Property valuations for IHT vary significantly - help

bab_bob

Hi all,

any assistance for my problem would be greatly appreciated. 

My mother in law sadly passed away recently. My wife being her direct daughter as we understand gives an IHT threshold of £500,000 before any tax would be due. The estate is pretty straight forward in that the significant part is the property. In addition there was approximately £10,000 in cash. 

We have had 2 estate agent valuations which have varied wildly. One for £475,000 and the other for £650,000 . The first I have to say was I thought a little under its likely value. The second perhaps a little over. As far as paying IHT, if the former were used that to me suggests no IHT would be payable up front. Though I accept when the property were sold some form of tax would be payable if the sale price achieved was in excess of the £475000 figure. Would this be IHT or capital gains tax. 

Any help at all on this topic would be very much appreciated. I'm not trying to avoid paying tax at all but clearly would rather pay tax after a sale than before if that were both possible and legal. Many thanks in advance for any help.

Marcon

bab_bob said:

Hi all,

any assistance for my problem would be greatly appreciated. 

My mother in law sadly passed away recently. My wife being her direct daughter as we understand gives an IHT threshold of £500,000 before any tax would be due. The estate is pretty straight forward in that the significant part is the property. In addition there was approximately £10,000 in cash. 

We have had 2 estate agent valuations which have varied wildly. One for £475,000 and the other for £650,000 . The first I have to say was I thought a little under its likely value. The second perhaps a little over. As far as paying IHT, if the former were used that to me suggests no IHT would be payable up front. Though I accept when the property were sold some form of tax would be payable if the sale price achieved was in excess of the £475000 figure. Would this be IHT or capital gains tax. 

Any help at all on this topic would be very much appreciated. I'm not trying to avoid paying tax at all but clearly would rather pay tax after a sale than before if that were both possible and legal. Many thanks in advance for any help.

Those valuations are a very long way apart. Have you tried getting a third one to see what that says?

Also - could there be any other IHT reliefs available - e.g. were your MIL and FIL married at the time your FIL died and did he use up his nil rate bands? If not, that could be added to the total now, which could bring it up to around the million mark.

CGT would be payable if the house achieves a sale price above that reported for IHT purposes.

bab_bob

They were married but he died in 1978 - a long time ago. We just figured it was so long ago as to be not relevant? 

p00hsticks

In those circumstances, I'd be paying to get an independent RICS valuation which HMRC should accept for the purposes of probate.

Keep_pedalling

bab_bob said:

They were married but he died in 1978 - a long time ago. We just figured it was so long ago as to be not relevant? 

It is very relevant, if he left everything to his wife then his NRB is fully transferable, and you will be able to transfer his RNRB as well, so it is unlikely that there will be any IHT to pay.

The danger of putting a low valuation in is that you will be hit by capital gains tax if it is sold for a lot more.

bab_bob

But I was under the impression capital gains tax is lower than IHT?

Keep_pedalling

bab_bob said:

But I was under the impression capital gains tax is lower than IHT?

It is, but as it seems in this case their is no IHT to pay even on the higher amount. If you submit a valuation of say £500k on the IHT forms then sell for £600k the estate will have a £100k CG liability. 

bab_bob

This is all very helpful information. On the back of the possibility my FIL s NRB may be relevant I think an initial discussion with the family solicitors would be a very sensible move. ?

Thrugelmir

Obtain a RICS valuation for probate purposes. Will satisfy the HMRC.  As you can supply a copy of the report. The fees incurred are chargeable against the Estate.  If the property ultimately sells for far more. Then a CGT liability will arise that's payable by the estate. 

Marcon

bab_bob said:

This is all very helpful information. On the back of the possibility my FIL s NRB may be relevant I think an initial discussion with the family solicitors would be a very sensible move. ?

Yes. A very good idea indeed.

Owain_Moneysaver

bab_bob said:

This is all very helpful information. On the back of the possibility my FIL s NRB may be relevant I think an initial discussion with the family solicitors would be a very sensible move. ?

As a first step, if your FIL's Will went to probate you can probably order a copy online. 
If everything was left to your MIL then you can almost certainly claim FIL's unused Nil Rate Band. The solicitors should have a copy in their file but it may save time if you have already obtained one.