IHT advice

mikewp

Good Morning, I need a little advice regarding IHT. My Father died in Nov 1997 and passed on the family home to my mother and left £80,000 which was then used against his allowance at that time which was £215,000. During the next couple of years we looked into ways of addressing the potential IHT issue for when my mum passed away but meanwhile the thresholds increased to £325,000 and we were advised that the allowance from my Father could be added to my Mothers allowance giving a total of £650,000 which at the time we thought would cover the property value. My Mother has recently passed on and we will shortly be in probate. However my brother was talking to a solicitor recently who advised him that not only does the £80,000 come out of the £625,000 but is also related as a % of the £215,000.
Can anybody help and clarify the situation please ??

getmore4less

the way it works is the unused nil rate band at the time of death is used to work out the % uplift of the nil rate band on the second death.

in your example the unused nil rate band is ((215-80)/215) 62.79%

this uplifts the current band 325*1.6279 = £529070
(check the HMRC proper calc for rounding this may be out by a £ or so)


This asumes that £80k of the nil rate band was used that would be the total of any gifts in the previous 7 years that are not exempt and anything distributed from the estate that was not exempt(spouse& charity being the main ones)

mikewp

Thank you for the clarification, I have a few further queries before we meet our solicitor we could do with some help with. It looks like we may have been caught out with the current valuation on the property likely to exceed the £529,070 and because there is some land involved it maybe ripe for development. Is there anyway that the property could be bought by family without planning permission then sold on at a later date after consent is achieved, this would of course involve CGT which would be the lesser of the two evils or are we stuck with IHT and nowhere to go ??

Do you think it's worth getting expert advice ??

Keep_pedalling

You must get a proper valuation on the property otherwise you risk being challenged and hit with fines by HMRC. You need to engage a RICS Chartered Surveyor do not use estate agents.

The time for IHT planning has passed (although now might be the time for the beneficiaries to look at it), there are no legal dodges to reduce what is due.

Yorkshireman99

Keep_pedalling wrote: »

You must get a proper valuation on the property otherwise you risk being challenged and hit with fines by HMRC. You need to engage a RICS Chartered Surveyor do not use estate agents.

The time for IHT planning has passed (although now might be the time for the beneficiaries to look at it), there are no legal dodges to reduce what is due.

Very sound advice. You will probably benefit from getting valuations done by an RICS member not just a run of the mill estate agent. They should be able to negotiate with the District Valuer to minimise the IHT.

SeniorSam

Hello Mike, sorry for your loss.

When you say ( and left £80,000 which was then used against his allowance at that time which was £215,000.) was that money not passed to your mother? Please clarify.

Sam

getmore4less

mikewp wrote: »

Thank you for the clarification, I have a few further queries before we meet our solicitor we could do with some help with. It looks like we may have been caught out with the current valuation on the property likely to exceed the £529,070 and because there is some land involved it maybe ripe for development. Is there anyway that the property could be bought by family without planning permission then sold on at a later date after consent is achieved, this would of course involve CGT which would be the lesser of the two evils or are we stuck with IHT and nowhere to go ??

Do you think it's worth getting expert advice ??

The IHT value is at DOD there is not a lot you can do about that. If hovering around the nil rate band then you need valuations that will have a chance of getting past HMRC so a DIY approach is probably unwise.

mikewp

Thank you for your replies, they have been very helpful.Clearly we will be paying IHT if the estate is valued over £529,000 but thanks to your info we have now established that it the best way forward will be to employ a FRICS surveyor to value the land/property/ belongings and look after our best interests with the District Valuer through to closure. This is especially important as we have already had 3 valuations from estate agents varying from £450,000 - £750,000 ( this is due to the unique nature of the plot ) so it is not going to be easy to value.If the property is valued by the FRICS surveyor and the District Valuer at say £600,000 at D.O.D and we pay the relevant IHT and complete the process of probate then upgrade/refurbish/ obtain planning and subsequently sell at £750.000 are we only subject to CGT because all the increase in value was created after D.O.D ?? or will the District Valuer try to revisit and put a case forward for an increase in the valuation for the purposes of IHT

Yorkshireman99

mikewp wrote: »

Thank you for your replies, they have been very helpful.Clearly we will be paying IHT if the estate is valued over £529,000 but thanks to your info we have now established that it the best way forward will be to employ a FRICS surveyor to value the land/property/ belongings and look after our best interests with the District Valuer through to closure. This is especially important as we have already had 3 valuations from estate agents varying from £450,000 - £750,000 ( this is due to the unique nature of the plot ) so it is not going to be easy to value.If the property is valued by the FRICS surveyor and the District Valuer at say £600,000 at D.O.D and we pay the relevant IHT and complete the process of probate then upgrade/refurbish/ obtain planning and subsequently sell at £750.000 are we only subject to CGT because all the increase in value was created after D.O.D ?? or will the District Valuer try to revisit and put a case forward for an increase in the valuation for the purposes of IHT

You need to be able to prove to the DV that the value at the DOD declared and agreed was reasonable. If the site does have significant development potential then that needs to be reflected in the probate valuation. Estate agents valuations are notorious for being wildly optimistic or pessimistic. That is why you need a FRICS or similar. If you are successful in getting PP and selling the site too soon after probate you could end up under investigation for under declaring the value.

mikewp

Again thank you for your comments, if the planning potential was declared thus increasing the valuations then would the cost of gaining planning consent be offset against the estate ??

Yorkshireman99

mikewp wrote: »

Again thank you for your comments, if the planning potential was declared thus increasing the valuations then would the cost of gaining planning consent be offset against the estate ??

That is why you need professional advice from an IHT specialist and a properly qualified surveyor. What I am saying is that it is a complex area that requires detailed examination of all the facts not just an answer from a forum based on an outline of the facts. There is an old saying that cheap advice is worth what you pay for it! In my experience in this sort of case the value of the professional advice should be much less than the fees.