Captial Gains Tax on sale of a retirement apartment

Sterlingtimes

To help me with my pre-planning, please let me know if any of these costs would be disallowed in the calculation of CGT.

cost of the solicitor on purchase
EPC for sale
cost of the transfer pack from the service provider
cost of the transfer pack from the landlord
agent's fees
cost buyer verfication
solicitor and disbursements
1% transfer fee on sale
1% contingency fee on sale

Jeremy535897

The costs you list should be allowable, but as all but the first item appear to be costs of sale, have a look at:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15250
An EPC has been confirmed as a cost of sale.

Sterlingtimes

That was kind of you to respond. Your referenced document was most helpful. I suppose that the two 1% transfer fees fall within the "cost of transfer" category, i.e., I would not be able to transfer without incurring those costs.

I understand that as the Trustee, I must declare and pay the CGT within 60 days of the sale. I am unsure whether the solicitor has a part in this or whether I would make the declaration personally.

Jeremy535897

You are responsible.
https://www.gov.uk/report-and-pay-your-capital-gains-tax
Are you selling on behalf of a trust?

Sterlingtimes

Jeremy535897 said:

You are responsible.
https://www.gov.uk/report-and-pay-your-capital-gains-tax
Are you selling on behalf of a trust?

Yes, I'll take responsibility if the solicitor is not involved. I am the sole Trustee of a family discretionary trust that owns the apartment and has no other assets. My mother, who is the life beneficiary who lived in the apartment for some 12 years, is "end-of-life" and resident in a nursing home. I understand that the first £1,500 of gains are exempt from tax, and then tax is calculated at 24% of the gain.

Jeremy535897

It may well be best to clarify that with the solicitor. You talk of a discretionary trust, but mention that your mother is a "life beneficiary." These terms are not compatible, at least in respect of the assets your mother has a life interest in, if that is actually the case.
In your shoes, I would first establish the precise nature of your mother's interest, and I would also look at section 225E TCGA 1992, which may extend capital gains tax residence relief in cases like your mother's. There may also be inheritance tax issues. You would be best seeking professional tax advice.

Sterlingtimes

Jeremy535897 said:

It may well be best to clarify that with the solicitor. You talk of a discretionary trust, but mention that your mother is a "life beneficiary." These terms are not compatible, at least in respect of the assets your mother has a life interest in, if that is actually the case.
In your shoes, I would first establish the precise nature of your mother's interest, and I would also look at section 225E TCGA 1992, which may extend capital gains tax residence relief in cases like your mother's. There may also be inheritance tax issues. You would be best seeking professional tax advice.

The trust value after the sale of the apartment will be sub £100,000.

Thank you. I have probably used the incorrect terminology. This is, without doubt, a discretionary trust. I have engaged a solicitor, but he is slow to act, leaving me with many worries, given all of the current circumstances. With much prompting, the solicitor has registered the Trust with HMRC.

It is (or was) a New Zealand trust, and under New Zealand law, no death duties are due on the settlor's death. I worry that IHT may be due. 

Jeremy535897

This is a very complex area, and there are other issues involved.
Assuming you are resident in the UK, and are the sole trustee, the trust is UK resident for tax purposes.
As the trust property (or most of it) is situated in the UK, it will be subject to inheritance tax, even if the creator of the trust was domiciled outside the UK. How much is the apartment worth?
If your mother had the right to occupy the apartment, she may have had a life interest in that part of the trust.

Sterlingtimes

Jeremy535897 said:

This is a very complex area, and there are other issues involved.
Assuming you are resident in the UK, and are the sole trustee, the trust is UK resident for tax purposes.
As the trust property (or most of it) is situated in the UK, it will be subject to inheritance tax, even if the creator of the trust was domiciled outside the UK. How much is the apartment worth?
If your mother had the right to occupy the apartment, she may have had a life interest in that part of the trust.

This is helpful. An accountant will need to sort this out. I became the Trustee when the New Zealand solicitor trustee retired. After expenses are met, the apartment will be worth about £100,000. Thank you for your various pointers.

Jeremy535897

Sterlingtimes said:

Jeremy535897 said:

This is a very complex area, and there are other issues involved.
Assuming you are resident in the UK, and are the sole trustee, the trust is UK resident for tax purposes.
As the trust property (or most of it) is situated in the UK, it will be subject to inheritance tax, even if the creator of the trust was domiciled outside the UK. How much is the apartment worth?
If your mother had the right to occupy the apartment, she may have had a life interest in that part of the trust.

This is helpful. An accountant will need to sort this out. I became the Trustee when the New Zealand solicitor trustee retired. After expenses are met, the apartment will be worth about £100,000. Thank you for your various pointers.

I think you are wise to employ a professional.