Interesting problem

In common with many pre-9 October 2007 wills a deceased husband’s will left a nil-rate band trust but stated that instead of his half share of the marital home being transferred into it the trustees would loan the value of that half share to his widow ‘interest free’ but conditional upon the loan being repaid to the trust upon the death of the widow.

A further clause stated that the loan repayment would rise in accordance with the retail prices index over the period of the loan. The loan at the husband’s death was £200 000 and now £240 000 has been repaid to the trustees in accordance with the retail prices index.

The question is whether the trustee’s profit of £40 000 is liable to income tax or capital gains tax or perhaps not taxed at all? TCGA 1992...