CGT from 2 angles

Klare1

Hi all
Hope you can help before I spend the whole of tomorrow on hold on the phone to HMRC please.

Dad passed Feb 2024, Mum lived in their home until Nov 2024 when she went into a residential care home. (Severe Vascular Dementia - Depravation of liberty in place)
We put the house up for sale in Dec 2024 and it finally completed on 30th June 2025.

Dad’s Will (mirrored with my Mum) was Mum could live in as long as she was able and could maintain it but if she sold and didn’t buy another property, Dad’s share (50%) would pass to me and my brother equally.

Can anyone advise if CGT would be due either by Mum, or me and brother please. It was something that the solicitor mentioned that we should look into on her completion statement.

Mum is (and always has paid her own care home fees £1600 per week). And also paying tax on her savings so it seems unfair to charge her CGT as well.

We are under the Inheritance tax value for her savings and reducing each month.

Thanks in advance, happy to answer any further info which may be required.

silvercar

Definitely no CGT from Mum. She lived in it as her home giving her exemption for the time she lived there and the last 9 months of ownership.

Hoenir

You and your brother will be liable to CGT on your share. You will be deemed to have acquired the share at the value when your late father passed away. 

The Estate will be liable to CGT on any increase between the probate value ( on the 50%) and the realised sales proceeds. 

Was there a reason that your father left 50% to you and your brother. Mitigate the impact of IHT or potential care home costs? 

Klare1

Thanks for that, he did it on the advice of his solicitor to mitigate against care home fees 

poseidon1

Hoenir said:

You and your brother will be liable to CGT on your share. You will be deemed to have acquired the share at the value when your late father passed away. 

The Estate will be liable to CGT on any increase between the probate value ( on the 50%) and the realised sales proceeds. 

Was there a reason that your father left 50% to you and your brother. Mitigate the impact of IHT or potential care home costs? 

Have to disagree with the statement the OP and sibling acquired their 50% share at date of father's death.


OP stated  ''  Dad’s Will (mirrored with my Mum) was Mum could live in as long as she was able and could maintain it but if she sold and didn’t buy another property, Dad’s share (50%) would pass to me and my brother equally.''


This has all the hallmarks of an IPDI trust, with the trust terminating when mother moved out into long term care in November 2024.  I would certainly argue on the OP' s behalf that it is the market value of the home in December 2024, which represents their acquisition 'cost' for CGT purposes and not the valuation in February 2024 when father died. In reality there may be no significant change in those 10 months.

Perhaps OP could confirm probate value in February 2024 compared to marketing price in December 2024.

The issue going forward therefore, is was there any material difference between December 2024 'valuation' and actual June 2025 proceeds ( net of related sales costs)? If net proceeds were less than December 2024 'valuation'  OP and sibling could conceivably share an allowable loss on their 50% share rather than taxable gains

Incidentally, mother apparently is still alive, so unclear whose estate you maintain would now be liable to CGT (assuming there is any  material gain to tax).

Finally agree @silvercar point that mother has no CGT exposure at all on her 50% personal  proceeds for the reason stated.

Hoenir

poseidon1 said:

This has all the hallmarks of an IPDI trust

Perhaps the OP could confirm whether there is or isn't.  

Klare1

Thanks both for helping with the debate
Will written in November 2014 states as follows;
I give my share and interest as tenant in common in the freehold house which I jointly own with wife (my mum).
Until the house shall be sold my Trustees (me and brother) shall allow Mum to reside in the house (or any future house if they or she move) rent free for as long as Mum desires provided she pays outgoings, keep it insured and in good repair
At request of my wife Trustees shall sell my interest and proceeds of sale as aforesaid my trustees shall hold net proceeds of sale and net income until sale upon trust in equal shares. Does that constitute an IPDI trust?

Probate value at Feb 2024 would have been approx £107,000 for HIS HALF of the property but Mum was still living there. (As per Nationwide on-line calculator) 

Valued in December 24 when she went into the home at £200,00 in total but we had valuations of £200K & £250k (to low and to high in our opinion, so marketed at OIRO £230k and accepted £220k ( it needed full refurbishment) No mortgage.

We are well under the £1 million IHT as care home fees and tax on savings is eating away at the capital.

We split the costs: estate agent & solicitors for selling 3 ways, £1615 each therefore I think me and brother just need to do the HMRC declaration but don’t owe anything?

Thanks for everyone’s input, it’s much appreciated. 

poseidon1

Sounds like there was an intent to create a qualifying IPDI, but did not quite hit the mark since mother was only entitled to live in the property ( rent free) as long as she wished.

A full blown IPDI would have gone on to say that if she did not wish to continue living in the property she would then become entitled to any income generated by the trust fund until her death.

Nonetheless there is no doubt she did acquire an 'interest in possession' [ IIP ] in the father's half share ( ie a right to exclusively enjoy occupation of the property as defined by the Pearson trust case), but arguable that right determined when she moved out and in effect involuntarily terminated her IPP as a result of her mental infirmity. 

However, based on the approximate  values for the property given by the OP on father's death, then in December 2024 and  finally the gross sales figure in June 2025, I don't see any basis for a taxable gain to have arisen either by reference to Probate value or the later December 2024 termination of the IIP. 

Therefore agree the OP's opinion that they have no taxable gains to disclose to HMRC.