House sold for above Probate valuation - Tax inplication?

edited 31 March 2013 at 9:29PM in Deaths, Funerals & Probate
5 replies 1.5K views
steveharvey2001steveharvey2001 Forumite
33 Posts
edited 31 March 2013 at 9:29PM in Deaths, Funerals & Probate
I am executor to an estate where the total value of the estate was just below the 325K inheritance tax exemption limit based on the valuation of the house at the end of 2012. The house made up 2/3 of the estate with the rest mostly as bank accounts etc.

The IHT205 forms were submitted and the grant of probate was issued with no significant delay.

The house has been put on the market at 5% above probate value as an asking price and is now sold "subject to contract" at the asking price.

The concern that I have is that the difference in selling price to probate value will put the estate just above the 325K limit for Inheritance tax.

How should this be handled - do I need to submit IHT400 series forms as a non-exempt estate OR would the small difference in value (under 5%) be treated as a capital gain and be subject to CGT. If so ,how should the capital gain be reported and any exemption claimed ?

Replies

  • getmore4lessgetmore4less Forumite
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    Asume there was no trensferable nillrate band from a spouse that has been forgoton about.

    If the house was sold from the estate then a estate return for the incomeCGT from DOD to distribution will deal with the sale.
    Estates get a CGT allowance.
    Any gains (0.66 * 325 * 0.05=£10725ish) should fall within this allowance(expences allowed).


    As for getting new IHT calcs there are some guidlines on HMRC site

    Was a pro vavluation used or a guess from EA

    Was anything done to the place that may have increased the value?

    I suspect you will be ok
  • Asume there was no trensferable nillrate band from a spouse that has been forgoton about.

    If the house was sold from the estate then a estate return for the incomeCGT from DOD to distribution will deal with the sale.
    Estates get a CGT allowance.
    Any gains (0.66 * 325 * 0.05=£10725ish) should fall within this allowance(expences allowed).


    As for getting new IHT calcs there are some guidlines on HMRC site

    Was a pro vavluation used or a guess from EA

    Was anything done to the place that may have increased the value?

    I suspect you will be ok

    Thanks. Could you explain the working of 0.66 * 325 * 0.05 ??
    Is the £10,725 the CGT allowance ?
    Does it matter if the Probate is obtained in the prior tax year to the sale completion?
    Would that allow a double years allowance?


    The probate valuation was a paid-for professional valuation from a local EA that we paid £60 for and had a 5 page report. We had another 2 agents give values, one agreed but the other was 50K below and was disregarded.

    It was a difficult property to value because the fabric of the 1960s building is very tired and it is in dire need of modernisation .. but on the plus side the garden is above average size for the neighbourhood.
  • getmore4lessgetmore4less Forumite
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    you said the house was about 2/3(0.66) of an estate that was close to £325k and sold for 5% more so the £10725 is my estimate of the gain over probate valuation.

    Would have to check the allowance for 2013 will be around £10k-£11k so likely after expences the gain will be below the estate CGT allowance

    if you have a paid for estimate of value then a 5% movement is 3 months is not that unreasonable.

    if you google HMRC insert question here

    you often get most of the info you need dealing with any tax issue.

    If the person had a spouse that died before them and did not use up there allowance then there may be some transferable nill rate band
    this should have been done for the IHT205/IHT400
    google hmrc transferable nil rate band

    this will be top and loads of other to look at
    http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm
  • you said the house was about 2/3(0.66) of an estate that was close to £325k and sold for 5% more so the £10725 is my estimate of the gain over probate valuation.

    Would have to check the allowance for 2013 will be around £10k-£11k so likely after expences the gain will be below the estate CGT allowance

    if you have a paid for estimate of value then a 5% movement is 3 months is not that unreasonable.

    if you google HMRC insert question here

    you often get most of the info you need dealing with any tax issue.

    If the person had a spouse that died before them and did not use up there allowance then there may be some transferable nill rate band
    this should have been done for the IHT205/IHT400
    google hmrc transferable nil rate band

    this will be top and loads of other to look at
    http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

    okay - I now see what you meant. A very close calculation as the gain is 10K.
    Unfortunately the spouse died in 1967 and there was no spousal exemptions prior to 1974 so that did not help.
  • getmore4lessgetmore4less Forumite
    44.1K Posts
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    ✭✭✭✭✭
    okay - I now see what you meant. A very close calculation as the gain is 10K.

    Unfortunately the spouse died in 1967 and there was no spousal exemptions prior to 1974 so that did not help.

    it's not based on the spouse exemptions.

    How big was the estate in 1967?

    There was a nill rate band of £5000 so if that was not used there may still be a transferable %
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