Just Inherited a third share - need advice on CGT

finowen

My two siblings and I are just inheriting equal shares of my dad's estate including his house and my brother is the executor. I have been offered the house as the other two don't want it; they would take a third each of the market value of the house from the estate, but I'm not sure of the CGT effect for me if/when I sell the house.
I need to work out if it's better to let it be sold from the estate and take the third share now. How do I work out what the baseline for CGT will be; i.e. the market value in full, my third of that value or any other value?

FYI The value of the total estate is below the NRB

CLAPTON

do you intend to live in the house?

John_Pierpoint

Assuming dad did not live "North of the Border":
How long ago did dad die?
When was probate granted?
Is there any risk of a claimant - eg the mythical "love child" - appearing within 12 months of the probate.
Has the executor performed the ritual of advertising for creditors over a period of at least 2 months?
Did you get a valuation for the house as at the date of death?
FYI The value of the total estate is below the NRB
Do you mean 325K or 650K?
Is the house plot registered at the Land Registry in your father's name?
Is the title "clean" - not chance of anyone having interests eg the guy renting the garage? a creditor trying to protect a debt?
Presumably your father bought the house (or inherited half when your mother died)?
How long has dad owned the house?
Where is "the bundle" of documents - sometimes still called "the deeds"?
Is there any "development" potential - probably not as the "Condems" are changing the rules?
Is there potential for renovation & extension probably using the recently enhanced "permitted development rights"?
Is the house still enjoying its 6-months-after-probate council tax holiday?
The government is under an obligation to build a database of the carbon footprint of all the houses in the country - this is being met by the creation of an energy performance certificate when a house is sold or rented, (check if one is needed when no money changes hands I don't know).

finowen

Thanks Guys,

Clapton - I don't intend to live there as we currently live too far away so it could be our occassional "holiday" home or just an investment.

John_Pierpoint -
How long ago did dad die? 1 month ago
When was probate granted? Awaiting grant of probate
Is there any risk of a claimant - eg the mythical "love child" - appearing within 12 months of the probate. No
Has the executor performed the ritual of advertising for creditors over a period of at least 2 months? My dad was meticulous and thee are no creditors
Did you get a valuation for the house as at the date of death? Yes
FYI The value of the total estate is below the NRB
Do you mean 325K or 650K? £325K
Is the house plot registered at the Land Registry in your father's name? Yes
Is the title "clean" - not chance of anyone having interests eg the guy renting the garage? a creditor trying to protect a debt? No
Presumably your father bought the house (or inherited half when your mother died)? Yes
How long has dad owned the house? Many years
Where is "the bundle" of documents - sometimes still called "the deeds"? My brother has them
Is there any "development" potential - probably not as the "Condems" are changing the rules? None as the house is adjacent to greenfield
Is there potential for renovation & extension probably using the recently enhanced "permitted development rights"? I think so for a small extension but this would spoil the garden plot.
Is the house still enjoying its 6-months-after-probate council tax holiday? Yes

My question remains - Is the baseline for a CGT gain the full value of the house market valuation or a third share of this value or some other value? I would forgo my third share and provide them the two thirds cost from the estate; is the the base value for CGT? I'm wondering how long it may take for the market value to rise sufficiently to make any gain at all, after CGT.

CLAPTON

the gain when you come to sell is the difference between the 'probate' value and the selling price

at the moment there are three owners (or could be) then the gain will be divided by three and each will benefit from their own 10,100 cgt allowance

if you buy them out and become the sole owner then when you eventualy you will of course benefit for the whole gain and hence be liable for the whole cgt (if any)

mlz1413

CLAPTON wrote: »

..
if you buy them out and become the sole owner then when you eventualy you will of course benefit for the whole gain and hence be liable for the whole cgt (if any)

But will OP also to be able to use the total cost paid to buy the others out? will this be added to the 1/3 of MV at time of inhertiting?

CLAPTON

mlz1413 wrote: »

But will OP also to be able to use the total cost paid to buy the others out? will this be added to the 1/3 of MV at time of inhertiting?

yes of course the gain will be the difference in the selling price less the full 'probate' price (assuming the acquisition of the other 2 shares happens at probate price)

finowen

Thanks Guys,

I'm now off today to see my brother so this info is most welcome. One further point is that I understand that the CGT rate has changed to 28% but is this only for higher rate taxpayers?

Thanks again

John_Pierpoint

finowen wrote: »

Thanks Guys,

Clapton - I don't intend to live there as we currently live too far away so it could be our occassional "holiday" home or just an investment.

John_Pierpoint -
How long ago did dad die?1 month ago
When was probate granted? Awaiting grant of probate
Is there any risk of a claimant - eg the mythical "love child" - appearing within 12 months of the probate. No
Has the executor performed the ritual of advertising for creditors over a period of at least 2 months? My dad was meticulous and there are no creditors
Did you get a valuation for the house as at the date of death? Yes
FYI The value of the total estate is below the NRB
Do you mean 325K or 650K? £325K
Is the house plot registered at the Land Registry in your father's name? Yes
Is the title "clean" - not chance of anyone having interests eg the guy renting the garage? a creditor trying to protect a debt? No
Presumably your father bought the house (or inherited half when your mother died)? Yes
How long has dad owned the house? Many years
Where is "the bundle" of documents - sometimes still called "the deeds"? My brother has them
Is there any "development" potential - probably not as the "Condems" are changing the rules? None as the house is adjacent to greenfield
Is there potential for renovation & extension probably using the recently enhanced "permitted development rights"? I think so for a small extension but this would spoil the garden plot.
Is the house still enjoying its 6-months-after-probate council tax holiday? Yes

My question remains - Is the baseline for a CGT gain the full value of the house market valuation or a third share of this value or some other value? I would forgo my third share and provide them the two thirds cost from the estate; is the the base value for CGT? I'm wondering how long it may take for the market value to rise sufficiently to make any gain at all, after CGT.

Is there any "development" potential - probably not as the "Condems" are changing the rules? None as the house is adjacent to greenfield. I was thinking of the possibility of knocking it down and building something else that meets modern standards.
You probably don't want us all having a look at it on Street View but in many places in the country a reasonably secure green outlook: carries a premium, offers some potential for flexibility and possible "hope value" in the future.
There is always the danger with family situations of the green eyed monster getting in on the act if you make a good investment (and zero sympathy if you make a bad one).

Is there potential for renovation & extension probably using the recently enhanced "permitted development rights"? I think so for a small extension but this would spoil the garden plot.
Assuming the local council has not revoked your rights or given the house or area a conservation status, you should have the right to extend and utilise the roof space.

As you have not had to go through the IHT assessment the Valuation Agency Office (aka District Valuer) won't have got in on the act for the probate value - your siblings (or the 3 of you) really want one as high as possible;) This means that if your investment did make an appreciable gain, you might well be called upon to justify and argue about your valuation after you have sold.
As you are all connected people you have done the right thing by getting a valuation as at the date of death.
(I am assuming that all three of you are "resident" in the UK and cannot claim exemption from CGT).

On the 28% point the answer is "it depends":
http://www.telegraph.co.uk/finance/financetopics/budget/7849250/Budget-2010-CGT-changes-will-hit-vast-majority-of-property-investors.html

finowen

Thanks again to all respondents,

This is my first forum exchange thread and I am sure to continue to "correspond" again,

John_Pierpoint - unfortunately the house is not on streetview as it is in a cul-de-sac where the camera didn't go. The lounge view/front garden view is amazing and will attract a premium I'm sure. I hope there will no green eye monster into the future and now that the CGT is the probate value and I can use the annual allowance as and when I'm nearly sure now to buy it from my siblings...

finowen

Just read the 28% edit ..... the area where the house is has always been lowly priced so... increases are likely to be slow and gradual. In any case there is a lot of sentiment in this house, where I grew up and my children often visited their grandparents, so I may put this house in trust for my children.

John_Pierpoint

There is a poster called "jimmo" who has a lot of experience with these situations. If you search for his postings with the search facility in the top green bar above, you may well find some more advice and warnings about the pitfalls of being a landlord or doing "holiday lets".
(It is all somewhat complex)