CGT Query

JPin

Hi All, 

I'm in the process of selling off a property that was inherited. The money is going into one account, however, one of the shareholders is not going to be eligible to pay CGT as their gain is much less than £12500. However, this person is owed a small amount extra from the sale to cover them for repairs to the house they paid for. This person is now worried that when this is paid along with their share value they'll have to pay the tax. Is this correct? I assume that the solicitor just notifies HMRC and everyone's share and profit s known. 

Jeremy535897

If this person's gain is "much less" than £12,300 (not £12,500), and the extra amount is small, why would it affect anything? It should be irrelevant anyway if it is a reimbursement of money paid out by the individual.

By "shareholder" I assume you mean joint property owner? Has the property been appointed to the joint owners as legatees or are you selling as executor? The tax situation is quite different depending on the answer. If the executors are selling, there is only one CGT exemption, and it is their job to report and pay the tax. If the legatees are selling, it is down to them to report and pay the tax each of them owes, and nothing to do with the solicitor involved in the sale. See:
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

JPin

Jeremy535897 said:

If this person's gain is "much less" than £12,300 (not £12,500), and the extra amount is small, why would it affect anything? It should be irrelevant anyway if it is a reimbursement of money paid out by the individual.

By "shareholder" I assume you mean joint property owner? Has the property been appointed to the joint owners as legatees or are you selling as executor? The tax situation is quite different depending on the answer. If the executors are selling, there is only one CGT exemption, and it is their job to report and pay the tax. If the legatees are selling, it is down to them to report and pay the tax each of them owes, and nothing to do with the solicitor involved in the sale. See:
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

Legatees, this one person is just below the threshold for CGT but with the reimbursement of monies they paid it will look like they have breached their limit when the funds are transferred into their account. How is this monitored from a HMRC perspective? 

Jeremy535897

I assume that what you mean is that a particular legatee will receive just over £12,300, but of course this amount will be much bigger than the actual gain, as their base cost is their share of the property valued at the date of death? If so, currently the rules are that you do not need to report a capital gain under the 60 day rule if there is no capital gains tax to pay. Nor do you need to complete a self assessment tax return if you have no capital gains tax to pay in respect of all capital gains in the year. If you have to complete a tax return for other reasons, you still don't need to declare your capital gains if the total proceeds are £49,200 or less and the total gains are £12,300 or less in the tax year.

HMRC do not monitor such things on a routine basis. If they look at residential house sale data and see a house disposed of by someone who has not reported the sale, and that someone lives at a different address, they might ask why nothing has been declared, but it should be a straightforward matter to deal with.