capital gains tax

Yorkshireman99

charlie2015 wrote: »

from what I understand this could be what is being done but they wont tell 3of us what is going on . this has been going on for 3years 8 months now. they are saying they have not had any reply from HMRC in all this time despite sending reminders to HMRC?. this was about 6 months ago .they now will not reply to emails sent do I need a solicitor to say they are personally responsible for their negligence .the solicitor was dealing with CGT but they then gave the problem to his accountant to sort out about 3 years ago .the last time I spoke to him he told me the CGT was nothing to do with him now.i was just pointing out how hopeless the solicitor seems to be many thanks

The bottom line is that the executors are solely responsible for the mess they have created. You, and your four co-beneficiaries have to resolve it with them. As far as I can see the only thing to do is to get a new solicitor to act for you all. The time for time wasting is over. The executors need to be told you want paying without delay and they will have to foot the bills for their imcompetence.

Tom99

[FONT=Verdana, sans-serif]If after, adjusting the acquisition cost, it still turns out that CGT is due on the estate then the executors could try to claim that the period of administration ended before the sale of the house, because the residue of the estate has been ascertained i.e. all assets and debts are known.

[/FONT] [FONT=Verdana, sans-serif]https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30700[/FONT]

[FONT=Verdana, sans-serif]That would mean the estate sold as bare trustee and each beneficiary would be responsible for CGT on their %age share but each would have a £11,300 allowance rather than the one allowance available to the estate.

[/FONT] [FONT=Verdana, sans-serif]Again if CGT was due the executors were probably negligent in not assenting the beneficial interest in the property to the beneficiaries before the sale since that also would have reduced or eliminated the CGT.[/FONT]

charlie2015

hi the house sold within 2 or 3 months . I dont believe house prices rose in that time. the problem seems to arise from the execs not putting the true price at probate. they knew the house sold for £625.000 but told probate the estate value was £554.000 I think they rushed probate to keep a cash buyer happy many thanks for replys

Tom99

[FONT=Verdana, sans-serif]Would other assets have taken the £554,000 above the IT £650,000 limit?

[/FONT] [FONT=Verdana, sans-serif]I suppose they thought the agreed sale price of £625,000 was too close to that IT limit and would cause delay.

[/FONT] [FONT=Verdana, sans-serif]Since IT was not involved the probate value has not been 'determined' so the executors can use a higher more realistic value as the probate value when they report for CGT.

[/FONT] [FONT=Verdana, sans-serif]There are also substantial set-offs against against CGT including, the annual allowance, all the legal and estate agents costs on disposal plus the probate costs in 'acquiring' the property.

[/FONT] [FONT=Verdana, sans-serif]For the CGT acquisition costs, the actual costs can be used, or a fixed formula whichever is the higher which would be 0.8% at that level so £4,432.

[/FONT] [FONT=Verdana, sans-serif]https://www.gov.uk/government/publications/statement-of-practice-2-2004--2/statement-of-practice-2-2004--4[/FONT]

charlie2015

hi IHT does not apply here as under £650,000 joint threshold . very little cash just property . when you come up with £4000 plus figure would this be total tax bill or each individual . I calculated CGT at about £21,000 with CGT at 28% I might well have got this wrong many thanks for all replys

Tom99

charlie2015 wrote: »

hi IHT does not apply here as under £650,000 joint threshold . very little cash just property . when you come up with £4000 plus figure would this be total tax bill or each individual . I calculated CGT at about £21,000 with CGT at 28% I might well have got this wrong many thanks for all replys

[FONT=Verdana, sans-serif]No sorry you have misunderstood. My £4,432 is the 'acquisition' costs you are allowed to set off.

[/FONT] [FONT=Verdana, sans-serif]Based on a sale at £625,000 and a probate value of £554,000 I think the CGT calc would look something like this:-

[/FONT] [FONT=Verdana, sans-serif]£625,000 - £554,000 – EA & Solicitors costs on sale say £5,000 - £4,432 - £11,500 annual allowance.

[/FONT] [FONT=Verdana, sans-serif]So a taxable gain of £50,068 x 28% = £14,019 tax due.[/FONT]

konark

It may have been just under the combined IHT threshold of £650,000 but anything over £600,000 whets the taxman's interest as whether it's been slightly undervalued to avoid IHT and they will insist on an official valuation. The executors may have sold it a bit cheap for a quick sale and may have been trying to avoid this, but reporting it as £554k when they had ALREADY sold for £625k is tantamount to fraud..

The executors have messed up badly and after nearly 4 years can be held responsible for any losses beneficiaries may have suffered..

Can an executor really claim for 'acquisition costs' for an asset that automatically passes into the estate for nothing?

Tom99

konark wrote: »

It may have been just under the combined IHT threshold of £650,000 but anything over £600,000 whets the taxman's interest as whether it's been slightly undervalued to avoid IHT and they will insist on an official valuation. The executors may have sold it a bit cheap for a quick sale and may have been trying to avoid this, but reporting it as £554k when they had ALREADY sold for £625k is tantamount to fraud..

The executors have messed up badly and after nearly 4 years can be held responsible for any losses beneficiaries may have suffered..

Can an executor really claim for 'acquisition costs' for an asset that automatically passes into the estate for nothing?

Yes they can, based on the actual cost of probate or an HMRC scale. If you have DIY'd probate then the scale will be the higher deduction allowed:-

Expenses incurred by personal representatives

Personal representatives incur legal and other expenses in the administration of the estate, for instance, in obtaining a grant of probate. If they sell or dispose of some of the assets of the estate, then some of that expenditure may be allowable in calculating the gains or losses. Because of the way solicitors charge for their services, it is often difficult to isolate the allowable expenditure from other expenditure which is not allowable.
We will accept calculations which include deductions for costs of establishing title which are based on a published scale. The scale is published as Statement of Practice SP02/04 (for deaths after 6 April 2004).
Personal representatives are entitled to claim the actual expenditure where this is known.
This expenditure is only available where the personal representatives dispose of assets.

charlie2015

hi many thanks for all replys .as you can imagine this is a bit of a nightmare . all we really want is closure . but this fiasco just goes on and on . I suspect this is why this is taking so long they are trying to get all of us to pay for their mistakes .any more advice gratefully received thanks.

Yorkshireman99

charlie2015 wrote: »

hi many thanks for all replys .as you can imagine this is a bit of a nightmare . all we really want is closure . but this fiasco just goes on and on . I suspect this is why this is taking so long they are trying to get all of us to pay for their mistakes .any more advice gratefully received thanks.

You are proably at the stage where you need to spend a few hundred pounds getting a solicitor involved to make them understand that they are going to be personally liable for their mistakes.