IHT405 form - intending to sell within a year question

tfridays16

Am in the middle of filling in the IHT 405 form where you include details of any houses/land/etc belong to the deceased - we have one house to list. One question near the end asks whether you intend to sell any property within 12 months of the date of death (and also do you want to use the sale price as the value at date of death) - how to you answer this question if you just don't know if/when you're going to sell exactly? 
In this case, there will be a small amount of inheritance tax to pay, but this can be paid out of cash from the estate bank accounts, and we have a paid for RICS valuation for the house so hopefully this will avoid any issues rising regarding the valuation. Hoping to therefore have a bit of time to decide what to do about the house - just can't say for certain that it will be sold in 12 months - basically, it is not necessary for it to be sold to pay the inheritance tax due.
Does this question affect how the inheritance tax is calculated? If you're not able to give a definite answer to this question, is is better to just answer 'No'? I suppose the problem then would be that if we did sell the house within 12 months at a higher value, we would really be due to pay more IHT? (if that's the case, you could just notify them though presumably?). But if you do end up selling over 12 months from date of death, then just capital gains tax would be due? (if the selling price does end of being higher than the date of death value, I mean it could well end up being lower!). 

macman

IHT is based on the value of the estate at death, i.e the probate value: whether the estate sells it within 12m or not has no bearing on the IHT calculation.  
There would be no CGT payable unless the property was left directly to you and therefore became a second property, assuming you already own one. If it is simply an asset of the estate that you inherited, then it remains within the estate until it is sold by the estate. If you chose to buy it from the estate, then yes, it would potentially attract a CGT charge if you later dispose of it.

tfridays16

macman said:

IHT is based on the value of the estate at death, i.e the probate value: whether the estate sells it within 12m or not has no bearing on the IHT calculation.  
There would be no CGT payable unless the property was left directly to you and therefore became a second property, assuming you already own one. If it is simply an asset of the estate that you inherited, then it remains within the estate until it is sold by the estate. If you chose to buy it from the estate, then yes, it would potentially attract a CGT charge if you later dispose of it.

No, the property has not been left directly to anyone. When the house is sold, as an asset of the estate, any CGT due would need to be paid from the estate is how I have understood things. 

Scatty_Rock

I know this is an old thread and the OP probably found the answer to his question. For the sake of others, I'll add my two pennies. Here's my understanding of the reply from macman:

1. CGT will only be due if the OP bought the property and later sold it on, as that is when a gain is made.

2. However, if the property was just sold and the proceeds went into the estate (for disbursement), there will be no CGT due.

3. Re point #2, however IHT may apply if the entire estate (not just the property) was valued at over the threshold of £325'000 (correct figure as at 2023).

I'm no expert on inheritance tax nor do I work for HMRC, so I'd be happy to be corrected by anyone who is an actual authority on this. I hope this helps someone some day.

Keep_pedalling

Point 2 is not correct if the value of a house increases between date of death and the eventual sale by the administrators the estate would be subject to CGT, If HMRC thing the initial valuation was below the market value at time of death they may challenge it and apply IHT instead.

Bee175

When filling this section in, I ticked the box for not selling the property within 1 year from date of death, based purely on the logic that I wouldn't be ready to sell before that point in time.

However, I am now at 9 months  from date of death and find myself in a position to sell. 

So what is likely to happen to me if I sell the property earlier than the specified 1 year?
Do I need to tell anyone?

Thanks,
Gary

Keep_pedalling

Nothing, saying you intend to sell within 12 months simply gives you the option of using the sale price for IHT calculation.