CGT and hometrack valuation

bigbeary

 I am potentially trying to calculate potential capital gains tax for a property which I inherited from my parents in 2 50% portions about 6 years apart.I and am planning to sell in the next month and am trying to get on top of things early

At the time because there was absolutely no way that the estate would go anywhere near inheritance tax adjusted so I used guesstimates from the value of the property for the lawyers for confirmation (Scotland)

At the time I said I thought the house was worth about 100k and when my mother passed away  later I said I thought it was worth about 135k

I thought it was a good idea to do a couple of hometrack valuations to get a more official value. Portion1 was106,000 which seemed reasonable -but for the second half the estimate is about 170,000.  The area has gentrified over the last few years and values have rocketed.

However There is no way it would have sold for £170,000 at that time. With the Scottish offers over the 135 would probably end up around 150.

It will probably sell for about 200,000 today.  I have spent around 20,000 on necessary enhancements

I don't want to pay more tax than I need to obviously but neither do I want to be dishonest. if I put in my guesstimate that's obviously wrong but if I put in the very high value, It’s not right either, and doesn’t match what I gave the lawyer.

I was thinking of putting round about the lower value of range, as that is more accurate but I wonder if I am just being stupid as these valuations are used regularly, 

Out of interest I got one for now and its pretty spot on.

Bookworm105

Scotland or not, HMRC will refer your declared values to its Valuations Office Agency (VOA) and they will come up with valuations at the two dates.
If those give a radically different tax amount payable to your version then you have the right to challenge HMRC's estimate

to add credence to your challenge you would be well advised to seek a professional valuation from a RICS surveyor who additionally holds the valuation qualification and instruct them to base their fees for doing so on the chance they may (or may not) need to defend their figure in front of a tax tribunal 
Going in front of a tax tribunal with DIY "guesstimates" is a recipe for disaster.

bigbeary

thanks that's really interesting, I am assuming there is no way for me to find out the VOA's value as that would make things easier?

Nomunnofun1

bigbeary said:

thanks that's really interesting, I am assuming there is no way for me to find out the VOA's value as that would make things easier?

No - it doesn’t work like that. It is exactly as described by bookworm105. 

You submit your computations of chargeable gain. HMRC appoint its valuer and one hopes they match as closely as possible. 

bigbeary

Well from what I have seen through looking at old prices on rightmove I have undervalued them - so even if i put the lower estimates I would expect them to match well.

Does my cgt submission not need to match what i said at probate then? It can't be that unusal for people to mess up at a time of grief

bigbeary

I'm assuming that they won't contact me if the values are much less than they should be? 

mybestattempt

bigbeary said:

I'm assuming that they won't contact me if the values are much less than they should be? 

The VOA should contact you to advise you of their valuations and invite your agreement (or otherwise) before referring back to the HMRC officer who is dealing with the capital gains tax.

Keep_pedalling

When your first parent died, did their will give the surviving spouse a life interest in their share? If they did then you would calculate and CGT from the valuation on the second parents death.

bigbeary

I am not sure, I will check the will, from memory they were 'tenants in common' so when I inherited their half I  assumed cgt payable from that date.   Is the life interest common with 'tenants in common'.  I must say I am relieved I started looking into this before the house went up for sale

Keep_pedalling

bigbeary said:

I am not sure, I will check the will, from memory they were 'tenants in common' so when I inherited their half I  assumed cgt payable from that date.   Is the life interest common with 'tenants in common'.  I must say I am relieved I started looking into this before the house went up for sale

It would be the normal way to do it (at least it is in England) as it provides security for the surviving spouce against the beneficiary becoming bankrupt, divorcing or dying. If also avoids a CGT liability for the beneficiary and avoids them losing their first time buyer status and additional tax when buying a home for the first time. 

Jeremy535897

A value for probate that HMRC do not look at is binding on neither you nor HMRC, but in the unlikely event that HMRC ask why the values tie up, you simply tell the truth, that the values didn't matter for probate.
The term "tenants in common" merely describes the type of joint ownership, and to enable a life interest to be granted on the first death, would have been necessary. So do check the will.
I have submitted several computations with estimated values, and at these levels I have never had any question from HMRC, but you must always work on the basis that yours will be the value they look at. Keep all your evidence, calculations and explanations to hand. You will have to pay interest if the tax paid is too little.
You will also need to check that your £20,000 enhancements count as improvements. See:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15180
You will also need to complete the online return and pay the tax within 60 days of completion:
https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020