Reduce CGT on inherited house by transfer to other family to use their allowance

benawhile

OK, I have spoken to the Govt Tax helpline and to a solicitor from the firm where the will was actually drafted and neither mentioned the term bare trust. The tax helpline guy said that the will seemed to give the option to do either. The solicitor is going to give me a quote for transferring to four names and went into the logistics of that from a lay point of view, (getting together all four signatories for a sale etc) but didn't volunteer that we have to do one or the other.
I understand from what you say that I could ask the solicitor if the will means the executors are selling as bare trustees or not, but I might get confused by the answer.

benawhile

Keep pedalling: Sorry I was impatient with you. I'm aware that there might be trouble with IHT and it's getting to me.

Keep_pedalling

benawhile wrote: »

Keep pedalling: Sorry I was impatient with you. I'm aware that there might be trouble with IHT and it's getting to me.

No offence taken, it's not easy dealing with this on top of grieving for a loved one.

benawhile

We have now had initial consultation with two conveyancing solicitors who have both been somewhat reassuring about the possible worst case IHT situation and also provided quotes for tranferring to all four names.
Something I am not exactly sure of which I would like help with is this: One solicitor explained that when we finally sell the sale will be flagged automatically with CGT. My question is will it be also flagged with IHT? I would prefer it was because I would like them to look into and be sure of the correct value of the house as it was on death of owner. I have not ruled out approaching IHT personally about the possibility of a high sale price, as this is seeming likely.

booksurr

if you have not yet had a final account from HMRC for inheritance tax (or you know none is due because the whole estate is below the threshold (unlikely with a house worth around 600k) then the value of the property has not yet been "ascertained" by HMRC so they can (and may) adjust it as they see if for whichever tax they want - IHT or CGT according to the circumstances

http://www.hmrc.gov.uk/manuals/cgmanual/cg16251.htm

also read this in detail
http://www.hmrc.gov.uk/manuals/cgmanual/CG32234.htm

benawhile

Thank you, does this mean that it makes no difference if I approach them as they will become aware anyway?

booksurr

benawhile wrote: »

Thank you, does this mean that it makes no difference if I approach them as they will become aware anyway?

I don't understand what you mean by "approach them"

has IHT been paid yet? Yes or No?
the rest follows from that.

jimmo

IHT is not my subject but Self Assessment does “exactly what it says on the tin.“
If you submit an incorrect Return you will be liable to a penalty unless you can show that you made an innocent error and took immediate steps to correct the error as soon as you became aware of it.
One perfectly acceptable reason / excuse for making an innocent error is that you took professional advice and acted upon it so, in this case, I would suggest that if you paid for a professional valuation at the date of death that would be a positive but if you got a free “valuation” from an estate agent that really is not so good.
As to taking immediate steps to correct the error you really need to contact the IHT people rather than wait for them to contact you.
Voluntary disclosure is far, far better for you than disclosure on challenge.

benawhile

Booksurr: Yes, IHT was estimated and paid on my application for probate last year but I submitted an estimate which on retrospect I think was too low. I do not understand whether the sale we are planning as soon as convenient, hopefully around the summer, will be automatically flagged to IHT or not. We are expecting a big difference between our IHT valuation and the sale price. The possibility of a fine for underestimating the value on inheritance, and subsequently the IHT, is hanging over my head, so I am asking whether it till make a difference if I contact IHT now and say that I gave them the average value including internet valuations, rather than the average valuations of just local estate agents and a surveyor, which was higher. Or I could just leave it until the profit on sale gets flagged to CGT/LHT. From my further research into the subject, since my IHT submission, I appreciate more now that ideally for a short period between inheritance and sale there should be minimal difference between the two prices and all or most tax paid should be inheritance tax.

benawhile

Thank you Jimmo, noted. I think I will have to contact them. I am getting very inconsistent advice in this inasmuch as the solicitor the family used in the past in estimating for the job of selling has told me just to leave it until it gets flagged.