Expensive CGT mistake

iamnotalawyer

My uncle died leaving me his farm equipment.  There is inheritance tax to pay.  Whilst he was terminally ill, using a power of attorney, I sold a tractor at auction for £42,000.  The value was written down to nil on his retirement / cessation of business years ago.  This creates a £42,000 * 24% CGT liability.  The sale proceeds are in his bank account on which we are paying 40% inheritance tax.  Total tax payable on the tractor is therefore 64%.  If I had not sold the tractor, the unrealized gain would be wiped out and I would've inherited it for the market value today on which we would only have paid 40% tax.  I did not understand the rules when I sold the tractor.  It seems very unfair.  Is there anything I can do?

DullGreyGuy

55% not 64% as the inherence is paid on the net value. 

Did you get advice on the CGT? Not my area of expertise but that sounds odd. Was he a sole trader or LTD? What was the original purchase price of the tractor?

Hoenir

As business equipment your Uncle benefited from tax allowances on the Capital Expenditure. 

Grumpy_chap

iamnotalawyer said:

My uncle died leaving me his farm equipment.  There is inheritance tax to pay.  Whilst he was terminally ill, using a power of attorney, I sold a tractor at auction for £42,000.  The value was written down to nil on his retirement / cessation of business years ago.  This creates a £42,000 * 24% CGT liability.  The sale proceeds are in his bank account on which we are paying 40% inheritance tax.  Total tax payable on the tractor is therefore 64%.  If I had not sold the tractor, the unrealized gain would be wiped out and I would've inherited it for the market value today on which we would only have paid 40% tax.  I did not understand the rules when I sold the tractor.  It seems very unfair.  Is there anything I can do?

No.
Not without a time machine.

Nomunnofun1

iamnotalawyer said:

My uncle died leaving me his farm equipment.  There is inheritance tax to pay.  Whilst he was terminally ill, using a power of attorney, I sold a tractor at auction for £42,000.  The value was written down to nil on his retirement / cessation of business years ago.  This creates a £42,000 * 24% CGT liability.  The sale proceeds are in his bank account on which we are paying 40% inheritance tax.  Total tax payable on the tractor is therefore 64%.  If I had not sold the tractor, the unrealized gain would be wiped out and I would've inherited it for the market value today on which we would only have paid 40% tax.  I did not understand the rules when I sold the tractor.  It seems very unfair.  Is there anything I can do?

It wouldn’t have been CGT but income tax (increased profit in that year) and National Insurance. 

There would not have been any option but to sell it. What would have been the alternative? If left unsold the value of the tractor would have come into play in any case. 

It also would not have attracted a rate of 64% as it would have been £42000 less tax and NiC that would have formed part of the estate. 

Jeremy535897

"The value was written down to nil on his retirement / cessation of business years ago.  This creates a £42,000 * 24% CGT liability."
I do not understand this. If his business ceased, and wasn't transferred to anyone else, there would have been a balancing charge in respect of the market value at the date of cessation of all his business assets. While the situation is complicated by the fact that some capital allowances were claimed in the past, it may well be that there is no capital gain, as a chattel is normally exempt. There is no point in looking at this in any detail until clarification is given regarding why there was no balancing charge.

Nomunnofun1

Jeremy535897 said:

"The value was written down to nil on his retirement / cessation of business years ago.  This creates a £42,000 * 24% CGT liability."
I do not understand this. If his business ceased, and wasn't transferred to anyone else, there would have been a balancing charge in respect of the market value at the date of cessation of all his business assets. While the situation is complicated by the fact that some capital allowances were claimed in the past, it may well be that there is no capital gain, as a chattel is normally exempt. There is no point in looking at this in any detail until clarification is given regarding why there was no balancing charge.

That’s the point that I was trying to make. Sold and it’s a balancing charge of £42000. Not sold and it’s a balancing charge equivalent to the market value, more likely than not £42000. 

Don’t see how CGT is at all relevant. 

Jeremy535897

Nomunnofun1 said:

Jeremy535897 said:

"The value was written down to nil on his retirement / cessation of business years ago.  This creates a £42,000 * 24% CGT liability."
I do not understand this. If his business ceased, and wasn't transferred to anyone else, there would have been a balancing charge in respect of the market value at the date of cessation of all his business assets. While the situation is complicated by the fact that some capital allowances were claimed in the past, it may well be that there is no capital gain, as a chattel is normally exempt. There is no point in looking at this in any detail until clarification is given regarding why there was no balancing charge.

That’s the point that I was trying to make. Sold and it’s a balancing charge of £42000. Not sold and it’s a balancing charge equivalent to the market value, more likely than not £42000. 

Don’t see how CGT is at all relevant. 

Indeed. My internet was a bit slow yesterday and your post hadn't loaded for some reason.