Tax on Trust Property

HollySummer

A property came to me via a trust agreement, the long term occupant having passed away. The trust was set up over twenty years ago to secure the occupants life long residency.  I am in the process of selling the property. Will i need to pay tax from the sale money?

poseidon1

HollySummer said:

A property came to me via a trust agreement, the long term occupant having passed away. The trust was set up over twenty years ago to secure the occupants life long residency.  I am in the process of selling the property. Will i need to pay tax from the sale money?

If the trust you describe was a life interest settlement, then the property would have needed  to have been revalued to market value at date of life interest beneficiary's death for the purposes of determining any liability to IHT.

The benefit of this  to you as the 'remainderman', is that the 'cost' of the property to you for CGT purposes is the market value revaluation which erased the previous 20 years of gains.

Have the trustees notified you of this revaluation figure? Did the revaluation together with the value of personal assets owned by the deceased exceed £325k, so IHT might be in point?

 I can't imagine there is any IHT if the property has been released to you to sell, but of course that assumes you were not the trustee of the trust over that 20 years and therefore unaware of your trustees' tax compliance duties once the life interest beneficiary died. 

A bit more information required regarding exactly what  happened after the death, the date of death, and who handled those legalities at that time.

Keep_pedalling

Was the trust created by a will? What was the relationship of the settler and the occupant? 

HollySummer

The property was not revalued at the date of the occupants death. It was given a £310,000 by an estate agent six weeks after the death which makes it under IHT levels.
The deceased had a will but there was nothing of value in it, mainly instructions both of which i wasn't named or incuded in.
The property was bought nearly forty years ago at the cost of £20,000. 
The property has come to me via a relative. I only have the then solictor created which names only me & the relative & no other trustees.

poseidon1

HollySummer said:

The property was not revalued at the date of the occupants death. It was given a £310,000 by an estate agent six weeks after the death which makes it under IHT levels.
The deceased had a will but there was nothing of value in it, mainly instructions both of which i wasn't named or incuded in.
The property was bought nearly forty years ago at the cost of £20,000. 
The property has come to me via a relative. I only have the then solictor created which names only me & the relative & no other trustees.

On this rather sparse history of events and lacking any form of actual trust documentation, assuming the deceased occupant of the property was indeed a life interest beneficiary (under the terms of the trust), then your acquisition cost prior to sale appears  to be £310,000.

However from you what say if the £310,000 value was not actually formally agreed for either  probate purposes or termination of trust, HMRC could query your acqusition cost if the property sells substantially above £310k. 

 Bear in mind if a taxable  profit is generated on eventual sale you have just 60 days to pay the tax due, and you may also will be required to submit a formal self assessment tax return  for the relevant tax year.

You may wish to acquaint yourself with the online CGT form if you do make a profit per link below -

https://www.tax.service.gov.uk/guidance/Send-your-Capital-Gains-Tax-on-UK-property-disposal-to-HMRC/introduction

If the sale proceeds are substantially above £310k, HMRC could revisit the basis upon which the deceased's estate IHT position was concluded especially if the life tenant only had a basic £325k nil rate band available on their death. In other words HMRC could go for a 40 % IHT liability in exchange for refunding any CGT you may have paid on the 'profit'.