I am dealing with a discretionary trust established within the Will of someone who died in 2005. The only asset of the trust was a 50% share in the family home. The deceased’s wife was named as a potential beneficiary of the trust and continued living in the property until her death in 2022. The property was sold in Nov 2024.
I understand that PRR can be claimed for the wife’s period of occupation under s225 TCGA 1992. My question is regarding the calculation of CGT on the gain. It appears to me that CGT can be calculated in one of two ways. Either:
(1) CGT is calculated on the difference in the value of the property share in 2005 and the sale price (less the standard allowances and costs), with CGT attributable to the period of occupation effectively being charged at 0% after the application of PRR;
(2) CGT is calculated on the difference between the value of the property at the date of the wife’s death and the sale price.
Can anyone clarify the position? The wife did not hold an IIP under the terms of the trust but was granted the right to occupy the property by the trustees.
As it is the discretionary trust that is selling the property, the entire period of its ownership must be considered - so between 2005 and November 2024. Thus your first option is correct. The date of the widow’s death is only relevant for calculation of PPR occupation. You will be aware that if a claim for PPR is in point then the last 9 months of ownership can be claimed, even though the property may not have been occupied as a PPR. I have not encountered this in practice where the occupier was actually deceased, but would include such a claim since it is deemed occupation not actual. However, there will still be a period between 2022 and 2024 not covered by PPR that is potentially subject to CGT - was the 60 day digital reporting complied with? If so, this point should have been considered then, if not then potentially there may be penalties to consider as well.
Maxine Higgins
TC Citroen Wells
The DT was set up in 2005 with the 50% house interest. For CGT the base cost of this 50% would be MV/PV as at 2005.
The death in 2022 has no CGT impact.
However, PPR relief would cease on the death (having been applicable from 2005 to 2022).
On the sale in 2024 by the trustees of the DT a CGT charge would in principle arise on the part of the trustees of the DT. The gain would be the difference between the disposal value on sale and the MV/PV as at 2005.
Of this gain, PPR relief would apply to [ [2022 - 2005]/[2024 - 2005]] ‘ths of the total gain; the balance of the gain subject to the trustees’ CGT rate.
Malcolm Finney
Thank you for your comments Maxine, very helpful. The CGT Return was filed within 60 days but the accountant (I am the solicitor dealing with the administration of the estate) calculated the gain using the second option, which I was not convinced was the right method. I will go back to them in light of your comments to review this with them.
Malcolm, thank you for this summary, very clear.