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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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A residential property has been left to a daughter by her late

Resolved Question:

A residential property has been left to a daughter by her late father and the daughter is entitled to the ultimate proceeds of sale.
However, the will also provided that the partner of the late parent be allowed to occupy the property for life (life interest).
The property proved to be too large for the occupant and this has now been sold and replaced by a smaller and cheaper house that the person with the life interest now occupies. The surplus monies on this sale have been remitted to the daughter which has produced a gain in the region of £ 110000.
Is there any possibility that this gain is covered by private residence relief at this point because of the life interest of the occupant.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

What you have is an interest in possession trust. The surviving partner is the life tenant of the trust and the daughter is the ultimate beneficairy. Assuming the surviving partner occupied the property for the entirety of their tenancy of the trust and it was sold within a maximum of 18 months after they moved out, then the gain will be covered by main residence relief. The fact that some of the money has been paid out to the daughter which I have to say is unusual in the case of a live IIP trust does not trigger the gain. The gain is triggered by the property disposal. Take a look here for confirmation of the main residence relief for a trust.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Many thanks, Tony.

Although I still run my own small accountancy practice from home, I very rarely come up against CGT problems, so when I do, I always need to research my answers. However, since this case is a little out of the ordinary, I did find that the information on HMRC's website was insufficient for me to come to a definite conclusion, but your answer has given me something written in plain English that I can relate to.

All the best,

John

Expert:  TonyTax replied 2 years ago.
Thanks.
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