Transfer from PR to non Beneficiary of estate

I have the following situation and would welcome any views please:

G dies in 1990 intestate a widow.

A and B are her children (and PR’s) but do not get on.

G held a shop with flat above and gardening business on adjacent land. During her lifetime she transferred the gardening business to A. It was intended that B receive the shop and flat but this did not take place.

Upon G’s death in 1990 nothing was done until 2019 when it was decided that the shop and flat should be transferred to B’s only child - C (grandchild of G). The transfer was from G’s estate rather than from B.

B has now died and I feel that the gift of the shop/flat is a gift from her in 2019? I am now doubting myself as Client is saying it was transfer from G’s estate and therefore a gift from A and B not just from B? Should I include the value of the failed PET in B’s estate? It seems no CGT advice was taken on the transfer in 2019.

Just to add to the ‘mix’ it appears that when the transfer took place a postage stamp piece of land was transferred to A and the rest transferred to C.

Hope this makes sense!!

Many thanks

Kathy Melkerts

It sounds like a gift by A and B on the basis that they were presumably entitled to the estate in equal shares.

It might be considered a gift by B alone if there was a convincing argument that B alone should have been entitled to the shop and flat under the intestacy but your description doesn’t really make one out unless you can formulate an argument based on A having received their share during G’s lifetime (I fear the law wouldn’t support it but its worth looking). It may of course be more tax efficient to accept that B’s failed PET is only half the value rather than the whole.

Andrew Goodman
Osborne Clarke LLP

IHTA 1984 s142 is inapplicable due to G’s death occurring more than two years ago.

On G’s death, A and B are each (presumably) entitled to 50% of the shop/flat (the property).

In 2019 the property was held by A and B as PRs. Any transfer of the property to C (B’s child) would presumably be made:

(i) by B pursuant to an agreement between A and B that B agreed to waive/disclaim her share of the inheritance of the property; or

(ii) by way of individual gifts to C by each of A and B separately.

Under (i) and (ii) B has made a disposal in favour of C for CGT. Under (i) A has made a CGT disposal to B and a CGT disposal to C under (ii).

Each of A and B have made PETs.

The assents to A and B by A and B qua PRs in 2019 is at the probate value of the property on G’s death. The subsequent gifts will be at 2019 market values. Partial CGT hold-over relief should be available on the presumed capital gains which will have arisen between G’s death and 2019.

Malcolm Finney