Reporting an estate to HMRC under informal arrangements - sell property first?

bigandy2

I'm administering my late mother's estate.

Do I need to sell the residential property before I report the estate's final position to HMRC via an "informal arrangement" letter? 

The property requires extensive refurbishment and will certainly sell for less than 2x Residence Nil Rate band (£350,000) and hence should have no bearing on the Inheritance tax paid. Or is it better to wait until it's sold? The estate meets all the other criteria for meeting Informal Arrangement.

DancingBadger

You will need to obtain probate in order to sell the house, although there's nothing to stop you marketing it.

The property I'm selling is sale agreed, but exchange of contracts will be delayed until I have probate; it has been applied for and the buyers are fully aware the timing is out of my hands.

poseidon1

bigandy2 said:

I'm administering my late mother's estate.

Do I need to sell the residential property before I report the estate's final position to HMRC via an "informal arrangement" letter? 

The property requires extensive refurbishment and will certainly sell for less than 2x Residence Nil Rate band (£350,000) and hence should have no bearing on the Inheritance tax paid. Or is it better to wait until it's sold? The estate meets all the other criteria for meeting Informal Arrangement.

I assume you are actually referring to an informal 'tax reporting' letter  for estate income and capital gains tax below £10,000 as indicated  in the guidance below -

https://www.gov.uk/probate-estate/reporting-the-estate

The question to ask yourself is, have all aspects of the administration of the estate been completed, which justifies your using the informal reporting process.

  I assume  at this stage you have not lodged an AS1 assent of the property into your name as sole beneficial owner, so you are selling as personal representative of the estate. If that's the case then the estate administration is ongoing and you don't know whether income and capital gains tax will be below £10k until after you sold the property and  you have calculated the gain on sale as it relates to the original probate value you reported. 

Incidentally bear in mind the estate CGT exemption ( currently £3,000) is only good for 2 tax years after death.

Of course if you assent the property to your name prior to sale, that would mark the end of the estate administration, which allows you to use the informal reporting process. The sale of the property thereafter would then be a personal  ( rather than estate) sale for future tax reporting purposes. Don't overlook that any CGT payable in this scenario is due 60 days after date of sale.