This is a variation on the CGT question for Advancement to Life Tenant absolutely
Husband and Wife only had one property. The matrimonial home held as tenants in common in equal shares. Wife died. Her will settled her half share on husband for life. Remainder to son absolutely.
A few days after wife’s death husband entered long term residential care. While he was in care the value of the house increased. It was sold 32 months after he went into care resulting in a substantial gain. The proceeds were to be used to fund his care. Sadly husband died a couple of days after the sale.
I believe his final period of ownership is extended by 36 months because he was in long term care. The trustees of deceased’s wife’s share have an equivalent relief because he was entitled to occupy under the interest in possession trust under wife’s will.
My question is whether this relief has to be claimed both by husband’s PRs for his estate and separately by the wife’s trustees for the trust or is it automatic?
Technically any CGT relief has to be claimed, but PPR is usually disregarded, as evidenced by the relaxation for same in the new 30 days reporting requirements and yes there are technically two disposals of half the property each.
Did the wife’s estate require registration on the HMRC Estate or Trust Register and does it otherwise have any liability to tax and/or a UTR (e.g.was the property let for income while he was in care)? If no, then it would not appear worthwhile registering just to inform HMRC that there is no tax. In the same way that the Estate/ongoing trust was dealt with informally, it might be worth dropping HMRC a quick line very briefly setting out the circumstances just to cover her trustees and also advising HMRC of the trust’s termination following the death of the life-tenant.
If yes, the trust was registered and there is a UTR then also, just to cover the trustees, a similar letter should be sent to HMRC briefly setting out the circumstances and advising of the trust termination and requesting that it be removed from the Trust Register.
Subject tho the amounts involved and whatever remained after deducting care home fees, this information may also be useful in supporting a downsizing claim for the residentail nil-rate band for each spouse when the son is sorting out the IHT for his dad.
There appear to be two disposals on sale of the property; (i) a sale by H (just prior to his death) who owns beneficially 50% and (II) a sale by trustees of the other 50% held in an IPDI trust set up under W’s will for H.
No PRs are involved in either sale although the PRs will complete and sign H’s income and capital gains tax return for the period 6 April, pre death, to date of death.
With respect to the sale by the trustees, TCGA 1992 s225 is in point even though H appears to have occupied the property for only a few days after W’s death. Assuming the conditions of TCGA 1992 s225 are satisfied, any claim for relief on any capital gain arising to the trustees must be actually claimed by the trustees [TCGA 1992 s225(1), last line thereof] in their (ie trustees’) tax return.
With respect to the sale by H of his 50% interest no claim need be lodged assuming that the property was his only or main residence throughout his period of ownership (which includes the last 36 months of ownership; TCGA 1992 s225E) ie there is no need for a claim for, inter alia, lettings or absences. Note that “Capital gains summary notes” SA 108 provide as follows:
" You do not need to fill in the ‘Capital gains summary’ pages if you only sell or dispose of:
your main home, if you qualify for Residence Relief on the full amount of the gain"
See here - HMRC manuals
For disposals post 2003, a claim must be made by the trustees.
The relief against the gain falling in the period pre date of death should be automatic, I think.
Hope that helps.
Whiting & Partners
Thanks for the very helpful responses