Main residence relief & relevant property trust

Wife dies in 2013 owning home jointly with husband as tenants in common. Will written in May 2012 and it leaves her 50% share of the home to her three children (DOBs Aug 1994, Nov 1996 and Dec 1997) “in equal shares absolutely on their attaining the age of 21 years provided that my husband shall have a right to reside in the property as long as he wishes”. The will contains no further detail. Husband remarried in April 2019 and moved out. Two of the children have lived in the property since wife’s death.

The property is to be sold for £700k and we are trying to work out the interests held for the purposes of calculating main residence relief. Could members please give their views on those interests and whether a relevant property trust arose.
Thank you in advance
Maxine Higgins
Citroen Wells

I’m inclined to the view that the husband had an IPDI in his late wife’s interest in the property, which terminated when he ceased living there (a PET for IHT purposes).

As regards the children, the youngest had attained age 21 when the husband vacated, so that it would appear they all had vested interests at that time.

When the husband vacated and terminated the IPDI, a CGT event will have occurred under s.71 TCGA 1992, although the trustees should be able to claim main residence relief (MRR) under s.225 TCGA 1992 for the period of the husband’s occupation.

The gain arsing on the late wife’s share from the date of termination of the IPDI will be assessable on the children as to a one-third share of that gain each, with those living in the property being entitled to MRR under s.222 TCGA 1992.

So far as the husband’s share of the property is concerned, he will have MRR up to the date he vacated (plus 9 months) and the gain will be time apportioned over the period of his ownership (rebased if appropriate) and the apportioned gain for the period since he ceased occupation (less the 9 months) will be subject to CGT.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Husband’s own % ownership
Any gain arising on the sale of his 50% interest in the property will be subject to PPR. He moved out in April 2019 (?) and of the subsequent two years to April 2022, one year and 3 months of any gain will in principle be subject to CGT (exempting the last nine months of ownership).

Husband’s interest under the trust
I tend to agree with Paul that the husband’s interest under the trust is an IPDI. When he moved out the IPDI terminates and the trustees are treated as having made a CGT disposal (and re-acquisition). PPR should apply to the deemed gain.

Three children
Presumably the three children do not become absolutely entitled as against the trustees until the IPDI has terminated. In which case, the children’s base cost for CGT is market value at the date the IPDI terminates. Each child is entitled to 1/3rd of the gain on sale with two of them being able to claim PPR.

Malcolm Finney

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Thank you very much Paul & Malcolm