Deceased's House valuation/CGT question/s!

izaac

I am an executor of my mum's Will; Her estate is probably worth about £500k, most of that being the house. We got some EA verbal valuations which varied by about £70k! It is quite difficult to 'guess' as it has 'potential'!

I need to 'accurately' value this for probate via a chartered surveyor, don't I?.

Am I right in thinking:
The valuer values it at the time of death. If it takes 6 months+ to sell, the price will have gone up. We are presumably liable for CGT on the difference? But won't personally be fined for an inaccurate valuation?

How much CGT will we have to pay if say it's valued at £430k and we sell for £460k? Just ballpark?

Thanks

SeniorSam

The property value of your mother's total estate needs to be carried out by three Charered Estate Agents and preferably in writing. With the potential of selling the properety, this should not be a problem, but explain that it is a probate valuation you require. Whatever you end up with when selling the house could be lower or higher that it eventually sells for, so there may be a need to notify the revenue if this changes by an amout that wold alter their figures.

If your father died before your mother and passed his estate to your mother, then both nil rate band allowances of £325,000 are allowable, so it is unlikely that there will be any inheritance tax to worry about.

Next is to consider who the property will be passed to. If this is a single beneficiary, then the difference between the property probate value and sale price, if higher, may attract CGT. Each person has a CGT allowance, so it will not be taxable until that allowance, or allowances have been exceeded that capital gains tax would be payable.

Personal allowance for 2014-2015 is £11,000 and tax rate is between 18% and 28% depending on your tax position.

Hope this helps

Sam

getmore4less

If you do have the transferable nil rate band at 100% that £650 so well within that no IHT.

you can do a bit of your own research along side th valuations from the EA to get a realistic valuation at the higher end of a the range.

if HMRC want to query they will value it you use your evidence to discuss if that HMRC valuation is to far from what you want..

SeniorSam

getmore4less wrote: »

If you do have the transferable nil rate band at 100% that £650 so well within that no IHT.

you can do a bit of your own research along side th valuations from the EA to get a realistic valuation at the higher end of a the range.

if HMRC want to query they will value it you use your evidence to discuss if that HMRC valuation is to far from what you want..

The correct figure for both nil rate band allowances is £650,000 not £650. I think this was a slip.

Sam

CLAPTON

given the valuation of the property is uncertain then one could observe that

-HMRC can if they choose challenge the probate valuation once you sell the property

-if the total estate is below the IHT allowance (325,000 or 650,000 if spouse allowance can be transferred) then it general best to use a higher valuation on the property

-if the estate valuation is above the IHT and so tax will be due then it probably best to user a lower valuation.

IHT is 40% whilst cgt is 18% to 28%


in your example of a gain of 30k you could probably deduct say 5k for expenses so gain of 25K

if only one owner the tax at 18% or 28% of 25k depending upon your tax position

izaac

Dad died in 2006 so his threshold was £285,000; giving us a combined IHT relief of £647,000.

I recognise this is still rather more than the estate is worth (hurrah) but I am also nervous of how fine the toothed comb the IHT people will use if I prove to be way out in my figures! I have 2 EA 'appraisals' (not paid for), one says they think the market value is £410k; the other £450k; am awaiting a third which , having just spoken to the person who met with this third agent, has corrected me and said 'about' £460k', so a £50k spread.

Under these circumstances, assuming this third appraisal does state that sum do you think I can just 'guess' and say £440k? As long as we tell them if it sells for more?

There are 4 beneficiaries; 2 adults, 2/5ths apiece; and 2 teenagers sharing 1/5th. Presumably the children don't get a tax free allowance for CGT?

I guess if I can 'prove' via the written appraisals why I reached my 'average' guess for the value of the property, we'll just have to wear CGT if it sells for more than £22k over the probate value, won't we? As I can't justify claiming the house is worth more than the agents have stated, can I??

izaac

Sorry, cross posted with you Clapton! Will read your reply a sec.

izaac

Being a bit thick, sorry, but what do you mean by £5k for expenses? ta

SeniorSam

All costs of selling the assets can be deducted. Also, the nil rate band for both is £325,000.

Sam

CLAPTON

izaac wrote: »

Dad died in 2006 so his threshold was £285,000; giving us a combined IHT relief of £647,000.

I recognise this is still rather more than the estate is worth (hurrah) but I am also nervous of how fine the toothed comb the IHT people will use if I prove to be way out in my figures! I have 2 EA 'appraisals' (not paid for), one says they think the market value is £410k; the other £450k; am awaiting a third which , having just spoken to the person who met with this third agent, has corrected me and said 'about' £460k', so a £50k spread.

Under these circumstances, assuming this third appraisal does state that sum do you think I can just 'guess' and say £440k? As long as we tell them if it sells for more?

There are 4 beneficiaries; 2 adults, 2/5ths apiece; and 2 teenagers sharing 1/5th. Presumably the children don't get a tax free allowance for CGT?

I guess if I can 'prove' via the written appraisals why I reached my 'average' guess for the value of the property, we'll just have to wear CGT if it sells for more than £22k over the probate value, won't we? As I can't justify claiming the house is worth more than the agents have stated, can I??

the transfer of the spouse IHT allowance is based on percentage

so if the husband left 100% of his estate to the wife then on her death her estate gets 100% of the current value i.e. the estate will have 325,000 plus 325,000 i.e. 650,000

CLAPTON

the HMRC guideline says you should get a professional valuation : an estate agent is acceptable so I see no reason why you can't use the 460,000 valuation.

If on actual sale, HMRC object then they will use the district surveyor to provide an valuation based on the time of death.
This could be either higher or lower than the probate value.

cgt is based on your gain
so if there was a net gain of say 50,000
then your sahre would be 50,000 x 2/5 = 20,000
your cgt allowance would be 11,000 this year 11,100 after 6th april 2015

so tax would be 18% or 28% (depending upon your income ) x 8,900
so between 1,602 and 2,492