Incorrect Probate Value and subsequent CGT

getmore4less

http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/land.htm#5

consider getting the probate value adjusted.

Mikeyorks

nad1611 wrote: »

So from this it would appear that the info you've given doesn't apply here.

Not quite following you there?

You don't have any CGT to pay - so no need to Notify?

You haven't mentioned having a Trust Return to file - so you don't have to advise of the 4 x disposal. If you do have a Trust return ..... you must file regardless.

If you don't have one ...... you won't get one unless you 'Notify'! Which you appear to have no need of?

getmore4less

Mikeyorks wrote: »

Not quite following you there?

You don't have any CGT to pay - so no need to Notify?

You haven't mentioned having a Trust Return to file - so you don't have to advise of the 4 x disposal. If you do have a Trust return ..... you must file regardless.

If you don't have one ...... you won't get one unless you 'Notify'! Which you appear to have no need of?

It is a return during the period of administration by executors of the estate trust unless they transfer the property to the benifitiaries(which may also require a trust if there are a few of them).

Mikeyorks

Yes I realise that. It was the bit I quoted :

So from this it would appear that the info you've given doesn't apply here

that I wasn't following. As everything preceding that was specifically about CGT and the bits also quoted :

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).

..... simply rationalised all that had been said.

getmore4less

As executor of an estate it is best to tell HMRC everything about the income and capital gains during admin period even if you don't need to, so they sign off based on all the facts.

jimmo

Sorry, but I fear we need to go back to your original question.
The agent gave a verbal valuation of £140,000 but in writing he gave a figure of £150,000.
I see that in post # 11 you have made a link to this thread.
https://forums.moneysavingexpert.com/discussion/comment/49677769#Comment_49677769
I won’t repeat what I wrote there but basically, neither of the agent’s valuations have been formally agreed by HMRC because no Inheritance Tax was payable.
No one on this forum can have any real idea whether £140,000 was a realistic valuation or whether £150,000 was nearer the true value. My guess would be that the agent probably thought the house was worth £140,000 but inflated it to £150,000 for Inheritance Tax purposes as a bit of a safety margin. In other words, the agent may have wanted to reduce the risk that the Inheritance Tax Office suspected that the house had been undervalued.
Now that the house is up for sale the beneficial owners will need to consider their own tax situation and the probate value declared to the Inheritance Tax Office is pretty well meaningless.
Regardless of whether £140,000 or £150,000 is used as the acquisition value for Capital Gains Tax purposes, the Capital Gains Tax Office will want to test whether the acquisition value has been overstated.
Turning now to the question about whether a Tax Return has to be completed or not, I stand by what I said in the thread that Mikeyorks referred to and I stand by what I said in the other thread that you referred to.
I can appreciate that that may seem like Double Dutch for a person who is not used to dealing with red tape but, as far as I am concerned, I didn’t say much, if anything, on one thread about completing or not completing Tax Returns because the question never arose.
Similarly, on this particular thread, you have said that a probate value of £140,000 will produce a Capital Gains Tax liability but a probate value of £150,000 will mean that the sale will be Capital Gains Tax free.
In replying to you I take your word on that, assuming you have done your own research. As an example, you have not said whether the executors are selling the property as executors, whether they are selling as bare trustees of the beneficiaries or the beneficiaries are selling the house so I have tried to answer in a non specific form by referring to the beneficial owners and I am confident that what I have said so far stand up in all circumstances.
Turning now to the question of Tax Returns if the beneficial owners of the house use a probate value of £140,000 then, in your own words, there will be a tax liability which needs to be declared on Tax Returns. HMRC will be justified in risk assessing the probate valuation of £140,000 and may do so.
If the beneficial owners use a probate value of £150,000 and no Capital Gains Tax is due then, on this issue alone, the beneficial owners will not need to notify HMRC and will not need to submit Tax Returns.
However they should keep their own records of the transactions.
Either way, it is almost certain that HMRC will get details of the sale of the house and may well start digging.
So, at this stage, I would suggest that rather than worrying about the niceties about completing forms, you should concentrate on the key issue. Is there a tax liability or not?
Therefore ask or challenge the agent. Was the house worth £140,000 or £150,000 at the date of death?
The rest should fall into place once you have resolved that.

nad1611

Thanks everyone. Like the thread I linked to, the house in this instance or it's proceeds are not yet in the hands of the beneficiaries. Yes jimmo the executors are selling the house and the proceeds will eventually go to the various beneficiaries.

My OH has done the sums twice today and actually in either case allowing for the annual exemption and agreed losses such as Estate Agent and Solicitors and losses through redevelopement, there would be no Tax to pay, even if the lower figure of £140,000 is used.

Bear with me Mikeyorks, as jimmo says it's all double dutch when your experiences haven't brought you into contact with this before, just as I'm sure it would be double dutch to you if I started talking about aspects of what I do and expected you to understand straight away.

So in the light of this and to wrap things up. If we are sure there's no Capital Gains owed we do not have to inform HMRC but it would be obviously prudent to keep all records which brought us to that conclusion, executors would keep records anyway.

Thanks jimmo, as always you have a wonderful way with words.