CGT on inherited house.

Corelli

Hi, I could do with some advice here about my mother's flat.

She died last year and we have nearly got probate sorted. The will states that my brother has a lump sum, and then the rest is divided between us equally. He was her carer and had lived with her for a few years before her death.

We are handling this by slitting the money she left equally between us, and making the charitable dontions mentioned in the codicils. Incidentally, it is the codicils that have caused the delay.

We are taking my brother's lump sum out of the value of the flat, it will be sold, or he can give me what would have been my share out of his lump sum.

It has just occurred to me that as it wasn't my main residence, I will be liable for CGT, presumably my brother will be exempt as he did live there.

I have never had to deal with anything like this before, and am wondering how best to handle this. If the flat isn't sold, then no CGT is due? But eventually it would be due presumably?

The probate value of the flat was probably optimistically high. Which didn't worry us at the time, as we had our father's Nill Rate Banding as well. But perhaps this is not so good, in the light of CGT?

Savvy_Sue

Corelli wrote: »

It has just occurred to me that as it wasn't my main residence, I will be liable for CGT, presumably my brother will be exempt as he did live there.

Yes to both those points.

Corelli wrote: »

I have never had to deal with anything like this before, and am wondering how best to handle this. If the flat isn't sold, then no CGT is due? But eventually it would be due presumably?

The CGT is only due on sale, or if you transferred your 'share' of the flat to your brother.

Corelli wrote: »

The probate value of the flat was probably optimistically high. Which didn't worry us at the time, as we had our father's Nill Rate Banding as well. But perhaps this is not so good, in the light of CGT?

Actually that's probably in your best interests, as long as it wasn't artificially high, and provably so, BUT although you're liable to pay CGT, it's entirely possible that none will be due, because ...

You take the value of your share of the flat at the date of your mum's death

then you take the value of your share of the flat on the date it's sold

And if you haven't made a profit, no CGT is due.

And if the profit you have made is less than £10,500 (I think), no CGT is due.

And some expenses can be deducted from the profit.

So if you're planning to sell quickly, no CGT will be due.

System

Surely if it is sold as part of probate to realise bequests then it is done as part of the deceased estate and nothing to do with the beneficiaries as far as CGT is concerned. The estate then becomes a cash only estate

getmore4less

Any CGT calculation uses the probate/ascertained for base value.

The brother can only get the exemption if he lived there since DOD the time before that does not count.

Keep_pedalling

Unless the value of the property has increased by more than £11,100 at the date of sale then there is no CGT to pay. If there is then that needs to be paid by the estate.

If you brother decides to stay put and he buys out your share, you would only pay CGT if your share had increased by £11100. Bearing in mind you can take off the cost of sale from your gain in is unlikely that any tax will need to be paid by either you or the estate.

Corelli

Thanks, that's all quite reassuring. My brother is still living there and what we will probably do is swap this flat for a smaller one in the same building.

So, I suppose technically we would sell this flat to the inhabitant of the smaller flat, and buy his. The money that would be the difference would come to me or some would be mine and some my brother's. Depending on how much it is.

If the flat was sold for much less than probate value, I suppose HMRC would be asking questions?

The reason I think it is over valued is that other flats in the same building have gone for much less, and I very much suspect that a proper survey would expose a damp issue.

Mojisola

Corelli wrote: »

It has just occurred to me that as it wasn't my main residence, I will be liable for CGT, presumably my brother will be exempt as he did live there?

Have you transferred the ownership of the flat into your two names or will it be sold by the executors as part of the estate?

AIUI, if the flat is sold by the executors, CGT isn't an issue.

Corelli

We've done very little so far, thanks Mojisola. As we are executors and inheritors - apart from the charities - we will do it that way round. Sell, then transfer the new smaller flat into my brother's name.