This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

CGT on sale of parental home that is in a trust

harfo99
Posts:1
Joined:Tue Aug 04, 2020 9:39 pm
CGT on sale of parental home that is in a trust

Postby harfo99 » Tue Aug 04, 2020 10:12 pm

I would be grateful for any advice on the following:
My father died in 2008 and his half of the family home went in to discretionary trust.
I understand the trust is an express trust and that the trust is settled.
However, the definition of settled is not completely clear to me. My understanding of the definition is ' with a Settled Property any income is payable at the discretion of the trustees'. In the case of our trust there is no income.
The trustees are my mother and the three siblings.
The beneficiaries of the trust are the three siblings.
Our mother still lives in the house & continues to own the other 50%. She does not pay any 'rent' on the 50% of the house that is in trust.
Due to potential IHT she is buying the 50% that is held in trust. We will then disperse the funds between the three siblings and dissolve the trust.
There are no other assets in the trust.
The total gain on the property is approx. £200k since 2008 i.e. the 50% in trust has gained £100k.
Now for the question - is the property eligible for private residence relief? If so, can you please advise the procedure for claiming this?
If it is not eligible, would we then have to apportion the gain in our respective tax returns under CGT? Or do the trustees need to settle the CGT before the monies are dispersed?
Thank you for any help.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: CGT on sale of parental home that is in a trust

Postby AGoodman » Wed Aug 05, 2020 10:54 am

I don't know where you found your definition but the property share is definitely settled.

PPR would not apply to the trust half because it is not the primary residence (or residence at all) of any of the beneficiaries.

The trustees will have to pay the CGT at 28% (after deduction of the trust annual exemption).

It may be better if:

(a) the trustees distribute the share to the beneficiaries
(b) the trustees/beneficiaries claim holdover relief under s.260 TCGA
(c) the beneficiaries sell, claiming 3 x annual exemption (saving £8,600 CGT vs one trust exemption).

Bear in mind that if the total trust value was over £325,000 in 2018 there could be an IHT exit charge and you may have had an IHT anniversary charge in 2018. If the value was over £260,000, you should have filed a nil return.

Lee Young
Posts:2707
Joined:Wed Aug 06, 2008 3:26 pm
Contact:

Re: CGT on sale of parental home that is in a trust

Postby Lee Young » Thu Aug 06, 2020 8:58 am

Is your mum really not a beneficiary of the trust? Sounds like a nil rate band trust, in which case the spouse is usually in the class of beneficiaries.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701


Return to “Capital Gains Tax, CGT”