:

undivided shares of property will not be subject to the ‘gift with reservation of benefit’ (GWRB) rules provided the donor and donee both occupy the property. The donor must not receive any benefit from occupation other than a negligible one, which in itself must be paid for by the donor.

So to avoid GWRB does it need to be held as tenants in common as so undivided shares of property will not be subject to the ‘gift with reservation of benefit’
So holding as joint tenants may invalidate GWRB compared to tenants in common.? Hence why i was thinking we should severance the tenancy in equal shares


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