Statement Of Practice: SP02/04

Hi everyone. Would appreciate some advice on this subject, if possible please. I am the Executor of my late Father’s estate. Sale of property is going through, STC etc. Inheritance Tax not relevant in this case, but CGT will be. Below is an extract from SP02/04.

“Expenses incurred by personal representatives

1. Following consultation with representative bodies, the scale of expenses allowable under Taxation of Chargeable Gains Act (TCGA) 1992 s 38(1)(b), for the costs of establishing title in computing the gains or losses of personal representatives on the sale of assets comprised in a deceased person’s estate, has been revised. The Commissioners for HM Revenue and Customs (HMRC) will accept computations based either on this scale or on the actual allowable expenditure incurred.”

My question is, with regard to the last sentence, is actual allowable expenditure ( funeral ,costs, Executor expenses etc), allowed in addition to the relevant scale in SP02/04? Will make a big difference to the calculation of CGT.

Any advice would be greatly appreciated.

Thank you. 

Comments

  • [Deleted User]
    [Deleted User] Posts: 0
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    edited 8 October 2023 at 1:53PM
    It would be my understanding that the allowable costs are those which are

    reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act.

    I cannot see how funeral costs could possibly fall under that criteria. The fact that inheritance tax does not arise in this case does not mean that expenses, normally allowable against same, can be relievable against another potential liability. 

    SP02/04 gave rise to claiming an agreed percentage to simplify-matters (a simple percentage or amount versus actual expenses) - it didn’t rewrite the rules. 

  • Putting to one side for the moment what expenses may be permissible to mitigate CGT, my question is: are any permissible expenses allowed in addition to SP02/04? Or is one or the other? I’ve read somewhere and will need to find it, that funeral costs, Probate application costs, are permissible. As are expenses incurred by the Executor in the process of finalising the Estate. 
  • Estate Agent and Solicitor fees are also permissible as I understand it. 
  • eskbanker
    eskbanker Posts: 29,940
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    "The Commissioners for HM Revenue and Customs (HMRC) will accept computations based either on this scale or on the actual allowable expenditure incurred.”
    Putting to one side for the moment what expenses may be permissible to mitigate CGT, my question is: are any permissible expenses allowed in addition to SP02/04? Or is one or the other?
    As the sentence you're querying states, it's either the scale or the actual (qualifying) expenditure.
  • Thank you- much appreciated. I was seeking clarification as I was told, on a different forum, that both were permitted!! . But as you rightly say, either makes it clear. 
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