Capital Gains Tax advice

terrier17

Afternoon all,

I'm hoping someone with Tax knowledge can help me understand the following situation.

My father died sadly a year ago and in order to protect the property value for my Mum who lived there with him, we changed the title deed so it was 50% Mums and 50% was put into a trust in Dads name. It was previously registered as tenants in common. This was set up with myself and Mum as trustees. This was all done by solicitors and registered with HMRC.

We are looking at moving Mum into a retirement flat on a comanaged complex (This wasn't on her radar when we changed the deed! otherwise we would have left it) She is 78 and retired.

The house she has which is owned outright i.e no mortgage or anything is worth approx £350k, the flat is a leasehold at £220k plus annual fees.

As she will be moving into the flat as her main and only residence am I right in saying that there will be no CGT to pay as she will benefit from Private residence relief? She will live her with ongoing annual charges and maintenance costs as long she lives.

I wont get any benefit as I'm not inheriting anything at this stage so cant see I will have any tax liability on nothing?

I understood that the trust would have a tax liability if monies were inherited if Mum had passed away and the property value was paid out as part of the estate but she is very much alive and kicking!

Apologies if I'm missing the obvious, the more I read the more I get confused!

Advice would be greatly received 😊

Thanks

poseidon1

You are correct that there is no CGT on sale of the home due to PPR.

However, the new property is cheaper, and if the terms of the trust are strictly followed only half of the £225,00 purchase price of the next property ( £112,500) is required from the trust share of the proceeds.

Therefore what does your father's trust state should happen to the difference ( approx £60k). Does the trust deed require this to be invested to produce an income for the life for your mother?

terrier17

https://forums.moneysavingexpert.com/discussion/comment/81981820#Comment_81981820

Hi Poseidon

The deed of variation of the trust effectively states that the property fund is paid in the 1st instance to the life tenant of the property which is Mum or if she had passed then to the persons stated in the trust i.e me and my 2 siblings.

Thansk for the advice on tax, I'm glad I had assumed right!