Scope

In broad outline, the rules apply where an individual successfully removes an asset from their estate for IHT purposes (ie the GWR rules do not apply) but is able to continue to use the asset or benefit from it.

Example 1
Ed gave his home to his son Oliver in 1999 by way of an outright gift and Ed continues to live in the property.

This is not caught by the POA rules because the house is still part of Ed’s IHT estate by virtue of the GWR rules.

Example 2
As example 1 except that Ed entered into a ‘scheme’ the effect of which was to remove the value of his home from his IHT estate. Ed continued to live in the property. This is caught by the POA rules. Even if Ed did not live in the property full-time because, say, it is a holiday home the rules would still apply.

The rules also catch situations where an individual has contributed cash towards the purchase of property from which they later benefit unless either:

the gift of cash was made before 6 April 1998 or
the gift of cash was made after 5 April 1998 and there is a gap of more than seven years between the gift and occupation of the property.

Example 3
In 1999 Hugh made a gift of cash to his daughter Caroline. Caroline later used the cash to buy a property which Hugh then moved into in 2004. The POA rules apply.

The rules would still apply even if Caroline had used the initial cash to buy a portfolio of shares which she later sold using the proceeds to buy a property for Hugh to live in.

There are a number of exclusions from the new rules, one of the most important being that transactions will not be caught where a property is transferred to a spouse or former spouse under a court order.