Capital Gains Tax and Inheritance tax

lilibbh

I am executor for my brothers will. His house was valued at £310,000 and the rest of his estate still came to less than the inheritance threshold of £325,000.
On marketing the property there was a lot of interest and I received offers from £300,000 to £400,000. In all about 9 offers.
I accepted an offer of £335,000. I didn't sent sent in IHT 400 because the estate was below the threshold and I have now been granted probate. How do I handle this situation now that the estate is above the threshold? Be grateful for any advice. 

Keep_pedalling

The threshold is based on the value of the estate at the date of death not however long after that assets are sold. You definitely have a CGT liability there which you need to pay. The gain is £25k - £6k (annual allowance) minus selling costs, and that will be subject to 28% CGT. 

It is possible that HMRC may challenge the original valuation if they think it was undervalued but I think that is unlikely.

CGT needs to be paid within 60 days of the sale.

https://assets.publishing.service.gov.uk/media/642d4806fbe620000c17dced/PPDCGT_Estates.pdf

lilibbh

Many thanks for that. I had to put a new roof on the property prior to putting on the market which may account for the increase from the original valuation, can I claim any expenses like that from the CGT?

km1500

for you to be able to deduct it has to be a capital expenditure rather than a repair

if you put the roof back to its original condition when the house was built then that would only be a repair and not deductible

if however you significantly improved the roof then that would be a capital expenditure and could be deducted 

lilibbh

Thanks for your response, very much appreciated.

lilibbh

Regarding the new roof: I replaced with a new roof and upgraded the insulation specification to current standards. Would this be enough to use the cost as a capital expense or is this still classed as a repair? 
 
 Do I now have to full in the IHT400 or do I deal with the extra income via the CGT?

km1500

in the end it is down to HMRC but if you improved the insulation and upgrafed using modern materials etc then you should be able to claim that it wasn't improvement and be able to deduct as a capital expense

the best thing to do is just claim it and if they query it be up front with them tell them what you did and the worst that can happen is that they say it is not allowable

Keep_pedalling

lilibbh said:

Regarding the new roof: I replaced with a new roof and upgraded the insulation specification to current standards. Would this be enough to use the cost as a capital expense or is this still classed as a repair? 

It’s one of those tricky ones to answer, maybe a you might get a better answer on the housing board.
 
 Do I now have to full in the IHT400 or do I deal with the extra income via the CGT?

No, you will only need to do an IHT if HMRC challenge the original valuation.