Do I need to tell HMRC no CGT payable?

nige123

My late mother's home was sold in 2011 in a falling market and for significantly less than the value submitted for probate. No IHT was payable so there was no "ascertained" date of death valuation.

I am now, somewhat belatedly, finalising administration and need to write to HMRC to inform them of a small (< £50) amount of income tax due as a result of an interest payment received gross. Should I at the same time give them the probate and sale valuations on the property OR simply tell them there were no capital gains during administration OR not mention CGT at all?

John_Pierpoint

I am a bit confused, and I expect HMRC will be too.

What was the asset that produced the untaxed interest?

Are you writing as the executor and trustee of the estate before it was settled and distributed as capital and income ?
Or are you writing as one of the beneficiaries, who has just received £50 of untaxed income?

As an individual do you normally complete a self assessment return ?

This link might help with the general concept of the property being queried for possible CGT

https://forums.moneysavingexpert.com/discussion/3388716

My initial thought is that it may well be worth establishing the capital loss, in order to keep it for future use against any possible future gain?
[Though is there a risk of being fined for a late return ?]

nige123

John_Pierpoint wrote: »

I am a bit confused, and I expect HMRC will be too.

What was the asset that produced the untaxed interest?

A B*rclays Savings Bond. It was paid gross during the deceased's lifetime and the first monthly interest payment (about £250) after their death was also paid gross. Subsequent payments were net of tax.

Are you writing as the executor and trustee of the estate before it was settled and distributed as capital and income ?

Or are you writing as one of the beneficiaries, who has just received £50 of untaxed income?

As executor, in the hope and expectation that HMRC will deal with it under the "informal procedure".

As an individual do you normally complete a self assessment return ?

Presumably not relevant, given my last answer?

This link might help with the general concept of the property being queried for possible CGT

*I'm not allowed to repost links, it seems*

Thanks for the link. I presume if HMRC did look at the sale they would have some regard for the prevailing market conditions in the area at the time? (Prices were in steady decline)

My initial thought is that it may well be worth establishing the capital loss, in order to keep it for future use against any possible future gain?
[Though is there a risk of being fined for a late return ?]

The property remained in estate ownership until its sale, so am I correct that none of the several beneficiaries could use any of that loss? And how to establish from this distance how much of that loss was down to estate agents' excessive optimism in the initial valuation?

holly_hobby

You should have had it professonally valued, an estate agent gives a value for marketing purposes, which is generally an optimistic sale price.

If you sold as the legal owner (and not in disolvement of the estate for debts/division), you don't report by self assessment, and there is no CGT due (due to a loss) on the asset, then no you don't have to report this to HMRC.

However if you have other assets that may be exposed to CGT on disposal, you may want to report the loss (by writing to HMRC if you dont use SA), in order that you may offset the loss to any chargeable gain you may incur in the future (registration of loss occuring in 2011/12 tax yr, must be reported to HMRC by April 2016).

If you already report by self assessment, then yes you do need to include the CGT details, and is via this method that you will report the loss for future use (if reqd).

If sold as executor and as part of the probate process, then there isn't any cgt due from the estate on tsf for disposal, as you are acting on behalf of the decd, there is also no CGT on tsf to beneficiaires - only on disposal.

Hope this helps

Holly

nige123

John_Pierpoint wrote: »

[Though is there a risk of being fined for a late return ?]

Sounds like an argument for not mentioning the property at all?

I'm intending to write to the bereavement section in Cardiff as the deceased had had no dealings with HMRC. For completeness I thought that I would tell them that IHT had been dealt with (none payable) and the deceased's last tax year had been covered by an R40 refund. Hence wondering whether and how I should mention CGT - maybe just by saying there were no capital gains during administration?

The property, incidentally, is "up North" and sold for £137,000.

nige123

holly_hobby wrote: »

You should have had it professonally valued, an estate agent gives a value for marketing purposes, which is generally an optimistic sale price.

Can't really do much about that now

In practice I wonder how many people pay for valuations when IHT is not an issue? All the agents who looked at it gave an "expected to achieve" price as well as an initial selling price, but it eventually sold for significantly less than any of these valuations.

If you don't currently use self assessment, and there is no CGT due (due to a loss) on the asset, then no you don't have to report this to HMRC.

However if you have other assets that may be exposed to CGT on disposal, you may want to report the loss (by writing to HMRC if you dont use SA), in order that you may offset the loss to any chargeable gain you may incur in the future (registration of loss occuring in 2011/12 tax yr, must be reported to HMRC by April 2016).

If you already report by self assessment, then yes you do need to include the CGT details, and is via this method that you will report the loss for future use (if reqd).

As the property was owned by the estate up until its sale I would have thought my own tax arrangements were irrelevant, even though I am one of the several beneficiaries?

holly_hobby

This may help.

http://www.hmrc.gov.uk/sa/personal-rep.htm

http://www.hmrc.gov.uk/helpsheets/hs282.pdf

Holly

nige123

holly_hobby wrote: »

If sold as executor and as part of the probate process, then there isn't any cgt due from the estate on tsf for disposal, as you are acting on behalf of the decd, there is also no CGT on tsf to beneficiaires - only on disposal.

Your edits are confusing me a bit, Holly ;-)

My understanding is if there is a gain during administration and the property is sold by the estate, the estate IS liable for CGT. If the property is transferred to beneficiaries at any time before its sale the CGT liability for the entire period from death to sale falls on the beneficiaries. Amount payable dependent on annual exemptions in both cases. Am I wrong?

holly_hobby

Sold = disposal

CGT only applies on disposal ie sale of the asset - beneficiaries arent liable to CGT on actual inheritance of the asset, only at the point they sell it (with a resulting chargeable gain).

Read the above HMRC links to help understand

H

nige123

holly_hobby wrote: »

Sold = disposal

CGT only applies on disposal ie sale of the asset - beneficiaries arent liable to CGT on actual inheritance of the asset, only at the point they sell it (with a resulting chargeable gain).

Read the above HMRC links to help understand

H

Yes, but unless I'm misunderstanding you, in your previous reply you're saying that if property is sold by executor rather than being transferred to benficiaries, no CGT is payable regardless of any gain since death. Which I think is incorrect.

holly_hobby

Sorry, no thats not correct.

There is no CGT on tsf to the executor or beneficiaries - as I say its when the asset is actually sold that CGT comes into play.

Holly