Capital Gains Tax Robbery, Warning

mommasue_2

This is a warning to any other honest citizens trying to sell out of jointly inherited family owned property. I have been done like a kipper by Inland Revenue for nearly £1000 and have no recourse to justice.

I inherited my parents home,a seaside flat, 25 yrs ago. For years I had been asking my siblings to buy me out. They wanted to retain it, but would not agree to let it, or share it's use fairly between the various families. With continual arguments it was a nightmare, with leaky roof as well.

Nearing retirement I had to put pressure on, and engaged a solicitor. After 2 years of acrimonious negotiation they finally agreed to buy me out and agreed on a price. I had 3 Estate Agents' quotes plus a full valuation. They still dragged their heels and several months went by before the deal was finalised. The sale was also dependent on selling another small dilapidated flat owned by us all, in order for them to raise the money.

Eventually everything went through, I was paid my one third share: £60.000. I paid Capital Gains. All done and dusted, or so I thought. Six months later the IR came back saying that it automatically takes the view that any inter- family sale of property is undersold to avoid tax, and that in their view the property was worth £15,000 more than the £180,000 for which it was valued. I had all documents to prove that I could not possibly have got another penny out of my siblings, and that the delay was unavoidable. Any attempt I might have made to raise the price to market level at point of sale would have collapsed the whole deal.

The Inland Revenue have no court of appeal, my accountants did their best, got the tax demand down as much as they could, but I have had to pay out over £800 CGtax on income which I never received!

olivetti

Was the amount paid by your relatives the market rate? If not that is why you have had to pay more CGT on top. If it was the market rate and you had a couple of indepenedent valuations to back this up where they shown to HMRC?

The most important part of this is the market value of the property which is the expected value a 3rd party would pay for that property at the same time as the sale. these 3rd party valuations are usually conservative and tend to be at the bottom end of the spectrum as well. Was that 180,000 all your relatives could afford or based on an independant valuation?

HMRC does have an appeals process and you should of been advised of this by both your accountant and HMRC. If your concerns are rejected by HMRC you can go to the General Commisioners, an idependant body which look at the facts of the case and make a binding decision. There is another layer above that called the Special Commissioners and then the High Court, House of Lords and even the EU court of Justice.

Did you or your accountant do the CG calculations and were all capital costs taken into account when the property was sold?

If the house was sold under value then HMRC were fully justified under the current statute to levy the additional charge. If it was not sold under value then you need to complain about a mistake being made and also about your accountant not knowing about the appeals process.

dunstonh

This is a known issue with the HMRC and they are quite correct in thinking what they have in very many cases.

it is well documented that the HMRC will look at transfers between family more closely and that market rates are expected to be used. Perhaps your accountant should have told you this and your disatisfaction aimed more towards him/her?

mommasue_2

Well obviously I got market rates at the time. Several quotes from local Estate Agents and one of my sisters had a valuation done. Bearing in mind that they didn't want to sell, they were being as tight as possible, but the agreed price reflected the market. The trouble was the market then was moving swiftly upwards, and my sisters and I had to wait a few months before the sale of the other flat reached completion, so that they had the money to buy me out. None of us are well off, I am not exactly Mrs. Rich !!!!!! this money is all I have to see me through retirement.

I said to my solicitor that at the end, the flat was probably worth more than I was going to get for it . She advised that as it had taken two years of acrimonious negotiation, to re-open negotiation on the price would only cause so much further delay and that there was a possibility that they would pull out entirely. I did not want to enter expense of a lawsuit.

Yes, I think the District Valuer who advised the Taxman, was wrong. He could not have known about the dodgy roof, cracks, leaky windows and poor rundown overall condition. I would have liked him to look at the place, but I had no access, after the sale. The cost of getting there, 300 miles, staying somewhere, paying him etc. was barely cost effective.

At the time of the sale I had not engaged an accountant, all was in the hands of the solicitor. I would with hindsight advise anyone else in this situation to speak to an accountant before making any decision. The first accountant I had was worse than useless. The one I have now has made the best of a bad situation.

What really irks, is that I feel the Tax people have made the assumption that I have deceived them when I have not, I have been disadvantaged by others' greed and duplicity. It is all very well them saying the place was worth a bit more, which it clearly wasn't, but no help to me if I couldn't get a penny more out of the reluctant purveyors of my third share.

The property was not actually sold on the market. They still hang on to the wretched place as some sort of shrine; I hope it falls down round their ears in the next Atlantic gale! I just put this behind me, but other people might be warned of the pitfalls of jointly owned inherited property

mommasue_2

Thanks, well thanks for your brutally honest view! see next post reply

Robert_Sterling

I think perhaps the most significant factor in this matter is the inabilty of the original poster and their siblings to reach an amicable solution in less than 25 years or so.
I guess the properties have appreciated over that period to the benefit of all parties concerned.
I think the additional capital gains tax is relatively small having regard to all the circumstances.
As Judge Judy might say. Get over it and move on.

John_Pierpoint

I had a similar situation, family house sold on the open market but inherited 15 months earlier.

Somehow we had to agree what the house was worth on the date of death.

I ended up haggling with teh District Valuer - A Scot woman and you would have thought it was her own money !

We traded "comperables" for "comperables" and eventually agreed on something in the middle. Now that we have access to the land registery and "nethouseprices" on line, the so called professionals can't pull the wool over your eyes, nor can you get away with pretending that an acre of Belgravia is worth 500,000 GBP.

I still felt a bit cheated, but the negotiation was fair if tough. It is generally agreed that a property in multiple ownership, like yours is worth LESS than vacant possession on the open market you should have pressed that point. HMR&C will argue that if and when the remaining siblings come to sell, perhaps you have sold your share too cheap AND saved your relatives some CGT in due course (ouch).

I think you should have been more proactive negotiating with HMRC over the valuation.

LittleWoman_3

olivetti wrote:

HMRC does have an appeals process and you should of been advised of this by both your accountant and HMRC. If your concerns are rejected by HMRC you can go to the General Commisioners, an idependant body which look at the facts of the case and make a binding decision. There is another layer above that called the Special Commissioners and then the High Court, House of Lords and even the EU court of Justice.

If it was not sold under value then you need to complain about a mistake being made and also about your accountant not knowing about the appeals process.

Do exactly what Olivetti suggests - In the past, on many occassions on behalf of clients, I have appealled to the General Commissioners for things the HMRC just would not budge on - and been successful on every occassion. It is worth the effort - also - being advised incorrectly is grounds for appeal! (As agreed by a General Commissioners ruling!)

mommasue_2

Thanks Littlewoman for this very helpful info