CGT on a Discretionary Settlement

[Scooby7]

My mother (and late father) transferred their house into a discretionary trust some 10 years ago. Under the terms of the trust, both they and their 4 children, (plus any issue of their children) can be beneficiaries.

We would now like to sell the property and distribute some of the proceeds.
1. Is there a CGT liability on the gain made while the property was in trust, or is it still treated as a principal primary residence (I understand it would be for IHT)?

2. If there is a CGT issue, could it be reduced by the trust distributing it to some/all of the beneficiaries such that their personal allowances could be used?

3. As the Chancellor effectively "backdated" his changes to the tax laws, is there any way to "unwind" the trust and give sole ownership back to my mother?

Thanks for any advice you can give

Steve

[AvocadoK]

Hi Steve
1 There will be no CGT if your mother lives there under the terms of the trust.
2. N/A!
3. You need specialist advice. Although you say it is a 'discretionary' trust, your mother could be argued to have a de facto interest in possession, in which case, the house could go back to her without an IHT charge.
It appears also that the initial gift was not effective for IHT purposes, since your parents reserved a benefit - unless they paid rent to the trust.
Regards
David B

[Scooby7]

Thanks David - my mother does live there, so the exemption from CGT is what I was really interested in!

3 isn't relevent as it would only be worth pursuing if there had been a potential CGT liability.

You're right, there was a reserved benefit as they didn't pay rent to the trust. The object wasn't to avoid IHT it was for... er.. something else.

Thanks for your help

Steve