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Do i have to pay capital gains tax?

Hi everyone,

This is my first post. I am wondering if anyone can help.
I am due to inherit some money from my grandparents home. My grandad died in 2007. In his will he left me a 25% share of his house. After probate was granted a declaration of trust was made stating that that share was mine but that as long as my nan lived in the property or was alive I could not sell my share. In 2012 my nan went into a home. My father (who had the other 25% of grandads share) and I then rented the house to pay for nans care, we did not take any rent ourselves. In sept 2017 my nan passed away, until probate was granted in Sept 2018 we continued to rent the house and I took 25% of the rental each month from Sept 2017 till January 2018.
Subsequently we have been made to pay tax for all the years the house was rented despite the fact that between 2008 and 2017 the rental income paid for nans care and we did not take our share. This has been done by self assessment through an accountant because we were advised the 25% share of the house was mine and I could have taken rent so had to pay tax.
Anyway aside from that, now nans house is sold and I am due my 25% sum from the sale. Do I have to pay capital gains tax on my share because grandad gave me it in the declaration of trust in 2008 or will I be exempt because in the declaration of trust I could not sell my 25% share as nan was still alive? No one can seem to give me a straight answer. I have found the capital gains calculator and have an idea what I might need to pay but there is a big question mark over whether I will have to pay it due to this declaration of trust.

Hope I am making sense, please give me any advice if you have any

Many thanks in advance

Lucy
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Comments

  • Keep_pedalling
    Keep_pedalling Posts: 19,343 Forumite
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    Assuming the trust was set up correctly, while your Nan was alive she was the beneficial owner, so the rental income should have been taxed as her income, which would have required her or her attorney to file SA returned. If this was not done then yes there would have been several years of income tax to pay.

    Because of the life interest trust there should be no CGT to pay.
  • pphillips
    pphillips Posts: 1,631 Forumite
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    edited 4 March 2019 am31 12:31AM
    CGT will be chargeable on the sale of the property for the gain held over while the property was in trust.

    CGT is payable on the increase in value of your share since the date of death in 2007, less your share of the costs involved in the acquisition, sale and improvement of the property.

    However, you will be able to deduct your CGT annual allowance (£11,300 for the 2017/18 tax year) so that you will not need to pay CGT if your gain falls below this amount.
  • Keep_pedalling
    Keep_pedalling Posts: 19,343 Forumite
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    pphillips wrote: »
    CGT will be chargeable on the sale of the property for the gain held over while the property was in trust.

    CGT is payable on the increase in value of your share since the date of death in 2007, less your share of the costs involved in the acquisition, sale and improvement of the property.

    However, you will be able to deduct your CGT annual allowance (£11,300 for the 2017/18 tax year) so that you will not need to pay CGT if your gain falls below this amount.

    The OPs Nan was a life tennant and on her death the base value of the trust assets will be uplifted to their then value without any CGT charge. This uplift wipes out any unrealised gains.
  • pphillips
    pphillips Posts: 1,631 Forumite
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    edited 4 March 2019 am31 1:09AM
    The OPs Nan was a life tennant and on her death the base value of the trust assets will be uplifted to their then value without any CGT charge. This uplift wipes out any unrealised gains.

    For the benefit of the OP- what the uplift means is that for CGT purposes, it is as if Nan had acquired the property at the probate market value on the date of her husbands death. The resulting uplift minimises any CGT that would otherwise have been chargeable on the sale..
  • G_M
    G_M Posts: 51,977 Forumite
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    pphillips wrote: »
    For the benefit of the OP- what the uplift means is that for CGT purposes, it is as if Nan had acquired the property at the probate market value on the date of her husbands death. The resulting uplift minimises any CGT that would otherwise have been chargeable on the sale..
    Since your original interpretation of theCGT liability differs so greatly from that of Keep pedaling's, if you are now agreeing with him, it might help the OP to state categorically that your initial advice as misleading.

    Assuming that's what you now believe.
  • Thanks for your replies.

    In regards to the tax on rental income, my father who was executor rented the house and used all rental income paying for care fees. He did not put any self assessments in during those years as he did not seek any advice from an accountant and wrongly assumed it could just pay for her care. Therefore when nan died and probate began again, we were referred to an accountant who then submitted accounts for the years we had not paid and based on the declaration of trust I was found liable for 25% of the tax. I tried to argue it at the time as I never took any of the rent but we were told it just needed paying so we paid it. Dad paid his 25% share and nans 50% share of tax was taken from her estate.

    The declaration of trust was drawn up legally at the end of probate for my grandad's estate. I assume my nan was a life tenant based on what it says.

    I have been on the cg calculator but I have no idea what my 25% share of the house was worth in 2008 compared to the value of my share in january 2019 when the house sold. Do any of you know where I can find that out please? Would the probate have to have had a valuation done on the house when grandad died and our shares were given to us in the trust and are they likely to still have that figure? It is the same company dealing with probate this time around although they have struggled to find other paperwork dating back to grandads probate at times.
  • Keep_pedalling
    Keep_pedalling Posts: 19,343 Forumite
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    Luce83 wrote: »
    Thanks for your replies.

    In regards to the tax on rental income, my father who was executor rented the house and used all rental income paying for care fees. He did not put any self assessments in during those years as he did not seek any advice from an accountant and wrongly assumed it could just pay for her care. Therefore when nan died and probate began again, we were referred to an accountant who then submitted accounts for the years we had not paid and based on the declaration of trust I was found liable for 25% of the tax. I tried to argue it at the time as I never took any of the rent but we were told it just needed paying so we paid it. Dad paid his 25% share and nans 50% share of tax was taken from her estate.

    The declaration of trust was drawn up legally at the end of probate for my grandad's estate. I assume my nan was a life tenant based on what it says.

    I have been on the cg calculator but I have no idea what my 25% share of the house was worth in 2008 compared to the value of my share in january 2019 when the house sold. Do any of you know where I can find that out please? Would the probate have to have had a valuation done on the house when grandad died and our shares were given to us in the trust and are they likely to still have that figure? It is the same company dealing with probate this time around although they have struggled to find other paperwork dating back to grandads probate at times.

    When you say same company are dealing with the probate are we talking about solisitors or a will wring company? I hope the former.

    The house would have been valued at the time of probate so it should be on there. If the trust was done properly there should be no CGT to pay, but you really should take iprofessional advice on that, especially if your grandparents used unregulated will writers to draw up the trust.
  • Thanks keep peddling. All work has been done through the same solicitors from the original will through to grandads probate, then declaration of trust and now nans probate. Even the house sale was with the same solicitors albeit a different department.
    I am hoping that there will be no cgt to pay, I just want to make sure I know 100% either way so I can put money aside ready to pay tax.
    I'll ask dad to ask probate solicitor to find out value of house when probate granted after grandads death so that I at least have an idea of gain.
    I did ask the probate solicitor about cgt and she said she can't give any advice on that as she doesn't specialise in that area but I'm sure some one must do within the same solicitors.
    Do we still have to do a self assessment for the cgt even if the declaration of trust omits us from paying cgt?
    How do I know for sure?
    Sorry for all the questions
  • pphillips
    pphillips Posts: 1,631 Forumite
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    edited 4 March 2019 pm31 12:17PM
    G_M wrote: »
    Since your original interpretation of theCGT liability differs so greatly from that of Keep pedaling's, if you are now agreeing with him, it might help the OP to state categorically that your initial advice as misleading.

    Assuming that's what you now believe.

    Yes - it was a bit misleading (but not intentionally) as I had overlooked the spousal uplift.
  • pphillips
    pphillips Posts: 1,631 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    edited 4 March 2019 pm31 12:50PM
    Luce83 wrote: »
    Thanks keep peddling. All work has been done through the same solicitors from the original will through to grandads probate, then declaration of trust and now nans probate. Even the house sale was with the same solicitors albeit a different department.
    I am hoping that there will be no cgt to pay, I just want to make sure I know 100% either way so I can put money aside ready to pay tax.
    I'll ask dad to ask probate solicitor to find out value of house when probate granted after grandads death so that I at least have an idea of gain.
    I did ask the probate solicitor about cgt and she said she can't give any advice on that as she doesn't specialise in that area but I'm sure some one must do within the same solicitors.
    Do we still have to do a self assessment for the cgt even if the declaration of trust omits us from paying cgt?
    How do I know for sure?
    Sorry for all the questions

    If you get the valuation details from the solicitor then I think that should be sufficient evidence.
    You still need to declare the gain even if this falls within your annual allowance.
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