Capital Gains Tax issues

By Tolley in association with Peter Gausden, Consultant Solicitor at Rowlinsons
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The following Trusts and Inheritance Tax guidance note by Tolley in association with Peter Gausden, Consultant Solicitor at Rowlinsons provides comprehensive and up to date tax information covering:

  • Capital Gains Tax issues
  • Death is not a disposal but is a deemed acquisition
  • Market value at death and ‘ascertained’ value
  • Variations and s 62(6) relief
  • The identity of the settlor
  • Section 62(6) relief must be claimed - but is it always beneficial?

Death is not a disposal but is a deemed acquisition

The rules dealing with capital gains tax on death provide the following:

  • assets the deceased was competent to dispose of are deemed acquired by the personal representatives, or other person on whom they devolve, at their market value at the date of death but are deemed not to have been disposed of by the deceased
    • this means death is not a disposal but nonetheless the assets acquire a new base value for capital gains tax. Any unrealised pre-death gains are effectively wiped out and assets that have risen in value since their original acquisition by the deceased are given a tax-free uplift for the calculation of future gains
    • this applies also to the deceased’s interest in joint property
  • if personal representatives sell an asset in the administration, they are liable for any capital gains tax on any gains realised after deduction of any losses they incur on their disposal. In addition to normal deductions for incidental selling expenses, personal representatives can deduct a proportion of the cost of valuing the estate for probate purposes. HMRC has published a list of permitted deductions, though more can be claimed subject to proof the actual cost was higher

    See HMRC Tax Bulletin Issue 72 and updated SP 02/04 - Allowable Expenditure: Expenses Incurred by Personal Representatives and Corporate Trustees.

  • if a person acquires an asset as ‘legatee’, no chargeable gain accrues to the personal representatives and the legatee is treated as having acquired the asset at the same time and base cost as when it was acquired by the personal representatives (ie the date of death)

    More on Overview of estate tax: