Capital Gains tax after selling late father's home

xylophone

Not an Interest in Possession/life interest trust then.

https://www.gov.uk/trusts-taxes/types-of-trust

You state that after your mother's death some fourteen years ago,the DoV created a discretionary trust with the half share of the marital home as its only asset.

Your father continued to live in the marital home - presumably he paid no rent so that there was no Trust Income?

After seven years had elapsed, your father decided that he needed a more manageable property - the marital home was sold.

The property was worth more at this point than when your mother died?

If so, there was a capital gain.

As far as your father was concerned, there was no CGT to pay as he was selling his PPR - however, the situation was different for the Discretionary Trust?

See https://www.gov.uk/guidance/trusts-and-capital-gains-tax

There may have been CGT to pay at this time?

The Trustees then used their discretion to buy a bungalow as Tenants-in Common with father?

The property was shown at the Land Registry as TiC 1/3 - 2/3?

Your father died leaving his share of the property to his children.

The executors of his will in conjunction with the Trustees of the Discretionary Trust decided that the property should be sold.

There was a Capital Gain for both the Trustees and the beneficiaries of Father's estate?

TrickyNicky

Xylophone - thank you for your interest. You are correct - not a life interest trust. Correct - the Discretionary Trust had half the value of the marital home as it's only asset. Correct - my Dad paid no rent to the trust.

When the marital home was sold after 7 years I have no idea whether it sold for more than at the time when my Mum died. My Dad sorted probate, paid no IHT and we paid no CGT.

As trustees we then bought a smaller property with my Dad - likely as tenants in common. I'm not sure what you mean about the Land Registry 1/3 - 2/3. I would have to check the original documents for the trust which are held by my Dads brother.

Correct, when my Dad died he left everything to his 4 children including his share of the property. My 2 sisters as executors, myself, my other sister and our Uncle as Trustees, decided to sell the property and the Discretionary Trust is now dissolved. From the valuation for Probate to the sale of the property it did not increase in value so there should not be any CGT as far as I am aware for his part of the estate and no IHT was due as his assets were well under the threshold.

Does this answer your questions?

00ec25

as Xylophone shows, there may have been an earlier CGT liability which has been overlooked

as to the sale of father's last home, sorry but if it was sold by the executors acting as executors and without having first transferred ownership into the names of the 3 siblings, then the sale was undertaken by the estate, and it is the estate which is now liable for CGT.

Estates only get one CGT allowance since there is only one estate, not 3 beneficiaries

also as no IHT has been paid, HMRC have not yet accepted (aka "acsertained") your calculation that there was no gain between value at date of death and sales value. You will need to have robust evidence to support value at death in case you are challenged by HMRC.

xylophone

There may have been CGT due by the Trust on the disposal of the marital home seven years ago.

The bungalow was purchased by your father/ the Trust following the disposal of the marital home - it appears that it was owned as TiC on a one third/two thirds basis.

Your father died a year ago, leaving his share of the bungalow to his children.

The executors of the will and the Trustees have now sold the bungalow.

While there was no increase in the value of the bungalow between probate and sale, there was an increase in value between the purchase of the bungalow and sale.

There may be CGT payable by the Trustees on the 2/3 that they owned.

It would be as well to take professional advice to clarify matters?

TrickyNicky

00ec25 - thank you. In response, can an earlier CGT liability still be payable? The 2 executors are also beneficiaries. Two trustees are also beneficiaries plus Dads brother. 4 siblings = 4 beneficiaries. The house was owned by the 3 trustees and my Dad before he died. You are correct the house was not transferred into the names of the 4 beneficiaries - it was already in the name of 2 of the beneficiaries plus my Dad and Uncle. We all 5 agreed to the sale and all 5 signed all the documents i.e. 2 executors and 3 trustees.

I am afraid we relied on our solicitor to conduct the sale of the property. I don't think he had any idea regarding Discretionary Trusts even though it was a partner in the same firm that set it up - since retired. You are right, he doesn't seem to have done us any favours and did not advise us about any of this during all our correspondence until he mentioned CGT in his final letter. Very disappointing which is why we don't feel we can go back to him - or his firm - for any legal advice.

I appreciate everyone's thoughts. As you can imagine this last year has not been easy and we all just want to get it all over and done with so life can get back to normal. This CGT is like a sting in the tail and my poor Dad would turn in his grave if he knew about it!! He did everything he could before he died to put everything in place ready for us. He never saw this coming or it would have been in his extensive notes.

Thank you everyone.

TrickyNicky

Thank you too xylophone for your correct summary of the situation above. We will indeed be seeking further advice re this very murky situation. I appreciate all your time.

marc3

apologies for partially hijacking another posters thread.

i was going to do a separate thread this eveing but as peoples minds are focused on CGT -seemed sensible to post here .
(again-genuine aplogies to original poster >

My scenario :
inherted from mother a property in april 2016

rented as buy to let for 3 years.

now about to sale.

probate value may 2016 £195000,

todays value £240000.

I am not sure for how many years i get CGT allowance on it ?

best estimates of how much cgt i will pay appreciated.

many thanks

00ec25

marc3 wrote: »

I am not sure for how many years i get CGT allowance on it

sorry but this is a below basic level question explained on the .Gov website

https://www.gov.uk/capital-gains-tax

the allowance is in the year of sale only
subject to HMRC accepting 195k, you have a net taxable gain of 33,300

https://www.gov.uk/guidance/capital-gains-tax-rates-and-allowances

xylophone

inherted from mother a property in april 2016

rented as buy to let for 3 years.

Puzzled by this - do you mean that you inherited a property and then mortgaged it?

Or you inherited a property and then let it out?

https://www.gov.uk/tax-sell-property/work-out-your-gain may help.

xylophone

We will indeed be seeking further advice re this very murky situation.

Perhaps google " trust tax accountant"? This could well bring up a suitable professional to advise you.