Please can you assist on the following. Husband died and his half share of the property was placed in the NRB trust. The Wife has now been taken into care as she has lost capacity and the property is about to be sold.
The Beneficiaries of the NRB Trust are the wife and sons - all of whom have lived in the property at some point.
Can you please give me some pointers with regards to CGT. The gain on the half share would be approximately £50,000. The Trustees intend distributing the sale proceeds of the half in trust to the two sons. One son is resident in Uk , the other abroad.
The CGT outcome will be different if the trust is, say, subject to an immediate post-death interest in favour of whoever was living there (the widow? Either of the sons?), or is a discretionary trust and the trustees have not given any of the beneficiaries a right to reside or a life interest.
If, as I suspect, the trust is a discretionary trust and there has been no appointment of a right to reside in favour of any of the beneficiaries, despite the fact that some of them may have lived in the property since the husband’s death I understand that main residence relief is not available to the trustees (as none of them will have had a “right to reside” for the purposes of s.225 TCGA 1992).
If the property interest is appointed out to the sons before sale, they would be able to use their personal UK CGT allowances to reduce the amount of CGT payable. However, the non-UK beneficiary may also be liable for tax on his share of the gain in his own tax jurisdiction; and the son within the UK may find that he is disqualified from claiming the “first time buyer” allowance for SDLT (if not already a property owner).
In any event, a CGT return will need to be made within 30 days of completion of the sale, and the CGT paid, either by the trustees (if a trustee sale) or by both of the sons (if appointed to them before the sale).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
On the understanding that it is an NRB discretionary trust, now that the wife has been taken into care I believe it is too late to appoint a life interest in the property to her in order to secure main residence relief under s.225 TCGA 1992.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
50% absolute ownership
The value of the 50% owned by the surviving spouse is uplifted to MV at the date of her death. Any subsequent gain on sale effected during administration of her estate is that of her PRs unless prior to sale her interest is assented to one or more inheriting beneficiaries prior to sale (in which case the latter have the CGT liability whether UK or non-UK resident).
Non-UK residents are now exposed to UK CGT on any gain arising on UK property; indeed any CGT payable is brought forward from the normal settlement date for CGT and an appropriate Return must also now be filed within a 30 day period.
50% trust owned
The NRBDT (I am assuming a DT) trustees are exposed to a CGT charge on any gain at 28% unless it can be argued that TCGA 1992 s225 applies; this necessitates arguing that the surviving spouse was entitled to occupy the property under the terms of the settlement (eg trustees have the power under the NRBDT provisions to permit her to occupy the property). If such an argument can be supported, it would be preferable for the trustees to effect any sale and not appoint the property out to one or more beneficiaries prior to sale.
Living in the property at a time when that person did not own any part of the property is irrelevant re a CGT charge.
I appear to have successfully argued for full CGT Private Residence Relief on a sale of NRBDT property where the trustees had the power to allow the wife to reside but did not do so in writing by referencing the full judgement in Sansom v Peay 1976.
I received an acknowledgement from HMRC saying they may raise queries within 12 months and this has now passed.
Absolutely give it a go! It helped my case was family and so not expectant clients but…
As far as I am aware there is no specific requirement for anything in writing. All that is necessary [per Sansom v Peay] is that the beneficiary has an entitlement to occupy under the trust terms and the trustees exercise their discretion to allow occupation.
We have also had success in claiming PPR for discretionary trusts where the occupant was a discretionary beneficiary and also co-owner with statutory right of occupation due to their ownership status. In all cases, the trustees had not put anything formal in writing to authorise or permit the occupant to reside under the terms of the trust. These are cases where clients have come to us at the time of sale rather than at the outset. I would always advise trustees to put something in writing to show they permit the beneficiary to occupy, however, care needs to be given to ensure an inadvertent life interest in not created where it is not wanted.