How to handle the reservation of benefit provisions

Recent case law confirms that the reservation of benefit legislation is difficult to apply in practice; areas of doubt continue. Small differences in fact can result in very different outcomes. The legislation is penal in nature and taxpayers may often be worse off by making a gift with reservation than doing nothing. Particular attention is needed if a gift of land is envisaged: anti-avoidance legislation ranging from anti-Ingram legislation in FA 1999 to pre-owned assets tax in FA 2004 prevents people giving away their homes and continuing to live there. There are statutory reliefs, such as the full consideration and co-ownership exemptions, but the conditions need to be observed carefully. The position is always tested in the seven years prior to death so merely surviving seven years from the gift does not avoid a gift with reservation problem.