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My partner is the Executor of the Will. The Scenario: London.

Customer Question

My partner is the Executor of the Will.
The Scenario:
London. Man died in April 2012. He left his house to his 2 children, one of whom lived with him and under he terms of the Will was allowed to stay living in the house for 3 years. Now the 3 years are up and the property is being sold.We appreciate there is CGT to be paid. The property value increased approximately £100K since April 2012.
Question: CGT not straight forward because 1 child lived there for 3 years and therefore this was his primary residence. Are there any exemptions to the 18%/28% CGT because of this scenario?
Also, someone mentioned that the £11K CGT Tax relief doesn't seem to apply after 3 years? Is this 3 years after his death OR 3 years after the Capital Gain is realised (which will be next month when the house is going to be sold).
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.
Right, let us put thus matter in perspective. You say the man left his house to his two children. In that case they were joint tenants, each owning 50% of the house. Then you say that under the terms of the will one was allowed to stay in the house for three years; odd, considering they part owned it! This bit of your question requires clarification please.
I am now partly stuck until I receive more data on the exact terms of the will.
If he owned it and occupied it as his sole or main domestic residence then Private Residence Relief would apply and this relieves any gain at 100%.
The other child might be liable to CGT, but is deemed to be resident in the last 18 months of ownership even if this is not the case, so after 3 years half the gain, the net selling price less the probate valuation, less another half ie a quarter might be liable.
There is no 11K CGT tax relief; there is an 11K (14/15 rates), 11.1K (15/16 rates) Annual Exempt Allowance, a use it or use it annual allowance of CGT free gain.
A further complication arises if the second child owns no other residence in which case PRR may apply. The law is quite clear 'sole or main' not 'sole and main' although HMRC offices would like it to be the latter, but this is not the case.
So you see the matter is not as straight forward as it might be.
You will almost certainly be back with a follow up question. I will be waiting.
I do hope I have thrown some light on the position for you.
Customer: replied 1 year ago.

Hello Keith,

Thank you so much. You have definitely shed more light on it but as you can see it isn't straight forward.

To give you more details of exact terms of the Will can we wait till the end of the weekend as my partner is away from home where the Will is. Is that OK with you? How do we contact you again then?

We are certainly extremely happy with your service and apologise for the delay in getting you more information.

To answer some of your queries.

1. Child 1 (lives with husband and 4 kids in rented accomodation and has done for years)

2. Child 2 (lived with his Dad, then stayed in said property for 3 years and has no other residence! He's now moving out in April 2015 just before 3rd Anniversary) and will find accommodation with his share of the proceeds of the sale in due course.

3. The said property was the Father's ONLY residence.

4. Little confused about 18mnts/3 years CGT for Child 1 (because we are layman in this issue)

5. We will be back with exact details of the Will.

Kind regards,

Tina

Expert:  bigduckontax replied 1 year ago.
Hi Tina, I will await the will details before responding.
I warn you it might become more complicated thereafter depending on the exact terms.
Regards
Keith
Customer: replied 1 year ago.

Thanks Keith,

OK, we are bracing ourselves but am sure we'll understand it.

Kind regards,

Tina

Expert:  bigduckontax replied 1 year ago.
Just a little post, otherwise my question list will keep on telling me that you are waiting when the reverse is actually the case!
Customer: replied 1 year ago.

Hi Keith,

Please find attached said Will.

If it's not diesplaying please let me know and I will type it out. The reason I've attached it is so that you have the full picture.

Thank you,

Tina

Attachment: 2015-03-22_151014_john_adams_will.pdf

Expert:  bigduckontax replied 1 year ago.
thank you for that, I read the will quite easily. Although my original answer stands the CGT liability falls to the deceased persons estate and is settled by the trustees. The rate of tax will be 28% for them and the Annual Exempt Allowance is not available, nor does Private Residence Relief apply. Legally, the freehold of property was still in the hand of the trustees who gave a lease to the beneficiaries for a term of years as stated in the will and took it back for disposal after the reversion of the lease.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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