Probate, Capital Gains Tax and Deed of Appropriation

ljayljay

I posted a related query a few weeks ago on the Probate board here,

https://forums.moneysavingexpert.com/discussion/6365057/house-sale-potential-capital-gains-tax#latest

and just have a few more questions, especially in respect of CGT.

I have recently received an offer for my late mother’s house for £25,000 above the probate valuation. After agent & solicitor fees this will be reduced to around £20,000. NB estate was well below the IHT thresholds. Myself & two siblings are the executors & beneficiaries. From my earlier post I have been made aware that unless the property is registered in our names, prior to sale, there will be only one CGT allowance that can be used & any excess gains charged at 28%.

I have since found out that if a ‘Deed of Appropriation’ is set up prior to completion of the sale we would each be able to use our individual CGT allowances thus negating payment of any CGT.

Does this seem like a sensible approach & what, if any, information will HMRC require? I presume they will still need to be notified on completion since the sale will be in the region of £375K.

Ideally, I would like to register the house in our names prior to sale as this would automatically allow us to have our own CGT allowances. However, I am thinking this could take several months & would prevent an earlier sale that I wanted to get completed during this year.

Jeremy535897

It is for the executors to decide whether to sell the house themselves, or appropriate the house to legatees. It may depend on the terms of the will, although those can be varied.

The legatees would then sell the house between them, which requires agreement between them. Also, there may be a stamp duty disadvantage if a legatee buys another property before the inherited property is sold, and any first time buyer benefits would be lost.

If the estate was well below the nil rate bands, HMRC will not have agreed any probate values, and are not bound to accept the value placed on the property by the executors. How did you value it?

There will be an obligation to report and pay tax due within 60 days of completion:
https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020

Keep_pedalling

Bearing in mind that the tax saving is going to be relatively small, I would question whether it is worth while. Any delay this adds to exchange of contracts could put you buyer off and the longer it takes to sell the more other expenses build up such as CT and insurance..

ljayljay

Jeremy535897 said:

If the estate was well below the nil rate bands, HMRC will not have agreed any probate values, and are not bound to accept the value placed on the property by the executors. How did you value it?

There will be an obligation to report and pay tax due within 60 days of completion:
https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020

Thanks,

I have followed the CGT reporting process in the link given & it would appear that if my gain is less than £12,300 nothing gets reported to HMRC. Is this a recent change? I am sure I saw something previously that mentioned any sale that exceeded X4 CGT had to be reported. If this is no longer the case how do HMRC check accuracy of calculations? Is there some sort of check after the sale is recorded with Land Registry or something similar?

Interesting point you make about probate value as I just used an estate agent knowing that IHT wouldn’t apply. However, I actually thought the valuation was at the low end, this was back in March 22, although obviously house pricing is somewhat unpredictable.

Keep_pedalling said:

Bearing in mind that the tax saving is going to be relatively small, I would question whether it is worth while. Any delay this adds to exchange of contracts could put you buyer off and the longer it takes to sell the more other expenses build up such as CT and insurance..

Yes I think you are probably right I was just unclear if it was a quick process for the solicitor to basically enact both registrations sequentially but somewhat doubt it. So a tax saving of about £2,000 would be worth it for a bit of extra paperwork but agree not worth it if causes delays etc.That is why I was interested in the 'Deed of Appropriation' route but was then unclear if checked would it definitely be accepted by HMRC. I assume so as the executors are also the legatees but does seem a bit weird to have to do this extra document when from the will myself & siblings are the only beneficiaries.

Jeremy535897

The £49,200 rule applies to tax returns, not the 60 day reporting rule. If you owe tax, you have to do both. If you owe no tax, and don't complete a self assessment tax return for other reasons, the £49,200 rule doesn't apply so you don't have to do either. If you normally do a self assessment tax return, you do have to report the gain on that if your share of the proceeds (of all gains) exceed £49,200, even if no tax is due.

I would have asked the estate agent to give the highest value he was comfortable defending, in these circumstances. If there is nothing odd in the will that would prevent an appropriation of the house to legatees, HMRC won't argue with it. Have a look at:
https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2021

ljayljay

Jeremy535897 said:

The £49,200 rule applies to tax returns, not the 60 day reporting rule. If you owe tax, you have to do both. If you owe no tax, and don't complete a self assessment tax return for other reasons, the £49,200 rule doesn't apply so you don't have to do either. If you normally do a self assessment tax return, you do have to report the gain on that if your share of the proceeds (of all gains) exceed £49,200, even if no tax is due.

OK that's where I must have seen it. I do not normally do a self assessment but will for the 21/22 TY as I am liable for some CGT following sale of land. I realise deadline is end of year so will get that sorted.

Jeremy535897 said:

I would have asked the estate agent to give the highest value he was comfortable defending, in these circumstances. If there is nothing odd in the will that would prevent an appropriation of the house to legatees, HMRC won't argue with it. Have a look at:
https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2021

I did get several agents, who in my opinion were valuing rather low with £350K the highest. This was only March & believe I was proved correct as an offer for £375K came within a few days.

I will have a good read of the link provided.

I assume, unless the above guidance states otherwise, that a simple signed declaration between myself & siblings will not suffice & we will need a solicitor to draw up a formal deed. 

Jeremy535897

There is a newer version of it:
https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2022

I don't think it is hard to transfer a property to legatees, but if the will says it should be sold, that may be more difficult. I am not a lawyer so it is outside my experience. See:
https://www.co-oplegalservices.co.uk/probate-solicitors/probate-transferring-property-death/