Capital GainsTax on potential property sale

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82122459#Comment_82122459

Can confirm that base cost of property is as at 2012 ( date of gift to life interest trust) and not date of your mother's death.

Your solicitor should be explaining that the gift into the trust represented a ' chargeable lifetime transfer' ( CLT) for IHT purposes. Such a trust set up in the lifetime of the settlors is a 'relevant property settlement', so potentially liable to 20% lifetime IHT if the value of the asset exceeds the nil rate bands of the parties concerned. Fortunately for you and the family the property would have to have been worth in excess of £650k in 2012 so no IHT on the value you quote now.

CGT is equally complicated, but with a likely favourable outcome. Since the terms of the trust explicitly gave the parents lifetime occupation rights to the property, the trust is permitted to claim the main residence exemption for the period of its existence until your mother's demise.

Assuming the trust terminated on death of mother, then there is a time apportioned calculation of the gain to be done starting with the 2012 market value which exempts the period the main residence exemption applies, with only a effective taxable gain related to the period post death.

Any residual gain on the 4/5ths being sold to you, will be attributed to your 4 siblings, but with most of the gain erased by the period of the main residence exemption it is likely your siblings' respective £3,000 CGT exemptions will have erased any individual taxable gain.

How this is all presented to HMRC is key, and what is already likely missing by way of compliance is registration of the trust on HMRCs trust register ( a requirement from 2017), and subsequent disclosure of the trust's eventual termination. There is a potential £5,000 penalty for non compliance as explained in the link below.

https://www.gov.uk/guidance/check-if-you-need-to-register-a-trust

Solicitor should therefore address this non compliance immediately, so that HMRC will have belated visibility of the trust's previous exsistence when CGT computations are eventually submitted. Hopefully the solicitor will have the requisite trust and tax competencies to navigate the different steps involved leading to your eventual clean 100% personal ownership of the property.

Seems your intial query was far more complicated than you intimated from your opening post. Just as well you filled in the important background trust circumstances for better clarity of the issues.

great_bald_one

Wow that was some response. Thanks very much. I'll read into the links further to get a better understanding. I'll then pass this on to the solicitor for comment. I don't think I've missed anything regarding the baseline information I provided so you seem to have understood the basic situation here. Cheers

Having just swotted up there a bit and re-read your post I now need to inform my solicitor regarding the "registration of trust" and the trust's eventual termination to be on the right side of the HMRC.