Captial Gains Tax - on Estate property

Greenacrecats

I have recently sold my late parents house as Administrator of their Estate. Probate was applied for 4 years after their death, but it has been 15 years since their death. I have yet to distribute the Estate. My brother and I are the sole beneficiaries.

My brother has lived in their house before and up until the house was sold in March 2019.

There is a gain on the property. Is it the responsibility of the Administrator to pay the Capital Gain Tax from the Estate and then distribute the remaining monies?
Or
Is it the responsibility of the beneficiaries to pay their own Capital Gain Tax?

As my brother has been living in the property as his main residence, is there any tax exemption for him?

The house was never in his name. It was sold in the names of my parents.

AnotherJoe

The estate pays CGT, not the beneficiaries. So only one allowance.
So the answer to

Is it the responsibility of the Administrator to pay the Capital Gain Tax from the Estate and then distribute the remaining monies?

is "yes"
Maybe your brother will agree to help fund more of the bill due to his having benefit of a free (?) place to stay for 15 years.

Keep_pedalling

AnotherJoe wrote: »

The estate pays CGT, not the beneficiaries. So only one allowance.
So the answer to

is "yes"
Maybe your brother will agree to help fund more of the bill due to his having benefit of a free (?) place to stay for 15 years.

I’m not sure that is the case. The estate is responsible for paying any IHT, but the siblings have been beneficial owners for 15 years, so I think CGT only applies to the OPs share of the house, it’s been his siblings home in all that time so he should have no CG liability.

00ec25

Keep_pedalling wrote: »

I’m not sure that is the case. The estate is responsible for paying any IHT, but the siblings have been beneficial owners for 15 years, so I think CGT only applies to the OPs share of the house, it’s been his siblings home in all that time so he should have no CG liability.

OP states sale was performed in capacity as estate administrator.

liability rests with the estate since that is who sold. The estate has not been distributed to the beneficiaries and they have no beneficial ownership at the point of sale, so CGT remains with the estate

Keep_pedalling

00ec25 wrote: »

OP states sale was performed in capacity as estate administrator.

liability rests with the estate since that is who sold. The estate has not been distributed to the beneficiaries and they have no beneficial ownership at the point of sale, so CGT remains with the estate

Thanks, so double the tax they could have got away between them.

jimmo

Was probate granted at 4 years or later?
If later when was it granted?
I know he's family but did your brother have a legal right to stay in the house?
Were there any specific instructions in your parents' will(s) regarding the house?

jimmo

AnotherJoe wrote: »

The estate pays CGT, not the beneficiaries. So only one allowance.

If the estate pays there is no allowance.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30600

xylophone

It is difficult to understand why the property was not transferred into the name of the beneficiaries so that the brother would have had no CGT to pay (PPR) and the OP could have used his own CGT allowance if not used elsewhere.



Re CGT in administration see https://www.litrg.org.uk/tax-guides/bereavement/how-estate-taxed-during-administration

During the period of administration, CGT applies to gains on any assets disposed of by the estate except for assets transferred to the beneficiaries. Executors or personal representatives might need to dispose of assets to release money to pay any debts, for example. Any gains arising on the disposal of any assets are calculated by reference to the sales proceeds less the value at death.

The full amount of the annual exemption is allowed to executors or personal representatives for the period from the date of death to the following 5 April (no matter how short this period is).

To the extent the administration period continues into the next two tax years, the personal representatives will also receive the full amount of the annual exemption in each of the following two tax years. If the administration period lasts longer than this, there is no further annual exempt amount available.

Greenacrecats

Thank you all for your replies. It is such a grey area. I have been told by a friend accountant that as my mother died intestate, the house automatically became ours. As a result my brother would be exempt as main residence, and I would pay my CGT obligation in my tax return.
However, I have read that it is the estates liability to pay the CGT at 28% of the gain, on the HMRC website and several other CGT info sites. So this was my dilemma and I was hoping that someone with professional knowledge would clarify the correct route. I can see that I’m not the only person to be confused.

I have a feeling the latter is correct 🙄 unfortunately, as it will be a substantial tax bill. Had I known the CGT rules earlier, I would of course transferred the property into our joint names, but alas as a novice administrator I didn’t have this info. The Estate was relatively small at date of death, and there was no IHT liability, so probate was very straight forward so I didn’t seek legal advice,
but 15 years on the house has doubled in price.

I think I will need to take specialised tax advice going forward, to ensure I do things right, and inform my brother accordingly.

Thank you all once again, your support is much appreciated!! 👍🏻👍🏻

jimmo

The key question now is when was the residue of your mother's estate ascertained?
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30700
This can be a tricky problem but, unless there are other complications you haven't mentioned a reasonable guideline is when probate was granted.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30800

So basically, when probate was granted you as administrator of the estate, ceased to be the beneficial owner of the house. Beneficial ownership passed on to you and your brother as beneficiaries. Legal ownership (the name(s) on the title deeds doesn't come into this so don't worry about the house being in your mother's name.
More formally, once the residue had been ascertained you, the administrator, held the property as bare trustee of you and your brother.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30720
Therefore you and your brother will each be assessable on half the capital gain and your brother will qualify for private residence relief.

Greenacrecats

jimmo - Thank you soo much for this information. Now it makes more sense what the Accountant's adviser had told me. It did seem unfair that my brother would have to pay such a large amount, bearing in mind he had lived in the house before and after the death of our parents as his main residence. I am so glad I run it passed you …….. I will now take the matter forward. I was basing the residue value when probate was granted 10 years ago, the house has now doubled in price, hence the gain. I will deduct the cost of Estate Agents and Solicitor cost for the sale of the property and work out my percentage of the gain and pay my obligation of CGT (not being my main residence) when I complete my Income Tax Return later this year. I believe this would be the route to go? thank you once again! Phew! :-)