Chris Thorpe looks at what happens for tax purposes when making lifetime gifts.
The Oxford English dictionary defines a gift as: ‘something, the possession of which is transferred to another without the expectation or receipt of an equivalent’. The gift of an asset is thus not an arm’s length sale in return for market value proceeds, nor a loan or investment – it is entirely unilateral.
For capital gains tax (CGT) purposes, a gift is treated as a disposal alongside a sale; inheritance tax (IHT) only applies to gifts. For IHT purposes, lifetime gifting can be used to reduce the value of one’s estate upon death.
What is a gift?
When both the legal and beneficial ownership of an asset passes to the recipient, the transaction is complete. The beneficial ownership generally follows the legal ownership, and for a gift of land, that is
