IHT 405 - selling with 12 months

Dilbert_Investor

I thought I had finished but one final question.  I know this has been covered previously but I’m still not entirely clear.

It’s the question about whether you are planning to sell within 12 months.

We will probably sell once probate granted, but what are the implication in respect of IHT or CGT?

We have a valuation (but it might sell for more) and IHT is due and will be paid.

Thanks.

CalvinHobs

I am in a similar situation, though in my case I jointly owned the property with my partner. Also, by the time I come to sell, more than 12 months will have passed since her date of death.

As I understand it, the 12 months referred to in IHT405 Question 12 is not about CGT. I believe the point of the question is how you wish IHT to be calculated, i.e. either on the valuation at the time of death - or on the selling price (if sold within 12 months).

Whether the property sells within 12 months of the date of death - or later than 12 months - and the inheritor(s) make a profit above the valuation figure, then CGT will be payable. Relevant costs can be set against CGT and there are also CGT allowances - so if there is a profit, it is not simply a matter of the difference between the valuation and the sale price.

You may be concerned that if the property sells for more than the valuation, then HMRC will demand IHT on the difference. Presumably you have a professional valuation and you are including a copy when you send the forms to HMRC? Assuming the valuation was realistic at the time it was made then, if the property sells for slightly more than the valuation, I don't see HMRC questioning it. On the other hand, say a property valued at £500K later sells for £1M, I would expect HMRC to investigate.

TL;DR - best to include a realistic valuation of a property when submitting IHT forms to HMRC.

More here:
Selling an Inherited Property and Capital Gains Tax

Btw, I am not a lawyer nor an accountant - the above is based on my understanding from recent experience.

Dilbert_Investor

Thanks.  I’m sorry for your loss.

We’re still debating what to do, so the helpline has suggested we simply put ‘to be determined’, and use the valuation of IHT payment.

We have a couple of valuations to send which are broadly similar.  I expect any increase will be down to the market moving over the year - so maybe some CGT if/when we sell.

RAS

If you have more than one estimate of value, use the highest. CGT is paid on the gain since death, not probate.