IHT or CGT? Help!

What_time_is_it

We sold an inherited property recently. The sale price was £150k more than the valuation we had previously used in the IHT calculations. We have paid off the IHT that was due. BUT, what happens with this additional £150k?

Do we need to pay additional IHT on it? At 40%?
OR do we need to pay CGT on it? At 28%?

There were Estate Agents fees and Solicitors fees of around £15k for selling the property. Do we take these into account?

The property was sold by the 2 executors (my partner and her brother).

BoGoF

Whwn was the date of death of the individual. If not much time has passed between death and sale was the IHT valuation accurate. Seems a huge difference.

What_time_is_it

BoGoF said:

Whwn was the date of death of the individual. If not much time has passed between death and sale was the IHT valuation accurate. Seems a huge difference.

Death was last April, so 11 months. The difference represents around +13% on the original valuation.
We set a high asking price for the house, had a number of offers of pretty much bang on the original valuation, and then 2 offers similar to each other at a higher value which we accepted.

Keep_pedalling

That is a big gain in a short period where prices are not generally increasing. HMRC are likely to see that as an undervaluation so you are potentially looking at IHT rather than CGT. How did you value the property? 

Selling cost can be off set against CGT but not IHT. 

What_time_is_it

Thanks. The property was valued by an Estate Agent at the time we put it on the market.

Is there a process for deciding whether this should be IHT or CGT? Do we need a solicitor?

BoGoF

I wouldn't have relied on one(?) Estate Agent figure for the IHT Valuation and ideally a RICS certified surveyor should have been appointed to avoid this scenario.

Personally I would contact the IHT office and say the property sold for £150k more than valued at date of death and seek their advice on how the surplus should be treated

What_time_is_it

Thanks. Too late for us to get additional valuations. We were learning as we went and could have done things differently of course. I find it almost impossible to get straight answers about IHT vs CGT. It always seems to be vague and it's really frustrating!

We've spoken to the IHT office a couple of times and had different answers! They point us in the direction of various forms to complete, but none of it makes much sense and it always seems to be in the direction of paying the difference as IHT. But when we mention the possibility of it being CGT they kind of shrug and say, "sometimes", "maybe", "in some circumstances", etc. 

[Deleted User]

What_time_is_it said:

Thanks. The property was valued by an Estate Agent at the time we put it on the market.

Is there a process for deciding whether this should be IHT or CGT? Do we need a solicitor?

How was it valued at probate? Was the same estate agent used? 

What_time_is_it

[Deleted User] said:

What_time_is_it said:

Thanks. The property was valued by an Estate Agent at the time we put it on the market.

Is there a process for deciding whether this should be IHT or CGT? Do we need a solicitor?

How was it valued at probate? Was the same estate agent used? 

Yes. We have had one Estate Agent. The same one valued it as completed the sale.

BoGoF

What_time_is_it said:

[Deleted User] said:

What_time_is_it said:

Thanks. The property was valued by an Estate Agent at the time we put it on the market.

Is there a process for deciding whether this should be IHT or CGT? Do we need a solicitor?

How was it valued at probate? Was the same estate agent used? 

Yes. We have had one Estate Agent. The same one valued it as completed the sale.

So what was the actual sale valuation they gave? Did you query why such a big jump since April last year?

What_time_is_it

BoGoF said:

What_time_is_it said:

[Deleted User] said:

What_time_is_it said:

Thanks. The property was valued by an Estate Agent at the time we put it on the market.

Is there a process for deciding whether this should be IHT or CGT? Do we need a solicitor?

How was it valued at probate? Was the same estate agent used? 

Yes. We have had one Estate Agent. The same one valued it as completed the sale.

So what was the actual sale valuation they gave? Did you query why such a big jump since April last year?

They valued the property at £1.15m. They recommended marketing the property at £1.5m. Most of the offers were around £1.15m. We then had 2 offers come back at £1.3m.
We didn't query any of this. The property requires extensive renovation from top to bottom but it is in a very desirable area and is very large. When fully renovated it could be worth double this amount. 

Is a 13% increase between valuation and sale really such a massive difference? I think that we maximised the sale price, and I think that the valuation was pretty accurate given the condition of the property.