Inheritance Tax situation when I own most of the property

jennie77

My father is 94 and lives with us. I am 67 and my partner 70. We own 62.5% of the property and Dad owns 37.5%. When he dies what is the best way to work out his parts value for IT? He has a large number of shares which alone will take him over the IT threshold . Is his part of the property actually worth anything with us living in it and owning a large part of it. I am wondering if I can save IT on the property in some way. I am aware that as his daughter I can use the Osbourne allowance against the property but because it is a large house in a desirable location there would still be IT to pay if it was valued in the normal way as if he owned it all and then his percentage calculated. Any thoughts anyone? thanks

agrinnall

Of course, neither you not your father pay any IHT, his estate will pay it on his death. So either he needs to take professional advice now, or (if you are the executor) you need to take it in preparation for distribution of the estate. Either way, with large sums involved you should really be looking to pay for advice that you can rely on rather than hoping for some online tips that may or may not be correct.

kidmugsy

(i) As said, get advice from a suitably qualified solicitor.
https://www.step.org/what-step-does

(ii) But there is, I understand, a useful deduction recognised by the taxman when a house is owned in fractions. After all, what is the market value of 37.5% of a house?

jimmo

In my working days (on Capital gains Tax) the Valuation Office Agency rule of thumb for jointly owned property was to discount the OMV by 10 to 20%.
I imagine that it will be in your family's best interests to achieve as low a valuation as possible so maybe go for the 20%.

Keep_pedalling

At 94 he has left it rather late to reduce IHT unless he gifts you some money and manages to live til he is over 101.

You would need to get a proper valuation from a RICS surveyor for probate purposes.

If you have children yourselves then now is the time for you to look at reducing IHT on your own estate. If you father is leaving everything to you, then he should consider leaving at least part of his estate to his grandchildren, so that it never forms part of your estate. You should also not leave it to long to start disposing of some of your excess assets to take advantage of the 7 year rule.

Keep_pedalling

jimmo wrote: »

In my working days (on Capital gains Tax) the Valuation Office Agency rule of thumb for jointly owned property was to discount the OMV by 10 to 20%.
I imagine that it will be in your family's best interests to achieve as low a valuation as possible so maybe go for the 20%.

With a large estate throwing in the lowest EA valuation you can find is not going to wash with HMRC.

Tom99

You can find the VO guidance on discount for a share here:

https://www.gov.uk/guidance/inheritance-tax-manual/section-18-undivided-shares