Deed of Appropriation - CGT question

I was wondering if forum members could assist me with an issue that has arisen on an estate.

I have an estate which I am looking to complete a Deed of Appropriation transferring the property into the beneficiaries names as the property is being sold for a £100,000 gain.

The issue that I have is that the only other assets in the estate (ignoring a pension refund of around £30) were jointly held. As such by appropriating the whole of the property there would be nothing within the estate to pay for a £10,000 pecuniary gift along with other estate costs (funeral and sols fees).

Alternatively if I do not appropriate the property to the beneficiaries then the estate will end up paying significantly more CGT than if I am able to appropriate the property (the estate is being divided into fifths).

We have spoken to an accountant on another matter who said that it wasn’t possible to part appropriate an asset, with that being the case, does anyone have any idea how to reduce the possible CGT cost, or will this simply have to be born by the estate.

I have been involved in a number of instances where the executors have appropriated only part of a property, retaining the remainder within the estate for the payment of legacies and administration expenses. I am not aware that HMRC has raised any issue in any of them, provided the disposals of the separate interests created by the appropriation are properly disclosed.

At one time it was believed that such an arrangement would be open to attack by HMRC under the Crowe v. Appleby principle, but this has not proved to be the case.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Hi Tim,

I often undertake CGT on Estates where the property has been part appropriated, with no issues. this has been done to use of multiple allowances, whilst retaining an element in the Estate. Currently, no queries raised by HMRC.

Lucy Orrow CTA TEP
Lambert Chapman LLP

Agreed I have appropriated 3/4 to beneficiaries and kept 1/4 back.

Also split 16 ways once as loads of beneficiaries and the estate.

No queries by hmrc on tax return

Excellent, thank you all.

Obviously the accountant that we spoke had been misinformed as I couldn’t see anything which suggested that a property couldn’t be part appropriated.

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I too have appropriated % beneficial interests in property to utilise beneficiaries’ annual CGT annual allowances and retained a % for the estate and claimed the annual allowance of the Executors as well and never had a problem.