Capital gains tax during administration

Produced by Tolley

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Capital gains tax during administration
  • Capital gains made by personal representatives
  • Whose gain is it?
  • Market value at death and ‘ascertained’ value
  • PRs’ annual exemption and rate of tax
  • Probate costs
  • Private residence relief for PRs
  • Losses and other reliefs for PRs

Capital gains tax during administration

Capital gains made by personal representatives

When a person dies, the assets in the deceased’s estate are deemed to be acquired by the personal representatives (PRs) for a consideration equal to their market value at the date of death. See the Deceased’s capital gains tax position guidance note for a fuller explanation of which assets are included in the tax-free uplift on death.

The PRs are treated for CGT purposes as being a single and continuing body of persons, which has the same residence and domicile that the deceased had at the date of death. This determination of the PRs’ residence and domicile is slightly different from that which applies for income tax purposes, for which the PRs’ residence may be determined by their own residence status as individuals. See the Income tax during administration guidance note.

If estate assets are sold by the PRs, the base cost, or acquisition value, for capital gains tax purposes is the date of death value. Gains are calculated as for individuals on the difference between sales proceeds and acquisition value, subject to the exceptions and features outlined below.

Where assets are not sold, but are instead transferred in specie to a beneficiary, no chargeable gain arises on the PRs. The beneficiary acquires the asset at the date of death value, and when it is eventually sold, the gain is calculated on the difference between the beneficiary’s sales proceeds and that acquisition value. See the Legatees’ capital gains tax position guidance note.

Whose gain is it?

As indicated above, a sale of the deceased’s assets after death may be made by the PRs during the period of administration. In this case, the chargeable gain is assessed on the estate in accordance with the features described below. Different rules apply to beneficiaries. In particular, beneficiaries may be charged to CGT at the lower rates, and they have their own annual exemption. It may be advantageous to transfer or ‘appropriate’

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