Hi Guys
In 1994 my parents put their home into a Discretionary Trust, the beneficiaries being family, the trustees were their sons. We were told that no action was required by us until they died. They then lived in their home as if it was their own. So the trust was dormant, it was not registered with HMRC and had no income.
First my mother died, then my father moved out last October and recently died. We sold the house in April, putting the proceeds into the trust account. We now wish to distribute the proceeds.
Because my parents had full beneficial use of their home at no cost, HMRC deemed that the house was part of the estate and liable to IHT. Normal rules using my parents tax thresholds would apply to the calculation. We have no problem with this.
HMRC have said that the Trust could be liable for CGT. I've had two contradictory conversations, one - no CGT payable, two - CGT payable but Private Residence Relief will apply. HMRC's website says that 'It must be the main residence for someone the trust says can live there.' My parents weren't entitled to live there, so this would not apply. So:
1. Is CGT payable as well as IHT?
2. If so, over what period? How do I calculate it?
Your help to demystify will be gratefully received.
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