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Query on acquisition date for CGT

Deed of variation done to leave 50% of property to children

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A new client has to do a capital gains tax report & pay tax on his share of a property sold last week. He acquired 25% of property, along with a sibling, by means of a Deed of Variation done after father's death - 50% of property was clearly less than the nil rate band & no property valuation was done at the time of death or when the Deed of Variation was done. I had thought a backdated valuation needed to be done as at the date of death, but client was told a while back by a solicitor that the valuation should be done at the date of the transfer.  Deed of Variation was done more than a year after death and there is likely to have been a significant property increase in that year so the valuation date is important.  Can anyone confirm that the transfer date is the right date for CGT?  The valuation is also going to be relevant for inheritance tax as & when the client's mother dies as there will be a bit of nil rate band left over from the father's death.

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By Tax Dragon
13th Apr 2021 15:35

It's* up to the person varying the Will - mother, presumably.

*"It's" being past tense - it was. Backdating is not automatic - it's by election when varying. It has to be written into the deed - or it least it does now, I'm guessing this all happened pre-2007, when it's possible that rule was different. Solicitor should know.

My guess (I love an Aweb guess) is that mother made an election for IHT purposes but not for CGT purposes. I reckon as how that would have been very good tax planning pre-2007. But what you could really do with for starters is a copy of the DoV. Coz I am just guessing.

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By TessaW
13th Apr 2021 16:06

Thanks, Tax Dragon. The problem is that the father's death was in 2002 and the mother now has dementia and has possibly destroyed some papers & the solicitors who prepared the original DOV have destroyed their files. My client has the original papers relating to the land transfer, a transfer Deed, land registry form etc but no actual DOV copy. He just has a letter from the solicitor saying " I have now prepared the DOV ready for your signature ... by which your late husband's share in the property ... is to pass to your children in equal shares." The correspondence refers to the DOV being done to pass an amount up to the deceased's IHT threshold to the children, so it would seem that only IHT has been considered.

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By Tax Dragon
13th Apr 2021 16:32

I've looked up the date the rule (s62(7) TCGA) changed. That slidy thing Dulls pointed out on leg.gov.uk is fantastic!

The change was for instruments (DoVs) made on or after 1 Aug 2002 (s52(2) FA 2002).

You could really do with finding that deed, as it will nail it completely.

As at the moment you are presumably considering only an estimate for the purposes of 30-day reporting, and might not have the deed within that timeframe, I guess you need to choose which way to jump. (Maybe caution is the better part of valour? Potentially get a tax refund, rather than a penalty/interest, with the SA100?) There would have been a time (we may still be living in that time - it's been a while since I've seen one) when the pro-forma DoV would have included the election by default. Your comment about CGT not having been considered might not work the way you wanted it to. Had CGT been considered, and considered sensibly, then the election would (or at least should) have been removed from the draft deed before mother signed it. (Assuming this is her home we are talking about.)

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