CGT IIP complications

Alfaholical

Hi experts

Not sure if anyone can help?

My late mother's house and land was held in an interest in possession trust for 40 years (she never moved).

I left home 28 years ago but my sister remained living in the house for the last 30 years with my mother. My mother passed away in 2014 and my sister and I have (after much effort) managed to get planning permission on a barn / out-building within the boundaries of the property.

The entire property has remained with the IIP trustees albiet a different firm and partners and we (or rather the trustees) have recently concluded the sale of the barn with planning permission which when shared should provide enough money for my sister to put down a deposit on the remainder (house/garden and small amount of land) and buy me out.

Can my sister get principle private residence relief for the 4 year period between when my mother died and the sale or will full CGT apply as title for the house will not transfer until she "buys me out"?

There has been quite a gain on the IHT valuation due to the splitting of the estate and selling off the barn.

I may consider delaying the purchase/sale of the house as I believe I might be able to then utilise two years of CGT allowance (one for the barn one for the house and remainder).

Hope the above is clear if a little complicated. I will probably end up going to a tax expert but I thought I would ask here first so I know what questions I shoud go in with.

Thanks

Alfa

madgagoo

Based on what you have said above, the trust has a CGT liability, not your sister. If that is correct then, yes, the trustees may be able to claim PPR relief on the basis that the property was occupied by a beneficiary under the terms of the trust.

However, what happened to the trust when your mother passed away? Did a remainderman become entitled to the property? If so, who? If it was you and your sister jointly then she can claim PPR relief, you can’t.

Once you have decided whether a claim for PRR is possible, then the trustees/your sister will need to consider whether it is correct. Developing outbuildings can lead to PRR being denied. Complex area!

Alfaholical

Thanks for the response Yes it was / is all very complicated. Both of the original trustees have now passed away and my sister and I utilised the services of an independent trustee. Title to the property remained with the the trust and it is only now that title will transfer to my sister and I.

In the IHT submission the valuation was only for the entire estate so there is no basis other than estate agent estimates of value for each part. As we have a valuation now (sale prices) I guess this could be used for the proportioning of the IHT base value which is c 65/35 house to outbuildings with PP.

I think I will need to seek advice just not sure whether accountancy or legal or both. The trustees do not want to advise as they say they have a conflict of interest,

Thanks

Alfa

madgagoo

To be clear, if the property is still in the trust then you/your sister cannot sell it, make any decisions about PPR claims or the apportionment of base costs. This is the sole responsibility of the trustees.

As the life tenant (your mother) has passed away, the trust deed will determine who is entitled to the capital in the trust (if anyone, it may continue with another life tenant).

I would say the trustees really do need professional advice. Ideally someone dual CTA and STEP qualified.

00ec25

Alfaholical wrote: »

Title to the property remained with the the trust and it is only now that title will transfer to my sister and I.

so the life tenant died 4 years ago at which point why do you think the trustees retain liability for the property? What did the will say would happen on the death of the life tenant?

it would not be uncommon for the trustees to retain the legal ownership of the property but the trust status change to a mere bare trust with the IIP Trust having notionally disposed of the property to the beneficiaries at market value at date of death. The beneficiaries therefore become liable to CGT from that date using market value as their acquisition cost

https://www.gov.uk/government/publications/trusts-and-capital-gains-tax-hs294-self-assessment-helpsheet/hs294-trusts-and-capital-gains-tax-2015

madgagoo wrote: »

To be clear, if the property is still in the trust then you/your sister cannot sell it, make any decisions about PPR claims or the apportionment of base costs. This is the sole responsibility of the trustees. depends if it is now bare trust or not

As the life tenant (your mother) has passed away, the trust deed will determine who is entitled to the capital in the trust (if anyone, it may continue with another life tenant). agreed, the key issue that has not been answered yet

I would say the trustees really do need professional advice. Ideally someone dual CTA and STEP qualified. totally seconded

yes, pay for proper advice from a tax accountant familiar with inheritance and/or a STEP qualified adviser

Alfaholical

[FONT=&quot]Whilst the property has continued to be held by the Trustees following our mother’s death, there is a suggestion that for tax purposes, both myself and my sister were beneficially entitled to the properties.

One of the properties (the barn) has been sold and proceeds shared after settlement of the IHT liability of the estate. The main property will be purchased by my sister she will use her share of the proceeds plus a loan to purchase my half of the house.

Does this mean it is a "bare trust"?

Okay I will seek out a STEP qualified advisor.

Thanks

Alfa[/FONT]