Joe Brough explains the inheritance tax implications of making a gift with reservation of benefit and some of the scenarios to which it can apply.
Finance Act 1986 introduced the ‘gifts with reservation of benefit’ (GROB) legislation to prevent taxpayers from gaining an inheritance tax advantage (IHT) by giving away assets whilst simultaneously continuing to benefit from them.
Where the rules apply, if the reservation has not been lifted by the donor as at the date of their death, they will be treated as still owning the asset. The value of the gift is included in their death estate when calculating IHT.
The legislation (FA 1986, s102(2)) provides that where an individual disposes of any property by way of a gift on or after 18 March 1986, a reservation of benefit will arise where either:
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the donee does not assume bona fide possession and enjoyment of the property at or
