Appropriation of a residential property to a non UK resident when it's the main asset in the estate

It is my understanding that since 6th April 2015 a disposal of a residential property in the UK, by an individual not resident in the UK (she has lived in Spain for many years and is now retired), is chargeable to CGT at the same tax rates as a UK resident and has the same annual exemption.

I have an estate where the two executors who took out the grant are one professional and the deceased’s sister. Power was reserved to the other directors/shareholders.

The deceased’s sister is also the sole beneficiary and the property forms part of the residuary estate. The property is on the market for sale and I was considering appropriating the property to her so she can have the benefit of the lower CGT rate of 18% if my understanding is correct. However, as there is now very little else left in the estate I am concerned as we haven’t yet received clearance from HMRC in relation to IHT and whether they accept the probate valuation as being the true market value.

If we ask for an indemnity will this be adequate to protect the executors against any further bills and expenses? The sale proceeds are to be paid into our client account.

Carole Butler
Bells Solicitors Ltd

Presumably you believe the gain will exceed the executor’s CGT allowance.

You could appropriate subject to a charge for outstanding costs/taxes etc

Simon Northcott

Many thanks, Simon – much appreciated.

The gain is £83,000

Carole Butler
Bells Solicitors Ltd

Has the beneficiary sought advice as to their potential liability to tax in Spain?

Whilst the possibility of avoiding UK CGT often arises when there are non-UK tax resident beneficiaries, once an asset is appropriated to them the gain may be taxable in their own jurisdiction and, possibly, their liability greater than would have been paid in UK CGT on a sale by the executor.

Paul Saunders

For 2016/17 there is no 18% CGT - the rates are 10% or 20% (28% for non-resident trusts). What is the significance of the reference to ‘directors/shareholders’ - is ATED in point?
How long since the death?
If the residential property has increased by such a significant amount over a relatively short time period than perhaps the probate/IHT value is open to challenge by HMRC.
If it is a longer period then is the Estate administration finalised such that you are in a position to assent the property or, as you note, there may be other as yet unquantified expenses?
Whether it is a sale by the Executors with the net proceeds being passed onto the non-resident beneficiary or the non-resident beneficiary selling the property (albeit through the ‘Executors’ as nominee) there will be CGT (unless the probate value increases and wipes out the gain) but in the latter case the beneficiary gets the benefit of their annual CGT exemption?

Maxine Higgins
Citroen Wells

The tax rates that Maxine Higgins refers to apply to gains on assets other than residential properties. However, as the enquiry does relate to the sale is of a residential property then the rate within the Estate will be 28% but for a UK resident individual will be 18% within the Basic Rate Band and 28% for gains over the Basic Rate Band.

Graeme Lindop
Coles Miller Solicitors LLP

Apologies you are of course correct about there being no change in rate for residential property.
Maxine Higgins
Citroen Wells