IHT404 Joint Assets

[Missjg123]

Trying to fill in IHT404 jointly owned assets for my mothers estate. I co-own the house in which we both lived as joint tenants. Box 1 column D asks for the contribution by each owner. My mum owned all the property after inheriting my dads half, later she then added me as joint owner about 13 years ago, so well over the 7 year rule, effectively gifting me half the property. So I did not contribute financially. How do I fill this in?? With only her half included in the estate we are below tax thresholds but if it was to be included it would be up to the limit. Appreciate any insights!

[AGoodman]

I'd put this as 100% your mother.

I'm afraid is it likely irrelevant as this sounds like a gift with reservation of benefit - your mother transferred an interest in the house to you but continued benefitting from it - therefore the whole house remains in her estate.

The only ways to avoid it would be if:

- your mother transferred you half from your father's estate under a deed of variation (so it is deemed never to have been hers); or
- you owned the property as tenants in common (rather than joint tenants) and you lived at the property with your mother.

It doesn't sound as if either apply so the whole property would be in your mother's estate - see IHT403 page 5

[Missjg123]

Thank you for your reply but it seems at odds with another response I have received from a solicitor. The gift has no reservation of benefit as I do live in the property & as I understood as joint tenant, still only 50% of the value is included in either estate. A little confused by your reply now but the below seems to make perfect sense?

‘Finally, a reminder. Essentially, the only circumstances in which a gift of the family home by a parent with continued occupation will not fall foul of the Gift with a Reservation of Benefit are:

A gift into the joint names of parent and adult child living at home; again, the Reservation of Benefit Rules will trap the gift if, at a later date, the adult child moves out (to get married perhaps);
Payment by the parent of a full market rent for their continued occupation.’

‘If the surviving joint tenant is in occupation of the
property in question at the date of death and
both parties own a 50% share, the standard
approach is to reduce the value of the deceased
share by 15%. So, 50% of a property with a value
of £800.000 would be reduced from
£400,000 by 15% to £340,000 for Inheritance
Tax purposes.
If the surviving joint tenant is not in occupation of
the property and both parties own a 50% share,
the standard approach is to reduce the value of
the deceased share by 10%. So, 50% of a
property with a value of £800,000 would be
reduced from £400,000 by 10% to £360,000
for Inheritance Tax purposes.
If the ownership split is not 50/50 the sit,
can become more complicated. Generally
deceased share is less than 50% the reduction in
AA
@peterbarry.co.uk
(

[AGoodman]

Whether it needs to be a tenancy in common is a little unclear.

Tolleys on Inheritance Tax (not quite a fundamental text) says: "At one time, it was thought that HMRC applied s 102B to all types of co-ownership, however, it has been reported that this is no longer the case."

HMRC's own manual says "This provision sets out in statutory form the practice which has already been adopted for transfers of undivided shares of land. It confirms that where, for example, a house is placed by the donor in the joint names of donor and donee, both occupy the property and both share the outgoings, that will not be a GWR." "Joint names" is ambiguous.

[AGoodman]

You're therefore somewhat dependent on HMRC being generous if you have a joint tenancy as strictly speaking transferring into joint names is not a gift of an undivided share, it is a gift of a whole.

HMRC may allow it, I just don't know, but I wouldn't like to fight the point if they opposed it.

Given their manual wording, you're probably justified in having a go.

[maths]

This is a post I made for what it's worth:

Joined:Wed Aug 06, 2008 2:25 pm
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Re: Gift with reservation query - property ownership transfer wrt IHT
by maths » Thu Sep 02, 2021 1:34 pm

There has in the past been significant discussion on the point raised by AG on this forum; without I believe any definitive conclusion!

FA 1986 s102B(1) clearly refers to a gift of "an undivided share of an interest in land"; it does not simply say "a share of an interest in land".

It would thus seem to be necessary for any gift to be of an undivided share. If X owned a property and and declared that henceforth he held the legal title for himself and Y as joint beneficial tenants this would not seem to satisfy s102B even though a gift of an interest in land had occurred but not a gift of an undivided share.

If A and B held land as joint beneficial tenants and A then severed his interest, henceforth A and B would hold as beneficial tenants in common even if 50/50. A or B could subsequently make gifts which would fall within s102B.

[Bill31]

Whether joint tenants or tenants in common is subjective to law. Hmrc make the following point:

IHTM15061 is instructive. The material parts are:
IHTM15061 Gifts With Reservation
It is possible that joint ownership arrangements may involve a Gift With Reservation (IHTM14025) (GWR)
Example
Anthony transfers his house into the joint names of himself and his son as joint beneficial owners (IHTM04031) so he has made a gift of a half share of the house. Anthony then continues to live in the property without the son taking up occupation. Anthony does not pay any rent to his son for the use of the son's half share. That is a continuing benefit to Anthony from the gift he has made to his son, so the gift is a gift with reservation of benefit (GWR).


In the example above This guidance does not relate to FA 1986, s. 102B: the son does not take up occupation with the father. There is, therefore, a GROB unless the son pays a market rent.

Nonetheless, HMRC appear to regard a transfer into joint names as “joint beneficial owners” as a “gift of a half share of the house”. Indeed, they refer to rent “for the use of the son’s half share”.