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HMRC internal manual

Capital Gains Manual

Death and Personal Representatives: Liability to the date of death: Assets of which the deceased was competent to dispose: Liability to date/death: deceased competent to dispose: Examples

Example 1

Mr A is resident and domiciled in England at the date of his death. He owns chattels, shares, a half interest in a plot of land and a half share in the matrimonial home. He has a balance standing to his credit at the Bank and is owed £500 by his brother-in-law. The half interest in the plot of land is held by him as tenant-in-common but the half share in the matrimonial home is held by him as joint tenant, with his wife holding the remaining interest.

Mr A can direct by provisions in his will to whom all the above-mentioned assets except his interest in the matrimonial home should pass. The interest in the matrimonial home would automatically pass to his wife as the surviving joint tenant. Even if he purported to direct in his will how this interest should pass that direction would be ignored.

All his assets, including his interest in the matrimonial house held as a joint tenant, will be assets of which he was `competent to dispose’ for Capital Gains Tax purposes. On his death

  • there will be no chargeable occasion in respect of any of the assets
  • apart from the interest in the joint tenancy the assets will all pass to his personal representatives. They will acquire those assets for capital gains purposes at market value at the date of death, see CG30730.
  • the interest in the joint tenancy will pass to his wife. For Capital Gains Tax purposes she will also acquire this interest at market value at the date of death. Her interest in the matrimonial home will thereafter consist of one half acquired at cost and one half acquired at market value at the date of death.

 

Example 2

Mr B was resident in the UK whilst working here for a period of years. However he was domiciled in a foreign country. He owned land in that country including the matrimonial home to which he and his wife had intended to return when the period of employment in the UK was completed. He has two children.

Mr B died before returning to the foreign country. Under the laws of that country, on the date of his death the matrimonial home passed immediately to his wife. The other land that he owns also passed automatically, this time to the joint ownership of his children. They have a right to partition their interests so that they ultimately each can have sole ownership of part of the land.

Mr B could not dispose of his land in the foreign country by will accordingly to the laws of that country. However had he been domiciled in the UK and had the land been situated in the UK he would have been able to dispose of it by will. As a result both the matrimonial home and the holding of land are treated as assets of which he was competent to dispose. They therefore benefit from the treatment provided by TCGA92/S62 (1). There is no Capital Gains Tax disposal at the date of death. The wife and the two children acquire their interests at market value at the date of death.