CGT calculation and retrospective valuations

canarydan

Hi all, I'd appreciate some help with a forthcoming house sale.

My family home is being sold shortly and there are complicated CGT questions I think I know the answer to, but would appreciate some guidance.

The property was purchased in 1985 for £45,000. My parents owned the house as tenants in common with an equal half share each. My Mum died in 2010 and her half of the house passed into a discretionary trust, to be managed by the trustees (of which I am one). My Dad continued to live in it until 2014, after which he let it out. The tenants are moving out this month and the intention is to sell the house.

The tricky part is, no formal valuation was done during probate.

My understanding is that as a discretionary trust, it cannot inherit PRR from any of its trustees, even if one of them (Dad) remained in the property until 2014.

So, from what I can gather we would need to get a retrospective valuation for the house for when my Mum died, and the trust would be eligible to pay CGT on the gain between then and the point of sale.

For Dad, we will need to get a retrospective valuation for when he moved out of the house in 2014, and his CGT liability will be on the gain between him moving out and the point of sale.

Is that correct?

Finally, can trusts also benefit from the improvements rule and the 9-month rule for PRR? An extension was put on the house in 2005 at a cost of £10,000, which can be evidenced by an invoice. I know Dad as an individual can take advantage of those things, but can trusts as well?

Keep_pedalling

You certainly can’t claim deduct the cost of the extension as that was done prior to the trust being created.

I think you need professional advice regarding the tax situation of the trust.

DRS1

For Dad, we will need to get a retrospective valuation for when he moved out of the house in 2014, and his CGT liability will be on the gain between him moving out and the point of sale.

Are you sure about that? I thought the gain would be time apportioned based on the period it was his PPR and the period it was not (with the 9 months being part of the PPR period.

poseidon1

Can I suggest you review all the past threads you created referring to this self same matter on :

17/5/2022, 14/4/2023, 23/10/2023 and 18/11/2024.

I believe your question today re valuation requirement was asked and answered by Jeremy53589 in his 18/11/2024 post so not clear why nothing has been done since then.

As for PPR and whether or not the trust can claim via your father, it is clear from your 17/5/2022 post that a deed of appointment was executed in his favour which led to him becoming entitled to future rental income. What was the date of that deed?

You should be aware that trusts can claim PPR via occupation rights of an underlying beneficiary (Jeremy53589 also raised that same point) . So is it possible your father was also accorded rent free occupation of the trust share of the property prior to him moving out, as well as the subsequent right to the rental income?

I would make a final observation. It's clear there has been professional advice provided for this trust in the past ( the deed of appointment).

What is the reason for not going back to the adviser who set up this arrangement, as previously suggested? By raising repeated and sometimes inaccurate queries on this forum you may receive responses which are not quite on point, mostly due to your imperfect understanding of past events, and the taxation aspects related to the complex background to this trust. I would also be concerned whether this trust has ever been placed on HMRC's trust register, and whether their self assessment trust division are aware of this taxable trust.

Although this forum champions a DIY approach to financial and estate planning matters, most contributors would definitely stop short of advocating such an approach for trusts, especially discretionary trusts. The forumites know their limitations in this respect, you should recognise yours.