CGT, related parties and gifted asset later gifted back!

CGT, related parties and gifted asset later gifted

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Client purchased a property at an undervalue from his Mother as part of an inheritance tax plan (not quite a gift as 'some' money was agreed to be paid to the mother, albeit around 10% of the MV).

Client's circumstances later changed so for one reason or another, the property was gifted back to the mother ( some of the reduced consideration was to be spread out over a few years and the client defaulted on it, so it was agreed all round that the property be given back to the mother ).

This is the crux of the matter, although there are many added complications.  Essentially, client acquired property at it's MV, held it for a number of years, then disposed of the property for it's now MV.  Therefore a gain exists and the CGT is a considerable amount.

Shortly afterwards, the property was sold (by the mother)

I feel very uneasy about this CGT bill (we inherited from another accountant) as the client would be paying a large CGT bill on the increase in value of a property which he has never had any slice of.  

I am thinking of going down the route that beneficial ownership never in fact changed and therefore the deemed acquisition and subsequent deemed disposal never took place.

Then, I also wonder whether ESC  D. 18 would be of use in terms of the reduced consideration agreement having been defaulted upon.

Any views?  How can you receive a gifted property, hold it for 3 years, then gift it back and have a chargeable disposal on a gain that wasn't yours!

Thanks in advance and anticipation!

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