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Capital Gains Tax on asset held in trust

Land inherited and sold for a gain

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A piece of land was inherited by three siblings, each on an equal share. The property was transferred to the names of two of the sisters as trustees of the will. Two years later planning permission was granted on the land and it was sold for a substantial gain. I'm struggling to work out who is required to declare and pay the tax, and have had conflicting answers from HMRC. One answer is the "trust" is required to pay the tax, although there is no formal structure set up, the other is on the owners as per land registry (two of the sisters) and the third is the benenficial owners, which as per the will is the three in equal shares. 

My feeling is it should be taxed on the beneficial owners. The will clearly states the land is to be split equally between the three, and they will each receive a third of the gain. If anyone has any experience of this they're willing to share, or details as to where I can get this advice it would be greatly appreciated. 

 

 

 

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By chicken farmer
22nd Aug 2019 10:15

The 3 siblings are beneficially entitled to the property and CGT is charged on the disposal of beneficial ownership.

But consider whether they might be trading in land.

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Replying to chicken farmer:
Psycho
By Wilson Philips
22nd Aug 2019 11:36

Why do you think that they might be trading in land? Because they obtained planning permission?

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By Tax Dragon
22nd Aug 2019 11:51

The answer may depend on whether the deceased's will said (for example) "I leave everything to my children equally" - and the inheritance is thus part of a larger estate - or (for example) "I leave £100 to The British Legion, Brown Field to my children free from tax and everything else to Mrs Smith next door".

My language probably doesn't pass legal muster (IANAL) - but I hope you see the point.

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Replying to Tax Dragon:
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By elvisisking
22nd Aug 2019 12:38

Thanks for your reply, other assets were not split equally. Savings were distributed under a separate split, and some assets were specified to a sibling. It was only the land that was left in equal shares between the three.

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Replying to elvisisking:
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By Tax Dragon
22nd Aug 2019 13:15

That wasn't the point. Find out about legacies, residue etc or involve someone that already knows about such stuff; from the limited pool of surviving members of this forum I would recommend chicken farmer or Montrose for that purpose. Or talk to the professional that dealt/is dealing with the estate.

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Replying to Tax Dragon:
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By Tax Dragon
22nd Aug 2019 17:33

And no offence is meant to those I did not recommend (in the same way as suggesting you watch Liverpool v Federer doesn't mean you shouldn't watch Bolt v the Blue Jays).

(Sport's not really my thing... does it show?)

The thing is I have a live case on this subject myself, but the number of people that look at (let alone engage with) questions about death, IHT and PETs is a weeny fraction of the number that will discuss death and pets... so I can hardly afford to go offending anyone, accidentally or otherwise, as I may need your help. And it occurs to me that I may have done. Offended some, that is.

If so, I apologise.
If not, just ignore my ramblings.... same as usual.

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By Accountant A
22nd Aug 2019 13:05

I know councils are slow but what happened in the two years? That might shed light on the tax treatment.

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Jerome lane stewart and co
By Jerome Lane
23rd Aug 2019 09:33

My reading of this is that as executors of the Will, two of the sisters are liable to pay CGT as a single entity (the personal representatives of the estate) and will have to complete a Trust and Estate tax return. If the asset had been appointed out to the three sisters first, it would have been easier and there would be three annual exemptions and not one. We deal with probate matters if you need specific advice. Good luck!

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