Capital gain on inherited property

poppystar

I received three valuations on the property prior to completing the IHT forms and submitted a figure for the property value based on these. I then had a further valuation that was considerably in excess of the first ones and went with that agent for the sale. While the property didn’t reach the value they put on it, it is set to sell at more than the value put on the IHT forms. I am assuming therefore I shall have to pay CGT on this unless there is a way to revalue the IHT figure?
Yes, I can see now I probably should have got a paid for valuation! I’ve learnt. 
No IHT payable.
Timescale less than year from date of death to sale. 

JGB1955

You can use Form C4 to correct your IHT submission (although there may be a time limit for doing so). Inheritance Tax: corrective account (C4) - GOV.UK (www.gov.uk)

poppystar

JGB1955 said:

You can use Form C4 to correct your IHT submission (although there may be a time limit for doing so). Inheritance Tax: corrective account (C4) - GOV.UK (www.gov.uk)

So, if I’m reading that correctly, this would increase the probate value and therefore that increase would not then be a capital gain? Would this have to be proved in some way to ensure it was genuine and not a ruse to avoid CGT? 

It seems contradictory that the form asks about ‘increase’ in value when the gov website clearly says that any increase in the value of assets between date of death and sale is classed as a capital gain. 

Keep_pedalling

poppystar said:

JGB1955 said:

You can use Form C4 to correct your IHT submission (although there may be a time limit for doing so). Inheritance Tax: corrective account (C4) - GOV.UK (www.gov.uk)

So, if I’m reading that correctly, this would increase the probate value and therefore that increase would not then be a capital gain? Would this have to be proved in some way to ensure it was genuine and not a ruse to avoid CGT? 

It seems contradictory that the form asks about ‘increase’ in value when the gov website clearly says that any increase in the value of assets between date of death and sale is classed as a capital gain. 

Property is treated differently than assets that are easily valued before they are sold. The value of things like gold and stocks and shares at the time of death can be established accurately and any increase in value when sold will be subject to CGT. The true value of a house or a Picasso painting is only going to discovered when sold, so the value given for probate is just an estimate.

poppystar

Keep_pedalling said:

poppystar said:

JGB1955 said:

You can use Form C4 to correct your IHT submission (although there may be a time limit for doing so). Inheritance Tax: corrective account (C4) - GOV.UK (www.gov.uk)

So, if I’m reading that correctly, this would increase the probate value and therefore that increase would not then be a capital gain? Would this have to be proved in some way to ensure it was genuine and not a ruse to avoid CGT? 

It seems contradictory that the form asks about ‘increase’ in value when the gov website clearly says that any increase in the value of assets between date of death and sale is classed as a capital gain. 

Property is treated differently than assets that are easily valued before they are sold. The value of things like gold and stocks and shares at the time of death can be established accurately and any increase in value when sold will be subject to CGT. The true value of a house or a Picasso painting is only going to discovered when sold, so the value given for probate is just an estimate.

Thanks. So I can rule out any need to pay CGT and just fill in the form JGB linked to giving the sale value as achieved? 

This also means the RNRB claim could be increased - would HMRC then do that automatically? I fear if they don’t I may have to go back and complete a transfer of unused NRB from my mother as the increase will push me close/over the limit - will go do a bit of maths. 

Marcon

poppystar said:

Keep_pedalling said:

poppystar said:

JGB1955 said:

You can use Form C4 to correct your IHT submission (although there may be a time limit for doing so). Inheritance Tax: corrective account (C4) - GOV.UK (www.gov.uk)

So, if I’m reading that correctly, this would increase the probate value and therefore that increase would not then be a capital gain? Would this have to be proved in some way to ensure it was genuine and not a ruse to avoid CGT? 

It seems contradictory that the form asks about ‘increase’ in value when the gov website clearly says that any increase in the value of assets between date of death and sale is classed as a capital gain. 

Property is treated differently than assets that are easily valued before they are sold. The value of things like gold and stocks and shares at the time of death can be established accurately and any increase in value when sold will be subject to CGT. The true value of a house or a Picasso painting is only going to discovered when sold, so the value given for probate is just an estimate.

Thanks. So I can rule out any need to pay CGT and just fill in the form JGB linked to giving the sale value as achieved? 

This also means the RNRB claim could be increased - would HMRC then do that automatically? I fear if they don’t I may have to go back and complete a transfer of unused NRB from my mother as the increase will push me close/over the limit - will go do a bit of maths. 

Don't kick yourself for not getting a 'paid for' valuation. It wouldn't necessarily have been any more accurate than taking an average of 3 (which you very sensibly did), given the way property prices was moved around in the last year.

Are you selling as the executor of the estate, or as a beneficiary? If the latter (i.e. you've already inherited the house), then you inherited the house at the probate value and are personally liable for CGT on any increase between that and the sale price.

If you are selling as executor and the sale proceeds go into the estate prior to distribution to the beneficiary(ies), you can indeed legitimately adjust the IHT submission. 

poppystar

Marcon said:

Are you selling as the executor of the estate, or as a beneficiary? If the latter (i.e. you've already inherited the house), then you inherited the house at the probate value and are personally liable for CGT on any increase between that and the sale price.

If you are selling as executor and the sale proceeds go into the estate prior to distribution to the beneficiary(ies), you can indeed legitimately adjust the IHT submission. 

Good question. Not entirely clear. I am both Executor and beneficiary. Half the house was held in IPDI Trust on death of first parent and the land registry documents were changed to include my name (me holding in trust for myself?). No change made to land registry documents after second death. I took this to mean that I became owner on second death and that was the start point for CGT, so the valuation I gave on IHT documents was the start point for that. But that still seems to leave the question of the accuracy of the valuation at that point and if it can be changed to reflect the sale value?

xylophone

 As far as I (no expert) can see, you were named as a proprietor on the Deeds because you were the Trustee of an IPDI Trust created by your mother's  will. You were the sole "remainderman" of the Trust and therefore with your father's death became beneficial as well as legal owner of the Trust asset (your mother's beneficial interest in the property).

Your father's will left you as his executor and sole heir so that you inherit his beneficial share of the property.

On your father's death, the sole asset of the trust (the beneficial share that was your mother's) is revalued  to date of death - the revalued property is taxable for IHT as though wholly owned by your father.

Against that value you may set  any  paternal NRB/RNRB and any transferable maternal NRB/RNRB.

You inherited the  whole property at probate value - if it sold for more than probate value, you will need to consider whether you have a liability for CGT.

poppystar

xylophone said:

 As far as I (no expert) can see, you were named as a proprietor on the Deeds because you were the Trustee of an IPDI Trust created by your mother's  will. You were the sole "remainderman" of the Trust and therefore with your father's death became beneficial as well as legal owner of the Trust asset (your mother's beneficial interest in the property).

Your father's will left you as his executor and sole heir so that you inherit his beneficial share of the property.

On your father's death, the sole asset of the trust (the beneficial share that was your mother's) is revalued  to date of death - the revalued property is taxable for IHT as though wholly owned by your father.

Against that value you may set  any  paternal NRB/RNRB and any transferable maternal NRB/RNRB.

You inherited the  whole property at probate value - if it sold for more than probate value, you will need to consider whether you have a liability for CGT.

Yes, that was what I thought. Although the market did rise last year I think the problem was the initial estimates of value on which I based the probate figure were in hindsight low. I appreciate prices rose but this equates to an increase of 10% in the three months from completing the forms to an offer being received which looking at other sales in the area is a much steeper rise. 

As the value used for probate was also lower that the maximum for RNRB I effectively didn’t use the whole allowance as I otherwise could have. 

Was hoping I might have missed something and could amend the value used. I guess I’ll have to just grin and bear the CGT loss. I’m not averse to paying tax due but feel a bit miffed that the first estate agents valued at so much less. 

xylophone

You could always make an enquiry of HMRC - there would be no harm in trying?

poppystar

So, I attempted in inquire of HMRC and have spent the afternoon being shifted from department to department in terms of exactly what the situation is.

CGT helpline said that they had no idea what should be used as the acquisition value but that I probably owed tax from the very start of the IPDI on my half, not just from second death. They insisted I speak with Trusts helpline.
Trusts helpline said it was a Inheritance Tax helpline issue and couldn’t comment on what related to Capital Gains or talk about Probate values.
Inheritance Tax helpline said it was Capital Gains Tax helpline issue (I sort of agreed with that!) and cut me off while attempting to transfer me back.

At all points no understanding of IPDIs was exhibited. So the only real information I have is from this forum not from any part of HMRC!.
That understanding is that I am only liable for CGT after the second death and not from the first. That the value I used at Probate should be the value used for “acquisition value” on the CGT form. That the amount of CGT payable now is on the increase from second death to sale less EA and solicitors fees.
I’m hoping that going forward on this basis (and I need to act quickly to meet the 30 day deadline) will be correct and there will be nothing to come back to bite me. I certainly see no possibility of getting any clarification from any HMRC helpline🙁