Gift with Reservation of Benefit (GROB): The Tax Trap You Perhaps Didn't Know About

Ever thought about gifting your home to your children to avoid Inheritance Tax? You know – “Let’s just put it in their name and carry on living here like nothing happened.”

Well… HMRC sees you.

This, dear reader, is where the wonderfully named Gift with Reservation of Benefit (or GROB) swoops in like the nosy neighbour of the tax world.

So, What Is a Gift with Reservation of Benefit?

In theory, if you give something away (like a house), and live more than 7 years after the gift, it falls out of your estate and no Inheritance Tax is due on it.

BUT — and it’s a big “but” — if you keep using or benefiting from the asset after giving it away, HMRC says, “Nice try, but it still counts as yours.”

That’s a Gift with Reservation of Benefit, or GROB. It's like giving away your car but still driving it every weekend. Not fooling anyone – especially not the tax man.

Common GROB Scenario:

You: "I’ve given the house to my kids. It's theirs now."

Also you: Still living in it rent-free, not paying market rent, doing up the garden, and calling it “my place.”

HMRC: “Nice house. Still yours. Tax bill, please!”

The Rules

If you gift something but:

Still live in it, or

Still earn income from it, or

Still benefit in any way...

…then it's a GROB and is still counted as part of your estate for Inheritance Tax when you die.

Unless… (plot twist) you pay full market rent to the new owner (yes, even if it’s your own child 😬), and don’t get any other benefits from it.

What Should You Do?

Don’t panic. A GROB isn’t the end of the world – but it is the end of tax-free gifting if you get it wrong.

Here’s what to do:

✅ Get tax advice before gifting property or assets.

✅ Understand the 7-year rule and GROB traps.

✅ If you want to keep using the asset – consider other planning tools, like trusts or part-gifting arrangements.

Final Thoughts

HMRC doesn’t mind generosity — as long as they get their slice of the cake.

So before you “give it all away,” give us a shout. We’ll help you plan smart, gift right, and stay tax-savvy.

The Tax Faculty offer a free consultation. Book yours today.

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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