Reporting Capital Gains on Inherited Property - process and checks 11 January at 6:13PM in Cutting tax 2 replies 111 views

bakkesukuk

Hi

Context

Parents dead, last August 22, first Feb 21. Myself and sister executors. Myself and 3 sisters are beneficaries - 4 in all

We think property was undervalued at probate. One of the sisters (non executor) is a chartered surveyor who gave us a figure. Can't change that now

Last to die had life interest, and Probate valued at £330k. No Inheritance Tax issues - house was only thing in Estate apart from a few K in a bank account, so both IHT allowances available and no concerns of incurring IHT in any review

Sought 4 agents views in November 22 for value to sell - all 4 higher than £330k. Two at £350k, and 2 at £425k. Went with one of the £425k, but with some scepticism. 

Have agreed to sell for £385k to avoid maintenance issues / costs over winter (all beneficiaries live over 30 plus miles away), and perhaps with one eye on Capital Gains allowances going down 23/24.

We have had our preferred estate agent give us a retrospective market value at date of death - £400k

Some initial advice would suggest that as a result of the Probate process used, HMRC probably have no record of the value £330k - eg no IHT was involved.

Advice 

One option will be to use CG report process and declare Value at Acquistion as £400k - based on agents retrospective statement. Thus no CG. What, if any, checks might be made against the Probate figures ? How do you know if / when HMRC have accepted declaration, thus you can distribute the money, or if they are going to challenge ?

Second option is to use the Probate value. But if so, there does not appear to be any way in which you can make a case that it was undervalued. Or is there ? And, am I right in thinking that although there are two executors, there would only be one CG allowance (the Estate) to be used.

Third option would be to use a Deed of Appropriation. Assuming it can be disposed of this FY, and after deducting expenses, then each beneficiary would gain around the same as their CG alowance. As an "insurance policy" this seems attractive if it turns out there is a risk to pursuing Option 1 ? Does anyone know if you can also retain anything in the Estate so to make use of that's allowance ?

Is there anything else to consider ?

Thank you

M

Keep_pedalling

bakkesukuk said:

Hi

Some initial advice would suggest that as a result of the Probate process used, HMRC probably have no record of the value £330k - eg no IHT was involved.

The probate records are public and HMRC have full visibility of them, so please ignore whoever gave you that advice.

Jeremy535897

What it probably meant was that if no inheritance tax is realistically going to be payable on the estate, even if the probate values are understated, HMRC do not waste time agreeing probate values, and reserve the right to dispute them for capital gains tax in the future. If they can do that, theoretically so can you, but you need proper RICS valuations in writing prepared for the purpose of calculating capital gains tax, and I would explain in my tax return that the probate figure was different, but not used because it was an understatement. Furthermore, you should seek professional advice before embarking on this course of action.