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HMRC internal manual

Capital Gains Manual

Qualifying corporate bonds: death and personal representatives

As a general rule the death of a taxpayer is not an occasion of charge for capital gains purposes, TCGA 1992 section 62, see CG30210+. When the taxpayer dies the assets he or she was competent to dispose of will pass to his or her personal representatives, but section 62(1)(b) provides that this is not treated as a disposal. However, this does not mean the personal representatives inherit any deferred gain. QCBs acquired by the personal representatives are not “the new asset” in their hands under section 116(4) and a deferred gain will not accrue when they dispose of the QCBs either by distribution to the beneficiaries or by sale or redemption for cash. The gain deferred under section 116(10)(b) is ‘lost’.

The situation is different if the personal representatives acquire shares or securities which are then converted to QCBs as a result of a relevant transaction whilst the shares or securities are still held by them, so that the gain latent in the shares or securities is deferred until the disposal of the QCBs. Then the deferred gain will accrue in the normal way if the personal representatives sell or redeem the QCBs. However, there will not be a charge if they distribute the QCBs to the legatees. A distribution by the personal representatives to the legatees of an estate is a transaction to which section 62(4) applies. Section 62(4) is one of the specific provisions referred to in TCGA92/S116(11) as not triggering the release of the accrued gain. Instead any liability on the deferred gain will pass to the legatees who receive the QCBs: the gain will accrue in the normal way under section 116(10)(b) when they dispose of the QCBs. See CG53710.