Form IHT 403

Helpiht403gwrobornot

If my parents paid a full market rent for the use of a  holiday apartment gifted over 7 years ago …. How do I declare this on form IHT 403 ?

Keep_pedalling

You should not need to declare it as it is not gift with reservation of benefit so the gift has fallen out of their estate.

Just for clarification, when you say they are paying full market rent, do you mean they are paying rent only for the periods they are using the cottage? 

Helpiht403gwrobornot

Yes … it’s an apartment in Spain … so they paid for the weeks they went there only … so not for the whole year as it would be occupied at times by others 

Keep_pedalling

In which case you do not have to declare the gift on either estate.

Helpiht403gwrobornot

i am not doubting you but ive got to page 5 question 8 of iht 403 ...i think i need to answer yes to question 8 ..they did contuinue to use it and have a benefit (but not a right to the benefit ) .... if thats correct i have to give details in question 12 ...do i claim an exemption as the "benefit" was paid for in full meaning that the exemption at "A "equals the value at death giving a net value of zero ??
i can see that leading to all sorts of requests for further details from HMRC ..lists of visits , proof of payment of rent , proof that the rent was market rent etc !
am i reading this correctly or am i missing something ?

JGB1955

If they were paying rent, where is the benefit?  They're in the same situation as any Joe Public who rents the accommodation.

Helpiht403gwrobornot

i can see that there is no "net" benefit ,as its paid for in full but the question asks ...in summary .....if the deceased continued to have use and enjoyment or ... or benefit from the gifted asset. 
so its a no to the benefit but a yes to the first part ..they did continue to have use and enjoyment ..... all be it they paid for it !

Keep_pedalling

JGB1955 said:

If they were paying rent, where is the benefit?  They're in the same situation as any Joe Public who rents the accommodation.

Exactly, if they continued to have holidays without paying then they would have a beneficial interest, so they were obviously totally aware of what was required to avoid this. 

Helpiht403gwrobornot

Thank you both for your replies, i agree that there is no benefit or any right , but i read question 8 as having another part to it ....a third part ...did the deceased....continue to have use and enjoyment .....

they did ...all be it they paid for it 

what do you think ?

obviously i would rather not answer "yes" and then have to list each visit etc at point 12 but equally i dont want a fine for not properly declaring anything that i should .

Keep_pedalling

I think you are safe to not have to declare the gift at all. 

Helpiht403gwrobornot

Great many thanks ..i was still having doubts but having also just re read HMRC guidence which states

Giving away a home before you die

There’s normally no Inheritance Tax to pay if you move out and live for another 7 years.

If you want to continue living in your property after giving it away, you’ll need to:

• pay rent to the new owner at the going rate (for similar local rental properties)
• pay your share of the bills
• live there for at least 7 years

Otherwise it counts as a ‘gift with reservation’ and will be added to the value of your estate when you die. (A gift with reservation is where you give something away but continue to benefit from it.)

i can see that the important word is "otherwise" ....if you havent paid for the benefit its reportable ..if you have its not its just not a gift with reservation of benefit therefore section 5 answers are all No 

what i was surprised at in the guidence is the requirement to ...pay a market rent AND pay a share of the bills .....if an unconnected third party rents a holiday apartment ..ie paying a market rent they then dont also get a bill for water, electricity ,local taxes, community fees etc etc ,, that bit seems a bit odd