Right of residence

[Stevo71]

In 2001 my father transferred a property to my sister by way of gift under love and affection. The transfer deed formally documented a right to reside in favour of my father. My sister was also obligated to meet my father’s living and funeral expenses as part of the arrangement.
In 2015 my sister transferred a one third share each to myself and another sibling, again by way of gift under love and affection, with the right to reside remaining in place.
My father passed away in February 2026, at which point the right to reside ended. We are now selling the property for £170,000.
Our position is that the right to reside documented in the 2001 transfer deed created a trust arrangement whereby full beneficial ownership never passed until my father’s death in February 2026, meaning our base cost for CGT purposes should be the market value at that date, resulting in little or no taxable gain.
Can you confirm whether this argument is correct, how we should document and present it to HMRC, and whether there are any other CGT considerations we should be aware of across all three of us?

[AGoodman]

My starting point would be that your father likely had an IIP and so the property remained in his estate for IHT purposes and benefitted from a tax free CGT uplift to market value on his death under s.72 TCGA.

However, it's not a situation I've seen before and I would want to look into whether the position is changed by:

- your sister paying for the property
- your father retaining an interest

Probably not, but, as I mentioned above, this is not a situation I have seen before.

[wamstax]

You might find the following interesting bed time reading (and surrounding guidance) as regards your questions - https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg36300

However please remember that this is only HMRC guidance notes and not LAW. If you wish advice that you can rely on then I suggest that you contact a suitably qualified tax adviser given the nature of the question and that it impinges both on CGT and IHT

Hope that this helps