Clients routinely try to reduce inheritance tax by giving assets away during their lifetime — but they often want to keep enjoying what they have given. A parent gifts the family home yet carries on living in it; a donor hands over shares but keeps the dividends. The anti-avoidance rules exist to stop this kind of "giving without really giving", and as a solicitor you need to recognise when a well-meant gift will simply be pulled back into the estate at death.
This lesson takes you through the three mechanisms that work together to keep gifts genuine, and shows you where the safe ground lies for legitimate planning.
- Gifts with Reservation of Benefit (GROB) — the main rule: when a donor keeps a benefit in what they gave away, and how the property is valued back into the estate.
- Exceptions to GROB — the two routes out: paying full consideration, and the shared occupation exception for family homes.
- Reservation Ceasing Before Death — what happens when the donor stops benefiting, and why a fresh seven-year clock starts.
- Pre-Owned Assets Tax (POAT) — the annual income tax backstop that catches benefits GROB misses, and the opt-in election into GROB treatment instead.
- Associated Operations and Unaffected Planning — how linked transactions are combined, and the genuine planning the rules leave untouched.