Income and CGT query

00ec25

vigman wrote: »

The property was willed to my wife and sister and sold by the estate. I don't believe it was transferred to them before the sale as the land reg was still in the deceased's name as far as I can make out.

The most confusing thing is that the money received for the sale of the property has actually all gone to pay IHT against the total estate.

So my wife is paying CGT on the difference between the valuation and sale price of the property although she is actually not getting a half of the sale proceeds?!

TIA

Vigman

OK, this is now getting into complex areas it appears you simply don't have enough knowledge of what is happening with the estate for the answers we have given so far to still be reliable. i for one assumed this was a simple estate with a single property, not a large estate with multiple properties and high actual IHT liability.

did the will expressly name a specific property as being left to your wife and her sister to do with as they pleased?
did the will expressly state the property was to be sold and the proceeds distributed to your wife and her sister?
did the will merely state your wife and her sister are beneficiaries of x% of the value of the estate?
how long has lapsed between date of death and date of sale?
who instructed the sale?

the answers to the above determine who is liable for CGT, if at all, since it is possible that the estate is selling at a price upon which upon IHT will then be rebased and no CGT liability will arise at all.

Tom99

00ec25 wrote: »

the answers to the above determine who is liable for CGT, if at all, since it is possible that the estate is selling at a price upon which upon IHT will then be rebased and no CGT liability will arise at all.

[FONT=Verdana, sans-serif]Providing the capital gain is a genuine reflection of property inflation over the period between probate date and sale date it is worth sticking with the lower probate value because CGT for the estate is 28% rather than 40% IHT and there are all the costs, including the cost of obtaining probate which can be set off against CGT.[/FONT]

00ec25

Tom99 wrote: »

[FONT=Verdana, sans-serif]Providing the capital gain is a genuine reflection of property inflation over the period between probate date and sale date it is worth sticking with the lower probate value because CGT for the estate is 28% rather than 40% IHT and there are all the costs, including the cost of obtaining probate which can be set off against CGT.[/FONT]

yes indeed, i was talking rubbish

forgot the rule is around selling for less than probate, not more than probate

vigman

Thanks everyone. This has been a nightmare scenario with many "professionals" being involved some of whom have given incorrect advice and had to be changed

My wife and I don't have enough real information to understand the complex situation. I have made guesstimate spreadsheets for IHT purposes but there are questions over who even actually owned parts of the estate.

My sister in law is the executor and is working with accountants solicitors and a barrister. HMRC have had three full valuations and we don't know if a final figure for IHT has been decided

All we know currently is that an accountant has advised that CGT is payable on one property that sold for £80k more than its IHT valuation and my wife must pay her 50% share even though no monies have been distributed. Apparently a form to pay this is in the post

I believe this specific property was left as shared between remaining children ( my wife and her sister) as opposed to it being part of the general estate. It was sold in October this year 18 months after my father in law's death.

My s-i-l is unwell both physically and now mentally stressed but is determined to carry our her duties looking after the finances as my wife was my father's carer without 'bothering my wife with all the details". Although well meaning it keeps us in the dark about my wife's commitments.

We don't understand the CGT commitment on this undervaluation yet believe it has to be paid by Jan 31st 2018?

TIA

Vigman

Tom99

[FONT=Verdana, sans-serif]Sounds a complicated situation, maybe you should ask the executors to clarify a few things for you including:-

[/FONT]

• [FONT=Verdana, sans-serif]How they intend to apportion IHT between the beneficiaries.[/FONT]
• [FONT=Verdana, sans-serif]Since it was the estate that sold the house your wife inherited, that it will be the estate who will report and pay any CGT liability.[/FONT]
• [FONT=Verdana, sans-serif]How they intend to apportion any CGT paid between the beneficiaries.[/FONT]
• [FONT=Verdana, sans-serif]Whether they yet have a draft CGT calculation there are prepared to share with you.[/FONT]

[FONT=Verdana, sans-serif]
If the probate value for the house has not yet been accepted by the IHT Office than no CGT calculation can yet be done.

[/FONT] [FONT=Verdana, sans-serif]If the property was sold in Oct 2017 then my understanding is CGT tax is due by Jan 2019 not Jan 2018 and it will be the estate who pays this not your wife.

[/FONT] [FONT=Verdana, sans-serif]You wife should not be asked to pay the CGT bill herself, whenever it is due. It should be paid or set aside from the estate funds before your wife's share of the inheritance is paid to her in cash.[/FONT]

00ec25

your understanding of the estate is too vague to give any sound basis for being able to advise you further.

who sold the property and in whose names was it sold?
estate distributions cannot be made until the IHT has been settled or at least ascertained.
CGT for something sold after March 2017 would be due by 31 Jan 2019 but we have no idea who is liable for it - it now appears it could be the estate

vigman

Thanks again. The most important fact in the last two replies is that CGT is not due until Jan 2019

Apparently we are about to receive paperwork soon that should clarify things more!

Vigman

vigman

Just a quick update as everyone has been so helpful.

I have the forms completed by an accountant for my wife's sister who inherited 50% of the property.

The property was actually sold in February 2017 but not moved into until October (which I believed to be the sale month) so the CGT is payable by 31/1/2018

The forms (accountant's own and SA108) show a half value of the property for IHT as £150,000 dated to the death date of their father in May 2016. Half sale expenses were £2689.50 The half sale price realised was £192,500 in Feb 2017 so the 50% net gain was £39,810.

Less the £11,100 allowance CGT for my wife's half has to be paid on £28,710.50.

Using the Gov.UK online calculator 18% of this is £5,167.89 CGT due (my wife only earned £1,500 16/17)

This is the same amount paid by my wife's sister via an accountancy firm.

I believe the property was in my father in law's name at his death but both daughters are being ask to make separate 50% CGT payments rather than the estate itself.

As there are other properties shared by my wife and her sister attracting IHT and no final figure has been agreed, I don't know why this one property has been singled out for CGT as it could possibly happen on other sales going through?

Finally we are using the online CGT payment system so will see how this goes.

Thanks

Vigman

Tom99

[FONT=Verdana, sans-serif]Unless your wife owned a beneficial interest in the property, which from the info you have given it appears she did not, then its the estate who are liable for CGT not your wife.

[/FONT] [FONT=Verdana, sans-serif]I would question the executor as to how they think the beneficial interest was transferred to you wife before you pay any CGT. Are you being asked to pay CGT direct to HMRC on you wife's own tax account, it appears from the computation that you are?

[/FONT] [FONT=Verdana, sans-serif]If, for whatever reason, you wife was a beneficial owner I would expect the proceeds of the sale to be handed over before and CGT deduction and in time for your wife to pay any tax due.

Also if the probate value has not yet been agreed then the 28% price rise in only 10 months is likely to cause HMRC and the VO to question whether the figure returned was too low and suggest a higher one meaning more IHT but less CGT.
[/FONT]

vigman

Tom99 wrote: »

[FONT=Verdana, sans-serif]Unless your wife owned a beneficial interest in the property, which from the info you have given it appears she did not, then its the estate who are liable for CGT not your wife.

[/FONT] [FONT=Verdana, sans-serif]I would question the executor as to how they think the beneficial interest was transferred to you wife before you pay any CGT. Are you being asked to pay CGT direct to HMRC on you wife's own tax account, it appears from the computation that you are?

[/FONT] [FONT=Verdana, sans-serif]If, for whatever reason, you wife was a beneficial owner I would expect the proceeds of the sale to be handed over before and CGT deduction and in time for your wife to pay any tax due.

Also if the probate value has not yet been agreed then the 28% price rise in only 10 months is likely to cause HMRC and the VO to question whether the figure returned was too low and suggest a higher one meaning more IHT but less CGT.
[/FONT]

Thanks. My SIL's accountant has submitted a personal CGT payment for her and has asked my wife to do the same. I have now done this online for my wife and the payment has been provided to us from the executor my SIL to pay to HMRC.

There are no funds from the sale of this property as they have gone to pay IHT.

There have been three full estate valuations and I believe the final one was accepted recently for IHT with only this one property out of four leading to CGT.

Vigman