HMRC internal manual

Inheritance Tax Manual

IHTM28061 - Liabilities: investigating liabilities: link between CGT liability and assets in the estate

If a deduction for CGT is shown in the form IHT400 the deceased has either sold assets or given them away. This will usually have implications for the deceased’s estate. For example, if there has been a straightforward gift it should be shown on form IHT403. There may also be a gift if the assets have been sold to a friend or relative at less than its full open market value (IHTM09000). If assets have been sold the proceeds should either be:

  • reflected in the assets of the deceased’s estate
  • given away as a gift, or
  • used to pay outstanding debts or on-going expenses.

If the deceased has a large portfolio of shares, for example, normal day to day transactions might produce a substantial CGT liability. But if it is not clear how the CGT liabilities arose or how this has been reflected in the deceased’s account you should consider raising enquiries to establish the facts.

You should bear in mind that the size of the CGT deduction claimed does not necessarily reflect the value of the assets that have been given away or sold. This is because the tax is charged on the increase in value over and above inflation and not the value of the asset itself.