I am dealing with a Trust which was held on IPDI for the deceased’s husband. The trust held a valuable property. The husband died last year and under the terms of the deceased’s last Will the property in the Trust passed to the grandchildren of the deceased subject to them reaching 25. 2 of the 4 grandchildren were 25 on the husband’s death. The other two turned 25 about 6 months later. 2 of the 4 grandchildren are not resident in the UK. The property was sold recently (after all the grandchildren turned 25) by my clients as the trustees. There was a significant gain between husband’s death and the sale of the property. I am trying to unpick the tax consequences of the situation.
I think there is an exit charge for IHT purposes on the 2 grandchildren turning 25. On the CGT front I believe there is a deemed disposal on the last grandchild turning 25. A couple of questions:
- Am I right in thinking that the IHT calculation is calculated against the value of each share of the grandchildren under 25 between husband’s death and their turning 25? So two separate IHT calculations for each grandchild under 25 on husband’s death over a short period is necessary.
- Given that 2 of the grandchildren are not resident in the UK am I right in thinking the Trustees cannot claim holdover relief on the deemed disposal when the last turned 25?
- The consequence of point two, if I am correct, is that there will be a CGT return for the trust (without holdover relief) plus CGT for the beneficiaries to pay personally in their tax returns between the deemed disposal and the sale of the property about 6 months later.
Any guidance on this would be very much welcome.
James