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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Disposals of legatee's interest in estate: variations: estate: sale of legatee's interest before assets vest

It can sometimes take a considerable time before residue of an estate is ascertained and the assets distributed to the legatees. Because of this a legatee who wishes to raise money quickly may decide to sell his or her interest in the estate to a third party. The legatee will probably have to sell at a discount compared to his or her likely expectation of the amount to be received from the estate because the purchaser has no certainty as to precisely what assets will eventually vest from the estate and when those assets will vest.

At the time of this disposal the legatee does not have an interest in any specific assets of the estate. All he or she owns is a chose in action, see CG30760. This is personal to the legatee and cannot be disposed of. What the legatee actually sells is an expectation of property to be received from the estate in the future.

The effect of this transaction is the same as when a legatee in return for full consideration executes a deed of variation which is not retrospective to the date of death. The only difference in the case of a sale to a third party at arm’s length is that the disposal consideration is the price received rather than the market value of the expectation. You should therefore follow the instructions at CG31940+ using the sum received as the disposal consideration.

A legatee may decide they wish to give the assets they are due to receive from an estate to some other person. This is often achieved by executing a deed of variation, see CG316000+. Occasionally the legatee simply gifts his or her interest in the estate to the other person. Such a gift is a variation of the devolution of the estate.

If all other necessary conditions are satisfied an election under TCGA92/S62 (7) can be made. This will result in the gift being treated as retrospective to the date of death for Capital Gains Tax purposes, see CG31630+.

If a valid election cannot be made or for any other reason is not made and the gift is made whilst the assets remain vested in the personal representatives, the gift will not be treated as retrospective to the date of death for capital gains purposes. The treatment described in CG32000+ will apply.