Private Trust of Land - Appointing additional trustees

[cloudnine]

As Executor of my father's estate I have transferred his house by Deed of Assent into the names of myself and my children thus giving effect to a Private Trust of Land. I presume that such a Trust is a bare trust and that those named on the Title
will be liable for CGT on any gains on disposal as if they were individual taxpayers.

Each of the three Trustees has a spouse. So if each were to transfer a share of their interest to their spouses the personal
CGT allowances of six people could be set against the tax bill. I believe that six or more people could sign a Deed of Assent. However only four people can be named on theactual Title Deed. So what is the best way of ensuring that the three spouses financial interest in the property can be secured and their CGT allowances used? Does it inevitably involve another round of SDLT and AP1/AS1 applications or is there a simpler way?

[Simon Sweetman]

Yes, each of the three of you can transfer half your interest to your spouses before any sale. My understanding is that you can do this by a simple deed of trust and there is no need to convey anything or alter the legal documentation. Nor is there stamp Duty as there is no consideration.

Assuming that there is only a short interval between this transfer and the sale of the property, you need to be sure that the transfer is a reality and that the spouses personally get the share of the proceeds to which they are entitled.

If you are still within two years of your father's death, you might do better with a deed of variation to change the will, because the allocation of the capital gain would then be unchallengeable.

[Peter D]

Whilst your actions are with good intent I am unsure of your true situation. A deed os assent implies your father has passed away. If this was recently then there is little if any CG liability. What do you intend to do with the property, what was the OMV at DOD and what date. You must ensure your are compliant with the Will or raise a DOV as Simon have said. I am, to be honest, that the actions taken are a DIY fix for a problem that may not be there or are innappriate. Regards Peter

[cloudnine]

Thanks Simon and Peter for the helpful responses.

Simon, do I take it that the new Deed of Trust would not need to be lodged with the Land Registry or other agency, simply retained for safekeeping by the Trustees? As to ensuring the
'reality' of the transfer to the spouses, at least one of the couples maintains a joint Bank Account. In their case would separate
receipts for the proceeds of sale suffice, I wonder?

Peter, the certified probate OMV at the DOD was provided to HMRC and accepted by the District Valuer for IHT. The property is unimproved and has been unoccupied for over a year.

A fresh OMV was obtained at the time the property was appropriated. (A Deed of Variation
was not appropriate in the circumstances).

The intention is to improve the property prior
to sale, hence the wish to mitigate potential CGT liability.

[Peter D]

I am concerned as this may not be accepted by HMRC and deemed to fall under there avoidance rules. I would take legal advice or personnally I would go for a DOV and redirect the ownership of the house in the Will. This as Simon said is unchallengeable.

You are going to have to pay for several Deeds of Trust and a DOV is by far the better solution.

What size of gain do you anticipate for what capital outlay. The outlay will be allowed as enhancements but only invoiced labour will be allowed, your working on the property is not allowable.

Also may I remind you that you have to comply with the Will who was to inherit the house in the Will. Regards Peter

[cloudnine]

Well, as I said in my original preamble, the
Deed of Assent has been effected and the house is no longer part of the Estate. While, in other circumstances, a DOV may have been a useful option it is no longer available to me.

I am concerned when you say: "this may not be accepted by HMRC and deemed to fall under there avoidance rules" but am unclear why they
would treat the approach suggested as avoidance. What CGT avoidance rules would apply and to which aspects of the unfolding scenario?

Much of the work to improve the property will be carried out by the Trustees and so not allowable. There will be a certain amount of
invoiced specialist work such as electrical and
central heating. I anticipate that the chargeable gain would be in the order of £60-
£80K.

I believe that the Will has been complied with. The house has been appropriated (s41 AEA
Act 1925) in satisfaction of the legacies of the principal beneficiaries with balancing monetary payments to the Estate to match the prevailing OMV.

[Peter D]

It is the total and expanding number of CGT allowances you are trying to use that will cause alarm bells to ring at HMRC. You really need to seek well versed professional advice on this or it may all go quite wrong. Do you have a lawyer/solicitor involved in this that is an experienced IHT/CGT practitioner, or are you just winging it. Regards Peter

[cloudnine]

I see the point you are making, Peter. I am dealing with the matter myself. I took the view that provided the actions involved make perfectly legal use of interspousal transfers and personal CGT allowances HMRC would not be in a position to disallow the situation.

[Peter D]

What does the Will Say. Who did Dad leave the property to. How have you registered the 'Deed of Assent' Regards Peter

[maths]

Not wishing to add materially to the above my understanding is that the following is incorrect:

"Well, as I said in my original preamble, the
Deed of Assent has been effected and the house is no longer part of the Estate. While, in other circumstances, a DOV may have been a useful option it is no longer available to me."

A DoV is in principle possible even where property has vested in the original beneficiary; indeed a DoV is feasible where the estate has been administered.