Immediate gifting of an inheritance

[davidxt]

My recently deceased mother's will gives the NRB to my sister and I, and passes the rest to her surviving spouse, ie our father. The three of us are executors and there are no other beneficiaries. We have just been granted Probate (with no IHT payable) but have not yet distributed the estate.

My father wishes to pass immediately some of the assets inherited (a portfolio of shares and mutual funds) to my sister and I. We do not wish to do it by Deed of Variation as it will change the taxation treatment of the estate and incur immediate IHT. His other choice is to allow the assets to settle into his name and then immediately make a lifetime PET by transferring the securities in specie at no money's worth to my sister and I.

My question is about CGT. THere was a lot of gain on the portfolio during ownership by my mother, but I know that there is no CGT payable by the estate on the securities being bequeathed to my father. I am assuming then assuming that once acquired by him, if he then disposes of them them as gifts, he will do so without any CGT liability except on the difference between the valuation on they day they become his, and the day he makes the gift. And also that doing this inheritance followed by disposal does not alter that IHT taxation treatment of the will.

If anyone could help me I'd be grateful.

[DJ314159]

For inter spouse disposals, the cost of acquisition, when calculating the subsequent gain, is the original transferor's base cost.

So when he disposes of the shares CGT will be calculated according to the original cost to his wife and NOT their value on the day of transfer. His transfer does not alter any IHT payable on his wife's estate, provided the will has not been varied.

Note, he has less than two weeks left to use his CGT allowance of £11,700 for this financial year 2018/2019.

[darthblingbling]

Fairly sure the base cost is uplifted to probate on death, even if it's interspouse

[DJ314159]

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22240

[darthblingbling]

Your link gives does not take into consideration of when the the assets are transfered of part of an inheritance.

The general position is that the assets are passed to the personal representatives of the estate and then once adminstration of the estate completes the assets are passed to the legatees at the market value on that date.

[davidxt]

many thanks for your responses

[DJ314159]

I assumed the personal representatives and the legatees were one and the same, in this case, as I got the impression that the original poster was seeking assurance that CGT would not at some point be calculated from
the point of acquisition of the assets. Surely, when the assets are passed to the personal representatives a disposal is taking place and the estate will have to pay the CGT? Cannot see HMRC not wanting their pound of flesh. Happy to learn here Darth.

[AGoodman]

As darthblingbling says, there is a tax free uplift on death. The identity of the PRs and heirs is irrelevant.

If there is any gain in value since death, the widower could make a deed of variation and only make the CGT election under s.62 (not the IHT election) so that the children receive the assets without further disposal but the IHT exemption remains.