Probate house valuation error means unnecessary CGT?

Eek_Bears

Interesting to note that for the new simplified probate form they brought in at the beginning of 2022 they don’t ask for the property value separately so I don’t think this scenario could occur now

BooJewels

If I may ask a supplementary question - as I've been thinking this through for my own CGT situation and it's causing me real consternation - I just can't get my head around it - the more I think about it, the more confused I'm getting. I'm probably going to have to ring HMRC again, but each time I do, I get more muddled when they contradict each other.

I got the form they've sent me in the post yesterday and it's definitely not set out to be filled in for an estate - it's very much a personal form.  I had an epiphany whilst looking at it - if we divide up the 'gain' on the property between beneficiaries in the allocated proportions according to the will - each of us have gained below our personal thresholds - gains of £11k for one, £9k for the other.

So how are we supposed to do it to be correct?  Reckon up from the estate, or individually?  One way would be no CGT to pay, the other would be about £750 to pay.

Savvy_Sue

I don't think HMRC care how you do it, so if you have to pay tax if you sell it from within the estate, but can avoid this if the beneficiaries sell, then let the beneficiaries sell - speak to your conveyancing solicitor about this, it should be straightforward to arrange. 

BUT one word of caution, if either of the beneficiaries do not and have not owned their own property, this will kybosh their entitlement to any First Time Buyer benefits - which may be worth more than £750 ... 

BooJewels

Ah thanks @Savvy_Sue - that makes sense. The property is already sold, so that ship has sailed.  And we're both rather too long in the tooth to be first time buyers -we've had our own homes long enough to have actually paid off our mortgages.

Who could I turn to to ask about CGT - apart from HMRC - is it an accountant, IFA?  It felt like it should be really straightforward for us - but it feels like it's turning into a fiasco.   I'm certainly going to be writing to my MP about digital exclusion - that's perhaps the core of the problem here.

Savvy_Sue

I think an accountant dealing with personal tax would probably be best able to help, and I don't think it should be too tricky or time-consuming for them either. Possibly worth saying that you do get STEP qualified accountants as well as solicitors if you have other queries over the taxation of the estate. 

BooJewels

Thanks @Savvy_Sue - it really should be straightforward it would seem, but the form they've sent me - twice now - just doesn't allow for me to answer the questions from the 'estate' - the first question is 'are you filling this in for yourself, someone else or a trust'. Then there are questions like "what date was the property put in your name" and "what percentage of the property did you inherit" - which was what set me wondering about doing it as individuals.

If we had sold it as individuals, how would the paperwork differ from the solicitor - as everything I have from them is in both our names - largely as "Mrs X and Miss Y, PRs of Mr Y deceased" and they paid us the proceeds directly in the appropriate proportions and the completion statement says this.   So that looks more like a sale by individuals than as an estate to me?

ETA:  I just found an article that described the distinction - if you sell as PRs, that's an estate sale - you'd have to put the property in your own names first, to sell it as individuals.   In our case, that additional step and resulting costs might well have been more than the saved CGT.

I'll just leave this here in case it helps anyone else.

Hal17

Hi BooJewels, I am going through this process at the moment. I am the executor on my MIL estate and there are 5 beneficiaries, all brothers and sisters. We have found ourselves in this CGT situation due to an increased offer from the buyer of the house.

I arranged for a Memorandum of Appropriation which they all signed allowing the property to be held in a Bare Trust so I can use the CGT allowances from each of the beneficiaries. This option needs to be arranged before you exchange contracts.

When I spoke with with the CGT helpline regarding the PPDCGT form, I was told to complete the form in conjunction with a spreadsheet outline the breakdown between the 5 beneficiaries and include as much supporting evidence as possible. It will be interesting to see how it all pans out when I come to complete the sale and send them the documentation.

I appreciate this is too late for your situation but as you indicated it might be useful for someone else.

BooJewels

Many thanks @Hal17 - as you realise, we've already sold, so any options like that are closed to us now.  The CGT isn't much to pay, so for us, any legal costs or whatever to make alternative arrangements might not have been worth it - we're just happy to have got as much for the property as we have, it's a chunk more than we were expecting, earlier in the process (it's dragged on a while, for various reasons).  So it seems churlish to complain about the CGT in the circumstances - but I want to get the process right too.  There's only my sister and I as executrices and beneficiaries, so it's seemingly pretty simple.

I have just rung HMRC again (I always ring Government departments first thing) - there was obviously a problem with the phone system the previous times I've rung and I said this to the last person I spoke to - it didn't seem to recognise 'Capital Gains Tax' as an option and consequently, after being on hold for around 40 minutes or more, I got through to a general PAYE adviser who knew nothing much about CGT.  This morning it recognised the phrase and put me through to a CGT adviser in about 15 seconds, who was lovely and very helpful.  He went through the PPDCGT form with me and told me what to write in each box.  I'd pre-filled a draft copy in already before ringing and had got most of it right and he explained the ones I'd put ? next to.

He also directed me to these help notes:  https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2021#valuation-of-assets-of-the-deceased-at-the-date-of-death

Hal17

Hello BooJewels, I am really pleased that you have now sorted the paperwork. I have to say that the CGT Advisors that I have spoken to have also been very helpful. Thank you for including the link to the help notes, that is much appreciated.