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Example 1

Mr H owned a holiday home. In 2015 he gave the house to his mother. She lived there until her death in 2020, when she gifted the property to Mr H in her Will. He has now resumed using it as a holiday home.

Mr H occupies land which he used to own, so the disposal condition is met by virtue of FA 2004, Sch 15, para 3(2). However, the relevant land is included in his estate for inheritance tax, so he is exempt from a pre-owned assets tax (POAT) charge.

Example 2

Mrs J transfers her house to a company of which she owns 75% of the share capital and of which her wife owns the other 25%. The value of the shares in the company which are included in Mrs J's estate are 'substantially less' than the value of the house (being less than 80% of its value), so although the POAT charge would apply, the appropriate rental value should be reduced by a reasonable proportion, perhaps 75%, to reflect the value of the