Disclaimer & CGT

I have a client who is considering disclaiming an inheritance some 4 years after the deceased death. He is entitled to a share in a property that has remained in the names of the Executors and he has received no rent of other benefit. There is to be no consideration for the disclaimer.

Having consulted the relevant HMRC manual, I am still a little unsure as to the CGT consequences of such a move, where there is no consideration and the asset remains held by the PRs. Any clarification would be welcome.

Nick Sewell
Bevirs Law

I have dealt with a case recently where the Executor continued to hold a property which continued to be occupied for some years after the Deceased’s death by a rent-paying tenant, in accordance with the Deceased’s wishes. After the tenant moved out, the property was sold and HMRC accepted that the administration period had ended some years ago, and that, therefore, the Executor was holding the property as bare trustee for the beneficiaries, and that each beneficiary was responsible for reporting and paying his/her proportion of the CGT on the gain made on sale, and the Executor had no liabilitiy to pay any CGT. If your client disclaims this responsibility should pass to the beneficiaries actually sharing the sale proceeds, but may be prudent to get written confirmation to this effect from HMRC.

Lee Penhaligan
Scott-Moncrieff & Associates

Following on from Lee’s reply, as more than two years have elapsed since the death then the beneficiary making the disclaimer is disposing of his interest in the property at deemed market value for CGT purposes. Whether his base cost is a fractional share of probate value or discounted for joint ownership will depend on whether the probate value was ‘ascertained’, which would normally be the case if IHT had been payable.

Kevin Preston
Amherst & Shapland Limited

There is no time limit within which a disclaimer needs to be made under common law assuming, of course, that there has been no acceptance of the gift.

A disclaimer 4 years post death is therefore possible.

A disclaimer is not a disposal but simply a refusal to accept the gift.

Even if the estate administration has been completed and the PRs hold as bare trustees this would not seem to preclude a disclaimer being exercised in which case the disclaiming beneficiary makes no CGT disposal. The “replacement” beneficiary will then be determined either under the terms of the will or on an intestacy.

Malcolm Finney