Base cost of property from a will

by **HMD** on Wed Jul 21, 2010 3:16 pm

Apologies if this is a Trusts 101 query, but here goes.... client inherited property (joint with a relative) in a will. I have the probate value, but client would have been a minor at the date of probate. Property was transferred into his name at the age of 21. This property is now being sold and I am trying to ascertain the base cost for CGT purposes.
It was my understanding that the trustees held the property as a bare trust - but does this only apply to the period when the client was a minor (i.e. up until 18). For the period from 18 to 21 (when he had the property transferred into his name), was this a interest in posession? Does it make any difference as regards the base cost (on acquisition) of the property? Is the base cost for CGT purposes going to be the date of probate, or will it be the market value at the age of 21?
Reading HMRC manuals, specifically CG36333 - CG36337, but I am getting a bit confused!
Am reluctant to ask the client to contact his solicitor to get the details of the value at age 21, if it makes no difference to his cgt comp.
Many thanks for any takers on this one

by **Lee Young** on Wed Jul 21, 2010 4:44 pm

Base ocst is the agreed "probate" value. Did the beneficiairy live in it at all?

by **HMD** on Wed Jul 21, 2010 10:19 pm

Many thanks for your reply Lee. (I have read your reply's on many other forum questions and I always find them easy to understand).
Yes, he did live in the property, (with the other owner - who is not his mother or his father) both as a minor and then for a very short time after he reached 21. He was away at uni (student accomodation) for some time. I am now trying to see if he has an "interest" in the house (CG64770) in the period from inheriting to 18, and then 18 to 21, for PPR purposes. I find it hard to believe that PPR would not be available to him in the period when he was a minor, as he did actually live there, but would you know if a minor can actually have a PPR? Or would this go back to the "interest" mentioned in the Revenue manuals above. Many thanks for your time again.

by **Lee Young** on Wed Jul 21, 2010 11:09 pm

PPR should be available to the trustees on the back of the beneficiary's occupation. I have never thought about it before but I do not think there is any restriction on PPR being available to a minor.

by **HMD** on Thu Jul 22, 2010 10:37 am

Thank you again for your reply Lee, but could I bother you again with another question? Your latest reply says "PPR should be available to the trustees on the back of the beneficiary's occupation" - this seems to indicate that it would not be a bare trust, and the beneficiary only became entitled to the property at age 21. Is that a correct assumption to make?
My understanding is that if it is a bare trust, then effectively beneficiary had beneficial ownership from date of inheritance - i.e. probate value. Therefore use probate value as the base cost for CGT purposes. On this basis, I was seeing what PPR relief he could claim with regards to his period of residence in the property (from his time of inheritance up to date of sale).
But, if you are saying PPR should be available to the trustees (on the back of beneficiary's occupation) then I presume you would be talking about the period from inheritance up to age 21? If this is the case, then why would the base cost on beneficiary's asset be the probate value - as he would then have a period (from inheritance to age 21) at which he (in his own personal capacity) would not be eligible to PPR as this time period was in fact covered by the trustees "ownership" of the property?
Or are we both saying the same thing?
Apologies, as I said in my opening question, this may be a Trust 101 query by a thicko here! I see the trust as necessary due to the fact that he was a minor, but at the end of the day, unless he died, he would always attain the age of 21, therefore the asset is held as a bare trust for him by the trustees. (i.e. it was not conditional on anything else, such as marriage or non-marriage, or anything that wouldn't just happen anyway.)
It was on this basis that I was looking to see if he could get PPR on his full period of ownership (part of which was when he was a minor).
I am booked to go on a Trusts course in the Autumn! I don't advise on trusts as I'm not 100% au fait with them, but am dealing with this client's CGT side of this one, so unfortunately I have needed to get my head around it.
Do you/your firm do ad hoc queries from fellow tax advisers on an hourly rate, as it's always good to get a second opinion when in doubt. I can send you a PM if necessary?

by **Lee Young** on Thu Jul 22, 2010 11:39 am

If the terms of the trust are that the beneficiairy did not absolutely inherit till the age of 21 then it is not/was not a bare trust. Therefore it is for the trustees to claim PPR and their base cost on any disposal is the value of the asset when they acquired it.

Once the beneficiairy became 21 from that point the trustees may have been holding the property as bare trustees, but the coming of age was a dispsoal for CGT purposes and therefore the disposal took place at the age of 21 (when the beneficiary became absolutely entitled to as against the trustees).

Always happy to be a second opinion - feel free to email directly, details below.