CGT - Case Study
The People
Nine and a half years ago, Mrs C placed £200,000 into a discretionary trust and these funds were used to purchase a property. The property has increased in value to £1 million and the trustees wanted to transfer the property to two of the potential beneficiaries.
The Problem
As the property had increased substantially in value, capital gains tax (CGT) would be payable at 18% on the gain over the available exemption of £5,050 (i.e. £143,091). Also, if the trust were to reach its 10 year anniversary and then the trustees were to transfer the property, Inheritance Tax of up to 6% (£40,500) would be payable on the anniversary and a further £4,050 on the date of the transfer.
The Solution
The property was transferred to the beneficiaries before the 10 year anniversary. As the value of the trust fund at set-up was less than the Inheritance Tax nil rate band in place at that time, no extra Inheritance Tax was payable – a saving of about £45,000.
For CGT purposes, the gain was “held-over” to the two beneficiaries. When the property was then sold, they each had their individual annual allowances (£10,100 each) to deduct from the gain reducing the CGT payable to £140,364 – a smaller but still worthwhile saving of £2,727.
Who to contact
Paul Tobias
Senior Partner, Head of Trusts & Investments
Email
Request a callback
Protect your family wealth seminars
Starting 25th April
Seminars across Surrey and London
Find out more...