Curious question about CGT on land

FlorayG

When this becomes an issue I will be dead, so I'm just curious 
In my will I have left my grazing land to my cousin on the basis that she may want to sell immediately or keep it while it increases in value as land always does (There is zero chance of getting planning permission on it ATM, but who knows in 20 - 30 years time?)
I'm assuming it has to be valued at my death and then if she sells it later she pays CGT on the extra money she gets for it? 
The problem there (for her) is that valuations on land hereabouts are always WAY less then the land actually realises on selling (recently one field advertised at OIRO £64k went for over £90k). So say it's valued at £50k on my death and 5 years later valued at £60k but sells for £90k does she have to pay CGT on the valuation or the selling price? Seems unfair to be on the selling price when land is always under-valued

silvercar

It would be the actual selling price. One solution may be to market it on your death or soon after and use any written offers as the valuation.

Bookworm225

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

Technically the probate value is not "ascertained" (ie accepted) by HMRC until:
either an inheritance tax return is submitted obviously including valuation of the asset,
or, where no IHT paid, the CGT return return is subsequently submitted showing the CGT numbers 

CG16251 - Assets: checking valuations: value ascertained for probate - HMRC internal manual - GOV.UK


It is precisely why there is always a game played when valuing assets for probate purposes because you want a high value to lower CGT but not high enough that it triggers IHT. Life (death) planning was much simpler when CGT, IHT, and income tax rates were aligned with each other

FlorayG

silvercar said:

One solution may be to market it on your death or soon after and use any written offers as the valuation.

I hadn't thought of that - I'll include it in my letter to her, thanks

FlorayG

Bookworm225 said:

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

I don't understand this. There won't be any inheritance tax

Bookworm225

FlorayG said:

Bookworm225 said:

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

I don't understand this. There won't be any inheritance tax

please re-read what I wrote: either ./.. or

If no IHT has been paid then the acquisition cost has not been agreed by HMRC at time of death. Only when a CGT return is done will HMRC consider if the value used as acquisition cost is acceptable to them. They will compare your claim against the advice of the Valuation Office Agency and may, or may not, accept the figure you offer.

The credibility of your figure is in doubt until it is tested at that time, written offer on a sale that never happened is no more credible than any other valuation done at the time of death (but also a rather good waste of innocent people's time in thinking they are buying the property).

Jeremy535897

I would note that if the grazing land is let for agricultural purposes, and you have owned it for seven years, agricultural property relief for inheritance tax would apply. It's not relevant if OP's estate is within nil rate bands, but it might be to the sister one day.

FlorayG

Bookworm225 said:

FlorayG said:

Bookworm225 said:

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

I don't understand this. There won't be any inheritance tax

If no IHT has been paid then the acquisition cost has not been agreed by HMRC at time of death. Only when a CGT return is done will HMRC consider if the value used as acquisition cost is acceptable to them. They will compare your claim against the advice of the Valuation Office Agency and may, or may not, accept the figure you offer.

Are you saying that she will make her own estimate of value at time of my death then declare the amount she sold it for and they will agree or not agree on the actual value? So if it would have been valued by an EA at, say, £50k and she sold it five years later for £100k then she could reasonable claim it was actually worth £75k when she inherited? She does not have to get it valued at the start?

Bookworm225

FlorayG said:

Bookworm225 said:

FlorayG said:

Bookworm225 said:

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

I don't understand this. There won't be any inheritance tax

If no IHT has been paid then the acquisition cost has not been agreed by HMRC at time of death. Only when a CGT return is done will HMRC consider if the value used as acquisition cost is acceptable to them. They will compare your claim against the advice of the Valuation Office Agency and may, or may not, accept the figure you offer.

Are you saying that she will make her own estimate of value at time of my death then declare the amount she sold it for and they will agree or not agree on the actual value? So if it would have been valued by an EA at, say, £50k and she sold it five years later for £100k then she could reasonable claim it was actually worth £75k when she inherited? She does not have to get it valued at the start?

get someone else to read what I wrote and explain it to you. It really is very straightforward.

lincroft1710

FlorayG said:

Bookworm225 said:

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

I don't understand this. There won't be any inheritance tax

IHT rates change and you do not know what your estate will be worth in a few years time, so at the present time you cannot say this.

FlorayG

lincroft1710 said:

FlorayG said:

Bookworm225 said:

her gain will, as with all CGT, be the difference between actual selling price and original acquisition cost

in the context of inherited assets, that means the acquisition cost could change if your estate did not pay inheritance tax on your death. The VOA have the power to impose their own value and you have the right to go to tribunal to argue differently to justify your own figure.

I don't understand this. There won't be any inheritance tax

IHT rates change and you do not know what your estate will be worth in a few years time, so at the present time you cannot say this.

I probably can, because I'm leaving everything else to charity