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Where Taxpayers and Advisers Meet

Will CGT be payable

ADSharpe
Posts:1
Joined:Sun Apr 11, 2021 12:42 pm
Will CGT be payable

Postby ADSharpe » Sun Apr 11, 2021 12:55 pm

Hi All

I require some advice please on a CGT Query

The background-

In 1995 grandmother transfers ownership of her property to her son and wife to hold the property in trust until such a time her two grandchildren reach 21 years old and request the transfer of the property into their names

In 1995 (Same time as the trust is created) a declaration was signed by the trustees confirming that the grandmother can continue living in the property until death or voluntary vacation. The term nominal yearly rent is mentioned, however in practice no rent, of any amount was ever received/charged.

For all intents and purposes the property was grandmothers to live in, maintain and improve as she would do if she was still legal owner.

Both grandchildren reached the ages of 21 in 2006 and 2013 however the ownership of the property was not transferred across to them, mainly as the grandmother was still happily and healthily living in the property.

In March 2021 grandmother sadly passed away. Her will states all of her estate will be left to her grandchildren (the same two named in the trust document)

The total amount of her estate (including the house in trust) is below IHT threshold so this will not be applicable in any instances

The property is still held in the name of the trustees.

Property value today = 200,000
Property value in 1995 = 40,000

My questions are:-

1) Is there a CGT liability on either the trustees or the beneficiaries.

2) Will probate be necessary?

3) If CGT liability is applicable, would there be any relief available as it was grandmothers main home for past 30 years?

You advice and counsel is greatly appreciated

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Will CGT be payable

Postby maths » Tue Apr 13, 2021 4:14 pm

It would seem that the grandmother intended to create a trust which came into effect when the legal title to the property was transferred from her own sole name into the names of the son and his wife. Presumably this change of legal title was confirmed by lodgement with Land Registry of Form TR1.

Although a little unclear, it also seems that g'mother intended that she would continue to live in the property until the earlier of death or were she to vacate the property; in the event on death. On her death her grandchildren were to acquire the property.

On g'mother's death the trustees (son/wife) would be treated for CGT as selling and re-acquiring the property for its then market value; the trustees then holding the property on bare trust for the beneficiaries. Any capital gain should qualify for principle private residence relief ie no CGT charge under TCGA 1992 s 225.. This would require a claim to be filed with HMRC by the trustees.

Probate will not be necessary with respect to the transfer of ownership from trustees to grandchildren as this is a trust issue not an estate of the deceased issue. It will probably be necessary with respect to g'mothers other assets.


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