CGT on house in Trust

[worden]

Hello help please!!

Discretionary Trust was set up by deed of variation 5 years ago. The only asset being a half share of house which was valued at 450K therefore 225k share. House is now worth apprx 650K. we are thinking that in view of rising house prices maybe worth winding up??? what is the CGT implications? there are 6 beneficiaries can the CGT be paid by beneficiaries as opposed to the Trust as i believe the Trust would need to pay 45%? If beneficiaries pay do they have to pay straight away or when the property is sold ?? and at what percentage??

Thank you anybody

[AGoodman]

General rule is that the transfer out of the property will be a deemed disposal by the trustees who will be liable for CGT at 28% on the gain of approx. £100k (minus a trust annual exemption). If the beneficiaries fund this, the payment could be considered consideration for SDLT - it could be beneath thresholds but that is another question. It certainly would not be a lot.

Two exception to this are:

1. The trustees and beneficiaries could jointly apply for holdover relief under s.260 TCGA - this avoids any tax on the distribution but the beneficiaries receive their shares with the original (probate) base cost; the beneficiaries could then sell and each claim their annual exemption. The overall gain would be the same but far more exemptions and the possibility of 18% for basic rate taxpayers.

2. If a beneficiary has been living in the property under the terms of the trust (essentially - not paying rent) then there may well be 100% principal private residence relief. That will have to be claimed.

Also a possibility of a small IHT exit charge (absolute max 3% at 5 years) on the distribution but this is unlikely on these values unless the deceased had made substantial gifts during his lifetime or there were other trusts under the will which used up or shared the nil rate band respectively.