Curious question about CGT on land

lincroft1710

FlorayG said:

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

Currently that would appear to be correct but there is no guarantee that in the future an inheritance left to a charity would be exempt from IHT. 

Yorkie1

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?

Option A: IHT is paid on the estate. As part of the IHT calculation, HMRC agrees a valuation of the land. Five years later, land is sold. CGT is payable on the difference between the agreed HMRC valuation at the time of acquisition and the later sale price (less any exemptions).

Option B: IHT is not paid on the estate. Therefore HMRC do not agree a valuation of the land at that time. Five years later, land is sold. CGT is payable. Estimated value at time of acquisition is given by the seller. HMRC decides at that point whether it agrees - or wishes to substitute - that acquisition value. CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

FlorayG

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

silvercar

FlorayG said:

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

You could always pay for a professional RICS valuation now, or indeed again at some point in the future. That would establish a base line against which she could appeal if she felt the hmrc valuation was wrong. You could also put something in your will instructing your executor to spend a small portion of your estate on a RICS valuation to establish the valuation at the date of death.

FlorayG

silvercar said:

FlorayG said:

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

You could always pay for a professional RICS valuation now, 

Going round in circles here. My whole point is that land around here SELLS for up to 50% more than the actual VALUATION prior to sale

sheramber

HMRC will either accept the probate/ inheritance tax value declared  or  refer it to the valuation Office  to value it. 

https://www.gov.uk/guidance/contact-the-voa

lincroft1710

FlorayG said:

silvercar said:

FlorayG said:

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

You could always pay for a professional RICS valuation now, 

Going round in circles here. My whole point is that land around here SELLS for up to 50% more than the actual VALUATION prior to sale

Well then clearly, whoever had done these valuations has underestimated the lands' true worth. The sales evidence now available will show what price(s) can be achieved and any future valuations should take this/these into account.


If the executors submit a valuation of the land at the date of death for probate then HMRC will either accept this figure or refer it to the District Valuer (part of VOA) for their opinion and possible negotiation with the executors. If the land is subsequently sold at a later date, the agreed DOD value will be used in calculating the actual gain.


If the land was not valued at the DOD, then on its sale HMRC will ask the DV for their opinion of its value at the DOD and subsequent negotiations with the CGT payer may take place. 

Bookworm225

FlorayG said:

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

it should be based on historic records of actual land sales at around the date of death, plus or minus "a bit"

valuers should start from known sales prices, whether they then get the market trend direction and rate "correct" since date of last sale includes some element of chance. Obviously there are many factors at play starting with exactly how close close in nature is the item being valued to previously sold items. 

silvercar

FlorayG said:

silvercar said:

FlorayG said:

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

You could always pay for a professional RICS valuation now, 

Going round in circles here. My whole point is that land around here SELLS for up to 50% more than the actual VALUATION prior to sale

That makes no sense. You can’t have a situation where prices consistently sell for 50% more than the valuations. One offs can occur, particularly where there is a scarcity of land for sale, but a valuer’s role is to calculate the selling price.

FlorayG

silvercar said:

FlorayG said:

silvercar said:

FlorayG said:

Yorkie1 said:

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?

 CGT is calculated on the difference between whatever value HMRC agrees the land was worth, and the sale price.

This is my question - how does HMRC value the land? Is it a proportion of the actual sale price, depending on how many years it has been owned and the general increase in the price of land, which would be fair? Or a random calculation of 'x acres of grazing at £y an acre ( a national figure) at time of death would have been worth £z? Which is not fair, because I already paid more than half again of it's nominal value when I bought it 

You could always pay for a professional RICS valuation now, 

Going round in circles here. My whole point is that land around here SELLS for up to 50% more than the actual VALUATION prior to sale

That makes no sense. You can’t have a situation where prices consistently sell for 50% more than the valuations. One offs can occur, particularly where there is a scarcity of land for sale, but a valuer’s role is to calculate the selling price.

I know it doesn't, but it took me two years to actually buy a field so I know this happens in almost every case; bids are WAY over the advertised price. Bear in mind that in 2 years I only found 6 suitable places for sale, so maybe valuers actually do have no idea of their value because of their scarcity