Many parents gift their properties to their children to avoid inheritance tax (IHT). This usually has to happen seven years before a parent passes away, but if the parent benefits from the property or the transaction there could be a hidden tax to pay called POAT - pre-owned asset tax.

As an example, if the child buys the property and allows the parent to live in it rent-free, or at a below-market rate, there may be POAT to pay when IHT is calculated. That could in some cases wipe out the savings from IHT. Another example could be where a parent gifts the property, the child sells it and then uses the funds to build a granny flat at their own home for the parent to live in rent-free.

POAT is a little known levy and if you are thinking of a property transaction to avoid IHT, you should speak to an accountant. 

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*This article does not constitute tax advice and readers should refer to an accountant or tax advisor.