CGT on death – settled property and section 74 TCGA 1992

It is a well-known, general rule that death wipes out chargeable gains. When the owner of an asset dies, then under Section 62 (1) of the Chargeable Gains Act 1992 all the assets comprised in his estate are treated as acquired by the personal representatives for a price equal to the then market value. The deceased is not regarded as having made a disposal of the assets concerned giving rise to any chargeable gain. Of course, IHT may be payable instead, and the rationale of the effective CGT exemption on death is that it avoids double taxation, with both IHT, and CGT being charged on the same occasion. Nevertheless, the favourable CGT treatment will apply even if there is no IHT to pay, because the deceased’s estate is within the nil rate band, or is within eg, the exemption for transfers between spouses, or enjoys Agricultural or Business Property Reliefs at the rate of 100 per cent.

In accordance with the general principle of avoiding double taxation by charging both IHT and CGT on the same occasion, an effective uplift to market value also applies to settled property on the death of the tenant for life. As with property owned outright, the favourable CGT regime applies even if there is, in the event, no IHT to pay. There are however, certain circumstances in which, with trust property, the general rule does not apply, and there may be a CGT charge on the death of the life tenant.