IHTM04165 | Dispositions not intended to confer bounty: first condition - gift not intended
From HM Revenue & Customs · Inheritance Tax Manual
The first condition in is that the disposition () was not intended, and was not made in a transaction intended, to confer any gratuitous benefit on any person (). It is necessary for the person claiming that a disposition is within to show that the transferor
sought to obtain the full open market price under the transaction, and
had no donative intent.
Example 1
Angela puts Blackacre for sale on the open market. Its value is considered to be £100,000. Barry, a stranger, starts negotiations to buy. He discovers that Angela needs a quick sale for personal reasons, e.g. because she is emigrating shortly. So Barry offers only £82,000, but in cash with an undertaking to complete the purchase very soon. Angela accepts because of her own circumstances. There is no gratuitous intent.
Example 2
Dispositions made on divorce or dissolution of a civil partnership () for the benefit of a former spouse or civil partner, as a result of arm’s length negotiations, will not normally give rise to a transfer of value in view of . Alternatively, IHTA84/S11(a) () may apply.
Where the dispositions are made following a Court Order () under the Matrimonial Causes Act 1973, the decision in Haines v Hill [2007] EWCA Civ 1284 at para 35 confirms that the applicant spouse’s right to apply for a property order is consideration equal to the value of the money or property that is to be transferred under the Court Order. As a result there is no loss to the respondent spouse’s estate in the first place and there is no need to rely on any exemption or other exclusion to prevent a transfer of value arising. Consequently, a settlement arising under a Court Order which gives the applicant spouse an interest in possession will be a relevant property trust and the spouse’s interest in possession will not form part of their estate in view of and IHTA/S5(1B). The same analysis applies to an interest in possession created in compliance with a Court Order under the Children Act 1989.