HMRC has identified £156m worth of gifts in the last year that may still be liable for inheritance tax as the donor continued to benefit from the asset after making the gift, according to analysis by TWM Solicitors.
Around 460 estates were identified as having made gifts with reservation of benefit in the last tax year, according to TWM.
The gifts with reservation of benefit identified by HMRC averaged £338,000 per estate.
Gifts with reservation of benefit often involve a parent or grandparent gifting a home even though they are still making use of the property. Other examples include gifting shares while continuing to receive the dividend or gifting artwork while keeping it in their home.
These types of gifts can leave family members with an unexpected IHT bill.
Madeleine Beresford, partner in the private client team at TWM, said: “Gifting assets can be an effective way of reducing a future IHT liability, but it’s important that families understand the rules.
“One of the most common mistakes is where someone gives away an asset but continues to benefit from it in some way. In those circumstances, HMRC may still treat the asset as forming part of the estate for IHT purposes.
“With more farms and businesses expected to be exposed to IHT in the future, gifting is likely to become an increasingly important part of estate planning.
“The rules are well established, but they do need to be carefully followed, and professional advice can be invaluable.”