IHT death-bed planning and effect on PRR election

Wondering if the election lapses and, if so, what effect?

Didn't find your answer?

Hi all,

Husband and wife own two residences (both owned 50:50) and an election under S222(5) TCGA1992 was made in favour of property 1.

The husband has been diagnosed with a terminal illness and doesn't have long left to live.

The clients are looking at transferring the unelected property to the husband outright (CGT and IHT neutral) which will then be bequethed back to the wife upon his death. 50% of the accumulated gain will then be washed out on the husband's death.

Both properties currently stand at about the same amount of accumulated gains and are used as residences in about equal proportions.

Does the S222 election automatically lapse on transfer to the husband? I am assuming it doesn't because there hasn't been a change in the combination of residences, but am wondering if the change in ownership has any affect. Any other useful observations welcome.

Thanks.

 

Replies (11)

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By Justin Bryant
19th Jun 2023 11:59

This looks like good sensible planning and I see no problem re PPR elections or otherwise, except possibly DN* may object to this as blatant tax avoidance (if so, this reinforces the fact it's good sensible planning).

* https://www.taxpolicy.org.uk/2022/07/27/iht_hole/

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Replying to Justin Bryant:
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By The Dullard
19th Jun 2023 12:24

DN may object, but HMRC don't. This is example D19 in the GAAR guidance. Incidentally it seems to just be BPR that DN objects to.

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Replying to The Dullard:
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By Justin Bryant
19th Jun 2023 12:31

I was being facetious, in case you didn't realise.

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Replying to The Dullard:
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By Software Seeker
19th Jun 2023 13:03

Thanks for the reference to the GAAR guidance.

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Replying to Justin Bryant:
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By Software Seeker
19th Jun 2023 13:02

Thanks.

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By Ruddles
19th Jun 2023 12:43

Surely it’s 100% of the gain that gets washed out?

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Replying to Ruddles:
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By Software Seeker
19th Jun 2023 13:05

Ah yes, of course you're correct. I was referring to the additional 50% washed out, which does then mean the entire gain. Thanks for clarifying.

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Replying to Software Seeker:
By Ruddles
19th Jun 2023 13:09

I did understand what you meant, but the uninformed may have been confused as to whether the planning had any effect ;¬)

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By Justin Bryant
26th Jun 2023 12:33

This case shows that deathbed hospice etc. marriages should work for this scheme even if they are voidable for some reason: https://www.bailii.org/ew/cases/EWHC/Ch/2023/1524.html

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By Justin Bryant
18th Aug 2023 10:44
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