IHTM44015 - Pre-owned assets: calculation of the charge on land: non-exempt sales

Sales for full consideration will normally be excluded transactions (IHTM44031). FA04/Sch15/Para 4(4) introduces the concept of a 바카라 사이트˜non-exempt sale바카라 사이트™ for a disposal which is

  • a sale of the chargeable person바카라 사이트™s whole interest in the property,
  • for a consideration paid in money in sterling or any other currency,
  • that is not an excluded transaction

and therefore covers sales made for less than the market value for cash. The 바카라 사이트˜appropriate proportion바카라 사이트™, which is relevant for ascertaining the 바카라 사이트˜appropriate rental value바카라 사이트™ in FA04/Sch15/Para 4(2) is reduced using the formula

(MV-P) ÷ MV where

  • MV is the value of the interest in land at the time of the sale, and
  • P is the amount paid.

Note that these provisions only apply to a sale of the whole of an interest in a property. They do not apply to part sales or to exchanges, or to transactions where the contribution condition (IHTM44005) is met.

Example

Andrew sells his house to his daughter for £100,000. It is worth £400,000. He continues to live in the house. The rental value is £12,000. The appropriate portion is

(400,000 - 100,000) ÷ 400,000 = 25%

The rental value subject to the POA charge is reduced by 25% to £9,000.

However, since Andrew has made a gift of 75% of the property and has continued to live in the house, the gift element is subject to a reservation of benefit (IHTM14301) and outside the POA charge (IHTM44044). This will remain the case even if the sharing provisions of FA86/S102B(4) apply so that there is no reservation of benefit in view of FA04/Sch15/Para11(5)(c) (IHTM44047). So, in most cases a non-exempt sale will be outside the POA charge since the proportion of the property that is attributable to the sale proceeds (25% in the example above) is relieved by FA04/Sch15/Para 4(4) and the proportion that was gifted is relieved as it is, or would have been, subject to a reservation of benefit.

If Andrew had sold part of his house to his daughter at less than the full market value then the non-exempt sale provisions would not apply. So in the above example if he sold half his house to his daughter for £100,000 and that half share was in fact worth £200,000, although he would have made a gift of a one quarter share in which he may have reserved a benefit (subject to FA86/S102B(4) as above), the proportion of the rental value that is attributable to the a one quarter share that was sold, would be subject to the POA charge.

On death, Andrew바카라 사이트™s estate would contain the half share of the property he had continued to own, plus the £100,000 received from his daughter and a reservation of benefit in the one quarter share he gifted.