Capital gains tax flagged by conveyancing solicitors on inheritance property

JojoP23

My father passed in November 2019 and left his estate including house to my brother and I equally

We have shared a house since 1991 and are joint owners

It was a family understanding that when both my parents passed it would mean we could each own our own homes

We are both single and have no dependants

I obtained probate online and no inheritance tax was payable.
The houses are worth a similar amount, pros and cons for both so I've asked our solicitor to complete the paperwork to assent my father's estate and transfer the deeds so that we are both of us own our own property outright. So swapping over our shares by transferring the title deeds, no money is changing hands.
Solicitor has flagged up CGT but does not give tax advice. Is this likely to cost us as these will be our primary residence? Any thoughts or insights would be appreciated. Thank you

Robert_McGeddon

Your conveyancing solicitor is flagging CGT as a possible issue to protect his/her rear end, not saying CGT is actually due.

You'd have to give more details (values, periods of ownership) for someone here to give thoughts on possible CGT liability.

Keep_pedalling

Has the value of the inherited property increased significantly since it was valued for probate? CGT is only for the person staying put if it’s value has increased by more than £24,600 and they have no other taxable gains that eat up their £12,300 annual allowance. 

Although no money is changing hands they are effectively selling their share of the inherited property. No CGT issues on the other house as it current the main residence for both of you.

sheramber

Is the house still in your fathers nam or has it been transferred to both of you?

If still part of his estate then the estate will be liable for CGT on any increase in value since  probate.

JojoP23

No it's still to be 'assented?' brother has been living there since Jan 2020 though and paying the bills etc. Good point about date of probate and valuations, both properties would have increased in value by the same percentage. We are both prone to procrastination unfortunately and when COVID kicked in it didn't help (as much as we are on the same page we are inclined to bicker, hence the decision to pay a conveyancer) we expected to visit the same office we used to transfer the deeds from my sole name to joint 7 years ago, reverse that and sort out the paperwork to 'separate ' our finances...bit naive it would seem.
My father's house was valued at £420k and like the home we shared is in poor state of repair...any CGT bill will be paid out of the estate itself, there is cash in the joint account we used for bills. We are not looking to avoid paying tax but just want to tie things up accurately

JojoP23

Frustratingly I was given the task of phoning to make an appointment with the solicitor (bums on seats pens poised) , and instead was asked to email the person who would likely do the conveyancing some more information, which I did. Do solicitors charge for reading and sending emails, like the do letters?? I've told the person that we just wish to expedite things asap and despite not expecting to pay CGT we would pay the bill and sort it out ourselves if it was due. No reply has been received..so in limbo once again. Everything seems so complicated  when it was meant to be so simple

NorthYorkie

In your first post you referred to the 'solicitor' and now you talk of a 'conveyancer' which is not the same thing. 

If I understand you correctly, there are two transactions here:
1. one of you is disposing of his half-share in the house you currently jointly own and occupy. This will not involve any Capital Gains Tax due to the exemption for 'principal private residences'.

2. The other one is disposing of his half share in the house inherited from your father. If the current value of that half share is greater than its value at the date of your father's death, then there would be a capital gain but, as mentioned above, there is an annual exemption which may cover that gain in whole of in part.

You really need to go and pay for some professional advice from a tax specialist - there's an old saying "Free advice is worth as much as you pay for it"

JojoP23

Advice isn't really what is required, it's a transaction that needs to be completed. Any tax will be paid fair and square. When I say solicitor it's the company we previously used to do conveyancing and who drew up my father's will legally. Just seems to me that employing a tax specialist just adds another complication! neither of us has ever needed to do a tax return or use an accountant before. Happy to pay the conveyancer but they've not been very upfront about procedures or costs involved, were just hanging unsure as to where we are in the process or what needs to be done to progress

NorthYorkie

I was under the impression from your first post that you were looking for advice on the tax issue. You said "Solicitor has flagged up CGT but does not give tax advice. Is this likely to cost us as these will be our primary residence? Any thoughts or insights would be appreciated. Thank you".
If you're not looking for advice, I am not sure what you are expecting from this post.

JojoP23

Basic advice on the process I guess..sorry North Yorkie we are both very green when it comes to legal matters I suspect as pp said above the conveyancer who works for a company of solicitors is covering their back. I feel perplexed that another layer of burocracy is being thrown in the mix I guess. Living in the south east the numbers are fairly high but we don't intend cashing in, I just don't want to find myself having to negotiate with an eccentric sibling in the future. Financial autonomy is the aim, but corresponding by email with the conveyancer wasn't what I expected...now everything still seems to be up in the air. Perhaps I should phone HMRC and run it past them.
Thank you for your time and apologise if my query has frustrated you

NorthYorkie

I am still unsure what you are asking. You want advice 'on the process' is this the process of conveying the respective half shares between the two of you? Or do you want advice on the process of reporting these transactions to the Revenue?

By your reference to 'eccentric sibling', you also appear to be concerned to avoid any future family friction. It is therefore essential that both parties are fully satisfied with the values being placed on the respective half-shares. Therefore I believe you need to instruct an independent professional valuer to provide valuations and if the values of the shares differ, then a balancing payment will need to be made. Yes I know this will cost, but it would provide a defence in case of any later friction. From the sort of figures you have suggested, it is worth getting proper professional advice.

Incidentally you say that seven years ago you transferred a half-share in your house to your brother. What did he pay for this?