Death and Personal Representatives: Non-retrospective variations: vested assets
If assets which are the subject of a non-retrospective variation had vested in the legatees before the non-retrospective variation occurred the possibilities are that before the non-retrospective variation occurred
- the asset(s) had been sold. If so the gain remains chargeable on the legatee and only the proceeds pass to the assignee.
- the asset(s) had not been sold. If so the non-retrospective variation is a disposal of those assets by the legatee to the assignee. This disposal occurs on the date the variation becomes effective. For disposals made otherwise than by way of a bargain at arm’s length the disposal is deemed to be at market value on that date. As for any other disposal made otherwise than by way of a bargain at arm’s length, if the disposal occurred before 14 March 1989 an election for gifts holdover relief under FA80/S79 can be made, see CG66450+.
When the information about the non-retrospective variation is received by the office dealing with the estate, that office should advise the office of the legatee that a non-retrospective variation has occurred after the assets involved have vested. In particular, the legatee’s office should be asked to ensure that if the assets had not been disposed of before the non-retrospective variation occurred the disposal by the legatee on the date of the non-retrospective variation is dealt with.
If you are advised
- that your taxpayer is a legatee of an estate whose terms have been varied as described above
- that that variation is not retrospective to the date of death
- that the assets had vested in your taxpayer before the variation occurred
your action will depend on whether the variation affected assets which had already been disposed of by your taxpayer before the variation occurred.
For the two possible cases the position is as follows.
- If the assets had been disposed of by your taxpayer before the non-retrospective variation occurred then the disposal is unaffected by the non-retrospective variation.
- If the assets had not been disposed of by your taxpayer before the non-retrospective variation occurred then there is a disposal of those assets by your taxpayer at the date of the variation. You should deal with the disposal on the same basis that you would deal with any disposal of an asset. Normally the disposal will take place at market value. Exceptionally, if the variation was for full consideration arrived at under a bargain at arm’s length, the disposal will take place at that figure.