Incorrect Probate Value and subsequent CGT

nad1611

Hi
Whilst having a valuation done for Probate purposes, the agent stated a figure verbally of say £140,000. The Inheritance Tax forms etc were filled appropriately and sent the same day.The inheritance Tax threshold was nowhere in sight.

However a confirmation letter was sent by the agent several days later, but only opened and filed by the executor, as it was seen as no longer needed.
The house is now up for sale for £162000 after some improvements and the executors looking at the possibility of CGT have been doing their sums and pull from the file the agent's letter, only to note now, that the agent has put £150,000 and not £140,000.
Now obviously in terms of CGT this figure is better because there would be none due (given their allowance and Fees etc to be paid).

The question is should the Tax people be informed about this oversight, or is it feasible to simply accept the new figure and assess the possible CGT from there. Also if the executor can see that no CGT would be due (using the £150,000) do they still have to inform HMRC, for them to okay it anyway?

agrinnall

I can't answer the first part, but I think HMRC will need to be told for CGT purposes, even though the gain may be less than £10,100 and no tax is actually due the asset is being sold for more than the minimum reporting figure of £40,400.

nad1611

The £40,400 is that a disposal figure of more than £40,400 as opposed to an increase in value of...?

agrinnall

Yes, see the section on Gains you don't need to report on here http://www.hmrc.gov.uk/cgt/intro/report-gain.htm

CLAPTON

that's the disposal figure

Mikeyorks

agrinnall wrote: »

Yes, see the section on Gains you don't need to report on here http://www.hmrc.gov.uk/cgt/intro/report-gain.htm

That paragraph, albeit initially unclear, is a part of the preceding para that starts off

When you're filling in your Self Assessment tax return, you won't always have to complete the Capital Gains Tax pages.

....... perversely the requirement to file disposals of more than 4 x allowance (and where there is no CGT due) only applies where you normally complete an SA Return. If you don't normally complete one then there's no requirement to report (where no tax is due). If you've any losses you want to register, under those circumstances, a simple letter is all that's needed.

nad1611

Oh that's confused me now. Working out the gains against the allowances and losses, there wouldn't be any CGT to pay. We don't normally fill a Self Assessment Form.

So are you saying that as we don't fill a self assessment and we're sure we won't be liable for Tax that we wouldn't need to inform HMRC. I have read the passages and can't seem to get from it, what you have.

Obviously it would save us a lot of bother if we didn't have to. So, I'm perfectly happy to be convinced;)

I'm not sure this applies in a Trust situation?

Mikeyorks

The basic principle is you only need to file a CGT Return if you have tax to pay. If you have to file an SA Return in any event then HMRC require you complete the CGT pages if the disposal is 4 x allowance or more. I doubt there's legislation to enforce that.

But I always defer to the resident expert and post #5, in particular, on this thread really covers it all :

https://forums.moneysavingexpert.com/discussion/2915004

...... if you miss it the critical bit comes from the bottom link regarding 'Failure to Notify' (FTN) :

There is no requirement to notify chargeability where there is no liability to Income Tax or Capital Gains Tax or where sufficient tax has been deducted at source to meet the net liability for the year.

There's perhaps a more relevant link to FTN here - but the principle remains the same

http://www.hmrc.gov.uk/briefs/customs-duty/brief3010.htm

agrinnall

Very interesting Mike, you live and learn, although as you say it is rather perverse that you only have to report it if you already have to do SA.

Mikeyorks

As you would deduce from the thread I linked to - I also learned! I normally avoid CGT like the plague - now even more so. Small wonder HMRC (and accountants) have dedicated experts.

nad1611

As a trustee, you must tell HMRC about disposals the trust makes if either of the following applies in a tax year:

• the value of the disposal(s) exceeds the annual exempt amount for Capital Gains Tax by four times (£42,400) and you've been issued with a Trust and Estate Tax Return
• you're liable to pay Capital Gains Tax

You do this by completing form SA905 Trust and Estate Capital Gains (the Capital Gains Tax supplementary pages of the Trust and Estate Tax Return).


So from this it would appear that the info you've given doesn't apply here.
Also going back to our resident expert as you so rightly call him, in the thread below, doesn't mention anywhere that it wouldn't need to be declared if Tax wasn't due which I know it was in this case, but I would have thought he or someone else would have mentioned it in this thread.



https://forums.moneysavingexpert.com/discussion/comment/49677769#Comment_49677769


Also does anyone know when one would be issued with a Trust and Estate Tax return?