CGT on sale of property on termination of Life interest

Property originally owned by second marriage H & W 40/60%. W died 2005 leaving H right of residence for life. H died in 2019 leaving his 40% to his son. Remaindermen of W share were two daughters, one of whom
has predeceased so her share passes to her children, the other daughter assigned her interest to her three children in 2014.

H’s son wants to buy remaining 60%.

Property submitted in H’s IHT400 @ £331000 (his accountant has claimed a 15% discount that I don’t think they are entitled to and am not acting in the probate) and has agreed to pay £390,000 for the 60% share.
I anticipate there will be a £59,000 capital gain (assuming HMRC reject the discounted valuation). There was no power of appropriation in the W will and trustees have no statutory power to appropriate.

I would like to know who is making a capital gain, i.e. is it the Trust with therefore only a trustees allowance, or does the property automatically vest in the beneficial owners on the life tenant’s death so
that in this case eight of them share the gain. If it does not automatically vest can the trustees make a declaration of trust that they now hold the 60% share on behalf of the remaindermen?

Kind Regards

Chris Hadfield



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Are you able to claim PPR since a beneficiary of the trust has used this a main residence? Or similar releif perhaps someone can point out the legislation for this.

Lucy Leach

Where on the death of a life tenant the trust fund is absolutely distributable, for income tax and CGT purposes HMRC treats the trustees as holding on bare trusts for the remaindermen from that date of death. It is generally only where there are cash legacies payable out of the trust fund upon the death of the life tenant, or gains have been held over on assets passing into the trust, that the trustees would have any liability for CGT.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals



The termination of H’s IPDI (and the cessation of the settled property) precipitates a deemed disposal of the trust assets on the part of the trustees (TCGA 1992 s 71) but no actual chargeable gain arises due to H’s death (s 73). The remainder beneficiaries thus become absolutely entitled to the trust property as against the trustees the base cost of the trust property being market value of the property at the date of death.

The subsequent purchase by the son of the trust property is thus a disposal by the remainder beneficiaries (not the trustees); as you say 8 off them.

Malcolm Finney

The trust created in 2005 would appear to be a qualifying IIP, it also appears that this has reverted absolutely following H passing away.

I would therefore suggest that gains in the property are uplifted for CGT purposes to the date of the husband’s death, meaning the probate value would be used. If there is spare nil rate band for husband, then a not discounted value may be a good idea and therefore corrective return perhaps to increase the base cost and therefore reduce the gain.

i’d be surprised if the property has increased significantly in value post that date but in terms of who is making the capital gain (if any) it would be the remaindermen as essentially, the trust has ended (of course subject to the terms of the trust) and so the purchase is from the beneficiaries.

it seems that there are several beneficiaries interested in the 60% so I would guess that if there are any gains then they should be soaked up by the CGT allowances of the remaindermen, i.e. grandchildren of wife.

Andrew Drakes
Countrywide Tax & Trust Corporation Ltd

Thank you Paul



@andrewdrakes great explanation. Can you explain why the purchase is from the beneficiaries and not the Trustees? Thanks

Lucy Leach

@LAnne The purchase will most probably be from the trustees who are holding for the beneficiaries absolutely, but critically, the gain would be on the beneficiaries as remaindermen.

Andrew Drakes
Countrywide Tax & Trust Corporation Ltd