The gift of undivided shares of property will not be subject to the ‘gift with reservation of benefit’ (GWRB) rules provided the donor and donee both occupy the property. The donor must not receive any benefit from occupation other than a negligible one, which in itself must be paid for by the donor.

It is not necessary for a proportionate sharing of the expenses of occupation, but the donor must at least bear the full share of the expenses attributable to him or her. There is no requirement for the whole of the property to be gifted. Therefore the arrangement could be as the example and be allowed.

Example:
James owns the whole of the house, which he occupies with his (adult) daughter and son. James gifts one third of the property to each but continues to live in the property. All three contribute equally to the day-to-day expenses of the property, including the cost of a new kitchen.

If the cost had only been met by the children then there would be a GWRB at that date because the owner, James, had received a benefit ‘provided by or at the expense of the donee for some reason connected with the gift’. (s102 (b) Finance Act 1986).

His daughter decides to move out of the property and at that date a GWRB will arise in respect of her share unless James pays a market rent for the continued occupancy of his daughter’s one-third share.