Pre March 2006 IIP - is this correct?

I have a client who’s mother settled her property for the benefit of her son in October 1998, retaining a right to live there, or otherwise downsize or sell the property, and retain the benefit of the income from the proceeds. I believe this is a pre March 2006 qualifying IIP.
Mother has stayed living in the property all these years and now needs to go into care.
My understanding is that as the trust has not been touched, i.e. no additional settlements made, and the beneficiaries have not changed, that on sale of the property s.71 TCGA 1992 will apply and no CGT will be payable (whether or not we sell during her lifetime), and will be rebased for IHT purposes. Further, that the value of the trust will be set against mother’s NRB / any TNRB for IHT purposes.
I also think she will benefit from the RNRB and TRNRB as she is looked upon from HMRC’s view as being beneficially entitled to the property due to her right of occupation.
Can anyone tell me whether they think the RNRB will apply in the same way as an IPDI, and whether I am correct that CGT will not be chargeable on sale of the house?

Sorry s.72 TCGA applies on death of the life tenant i.e. the mother. It would be then PPR that would apply under s. 225. I do not believe a hold-over claim would have ever been made limiting this as she has always lived in the property

As I’ve often said, I’m always a little wary of responding to a post when no-one else has!

Mother possesses a qualifying iip (settlement also gave rise to a gift with reservation on Mother’s part).

Mother retains her qualifying iip following a move into a care home.

If subsequently property is sold by trustees then trustees precipitate a CGT charge on any capital gain but TCGA 1992 s 225 should apply. As Mother post sale continues to be entitled to trust income (arising trust sale proceeds) no absolute entitlement arises and TCGA 1992 s 71 is not in point (nor is s72 as no death).

On Mother’s subsequent death, son becomes entitled to trust sale proceeds but no CGT arises the monies.

Mother, at date of her death, has no qualifying residential interest for RNRB purposes but her estate is entitled to a Downsizing Addition for such purposes.

Malcolm Finney

Hi Malcolm,

I am so glad you’ve said this. You are brilliant. Thank you