Probate valuations and capital gains tax

Thrugelmir

lincroft1710 wrote: »

Where this is a large difference between the declared value of a property for IHT purposes and the sale price only a few months later, there is usually a request to adopt the sale price as the value for IHT

We paid a large amount of CGT. The property had huge development potential. The RICS surveyor based the valuation purely on the property itself, it's current condition etc. The HMRC were perfectly happy. As the RICs survey is a full report containing justification, i.e. comparatives etc, not just a figure plucked out of the air.

lincroft1710

Perhaps it was only where the sale price was lower than the returned IHT value. I remember seeing quite a few of such cases when I worked in the VOA.

Tom99

Unless IHT was paid the value as at January has not been ascertained and you are free to substitute a different value for CGT.
The fact you sold it for 18% more 5mths later in a flat market is proof that the £300k was undervaluing the house.
Unless you have transferred the ownership to you it will be the estate which makes any gain not you. The estate still has a £12,000 allowance and a generous 'acquisition cost' allowance as well as the usual disposal costs, but tax is paid at the higher rate of 28%

sarahs999

It’s a property I’ve inherited - probate has just been granted last month. I’m the sole beneficiary. There is no IHT as the entire estate has been valued at about £335k, plus my mother’s probate allowance was never used giving me a huge margin. It needs huge amounts of work doing but like someone mentioned, it sits on some prime land in the centre of the city and has huge potential. It feels wrong somehow that I have to pay a huge tax bill because the surveyor undervalued it. So as not to drip feed: it is hard to value because nothing else on the street is similar; it has more land around it and outbuildings than any other nearby property.

The estate agents say that because there were two other offers well under the asking price it shows that the valuation was right and they stand by it. But surely a house is worth what someone will pay for it? And the fact that we received an over-asking-price offer within a month of it being in the market, and because three other estate agents valued it higher (at £330, £350 and £400) I feel that this is all somehow not quite right.

Tom99

sarahs999 wrote: »

It’s a property I’ve inherited - probate has just been granted last month. I’m the sole beneficiary. There is no IHT as the entire estate has been valued at about £335k, plus my mother’s probate allowance was never used giving me a huge margin. It needs huge amounts of work doing but like someone mentioned, it sits on some prime land in the centre of the city and has huge potential. It feels wrong somehow that I have to pay a huge tax bill because the surveyor undervalued it. So as not to drip feed: it is hard to value because nothing else on the street is similar; it has more land around it and outbuildings than any other nearby property.

The estate agents say that because there were two other offers well under the asking price it shows that the valuation was right and they stand by it. But surely a house is worth what someone will pay for it? And the fact that we received an over-asking-price offer within a month of it being in the market, and because three other estate agents valued it higher (at £330, £350 and £400) I feel that this is all somehow not quite right.

Since no IHT was due the 'acquisition' value is up to you to decide and if you think a taxable gain was made to make the appropriate tax return. No-one is going to send you a bill for a £55k gain less costs unless that is the gain you choose to declare.

babyblade41

I think the surveyor is valuing it as it stands, not potentially what someone else can profit from it

The person who offered may want that particular house because of exactly where it is, as you say no comparable nearby, that doesn't necessarily mean it's a true value as 2 other offers were a lot less than this.

In that situation I'd say your claim would fall on deaf ears and just accept some CGT to pay , then enjoy your inheritance like your late parents would want you to do

Thrugelmir

sarahs999 wrote: »

But surely a house is worth what someone will pay for it?

Not for probate purposes.

Why did you a RICS survey done if the estate was nowhere near the threshold for IHT (on the basis that the property was potentially worth more).

sarahs999

Thrugelmir wrote: »

Not for probate purposes.

Why did you a RICS survey done if the estate was nowhere near the threshold for IHT (on the basis that the property was potentially worth more).

I'm actually wrong on that. I've looked back on the paperwork since I posted. It was a survey by the two estate agents who later marketed the property. When it came in at what I thought was a low valuation I didn't take much notice because I thought it would sell for more and that would be that. I didn't realise it had capital gains tax implication.

sarahs999

Tom99 wrote: »

Since no IHT was due the 'acquisition' value is up to you to decide and if you think a taxable gain was made to make the appropriate tax return. No-one is going to send you a bill for a £55k gain less costs unless that is the gain you choose to declare.

Thanks - but presumably this is somewhat dodgy not to declare. You'll have to forgive me, I have no experience in this field.

Thrugelmir

Tom99 wrote: »

Since no IHT was due the 'acquisition' value is up to you to decide and if you think a taxable gain was made to make the appropriate tax return. No-one is going to send you a bill for a £55k gain less costs unless that is the gain you choose to declare.

Self assessment is nothing new. Likewise HMRC monitor Land Registry records.

Executors have legal obligation to declare.