CGT & Approriation

I am dealing with an estate of which the property is the only real asset. A probate value has been agreed with HMRC for £350,000. However, the property is due to sell in the next few weeks for £375,000 giving rise to a potential CGT liability. There are legacies payable of £40,000, and then the residue is payable to the 3 children.
I am trying to find out if the property can be appropriated to the children subject to the payment of any additional taxes and the legacies, or whether a percentage of the property (eg 75%) can be appropriated to them.
I have looked through my own resources and online resources, but can find no guidance or precedent to cover this scenario.
Any thoughts would be appreciated.
Paul Finn
Goddard Dunbar

I see no reason why you cannot appropriate a share and keep one back. This will mean you have the executors’ allowance as well. I have just done it.

Simon Northcott

In these circumstances, I believe it is more usual for a proportion of the property to be appropriated to the residuary beneficiaries.

Whilst I believe the principle in Crowe v. Appleby applies in such situations, so that any gain would be assessable on the executors in any event, my understanding is that HMRC has not to date sought to assess the executors on the gain on the whole property when only part has been appropriated.

Whilst the whole could be transferred subject to a charge in favour of the executors, the executors then lose control of the sale, and the residuary beneficiaries could decide to hold out indefinitely for what might be considered to be an unrealistic sale price (or decide to retain the property as a long term investment).

If any of the residuary beneficiaries are charities, a sale subject to a charge may not qualify for the CGT exemption available to charities, as the proceeds will not be applied wholly for charitable purposes.

In the particular case in question there is a £25,000 gross gain. After deducting the allowable costs and the Re Richards allowance, I wonder if the amount of CGT at stake is sufficient to justify the further time and costs that would be incurred in implementing the arrangement?

Paul Saunders

If IHT is not an issue and the property has sold relatively quickly you could invite HMRC to agree a higher date of death valuation for the property for CGT purposes using form CG34.

Sarah Arundel
Taylor Fawcett

If sold by the executor and the Re Richards allowances were used there would still be a gain of maybe £12,000. Therefore, if a simple appropriation of a percentage of the property can be done there would be no CGT to pay.

Paul Finn
Goddard Dunbar & Associates Ltd

My understanding is that HMRC is very reluctant to agree a higher date of death value where no IHT is payable as a result.

Taurean Drayak
Elliot, Bond & Banbury