Capital gains tax when property inherited in two parts

Film_Critic

I am trying to clarify how to submit this. My Dad died 7 months before my Mum. They were tenants in common so when he died my sister and I inherited 1/4 of the house each while Mum retained the other half. When she died we inherited the other half between us (so another quarter each). There hadn’t really been any change in value at that point but the submission only allows you to put the value at inheritance (which I suppose would be the date of Dad’s death which for each of us for our 1/4 would be £62.5k but by the time we owned half each would have been £125k. The amount we sold for (our share each) was £140k so obviously if the gain was calculated from when we just owned 1/4 it would be the gain on £140k - £62.5k (minus expenses etc) but if calculated from when we owned the whole house between us would be £140k - £125k so clearly quite a big difference. 

I found (on the HMRC discussion forum) a similar scenario although I think the advisor uses the wrong terminology saying “purchase price” as it should be “value” and the submission form is not clear as it asks for the value when you inherited it so is that the value when I inherited the first part or the two parts combined which is what the HMRC response seems to suggest (see below)

“My 2 siblings and I inherited half of the family home (ie around a 16.5% share each) when our Dad died around 20 years ago. He left it to us in his will. None of us have been living there and Mum has continued living at the family home on her own (no rent or mortgage) until her death last year, when we inherited the other 50% of the house and are now the 3 equal owners of the property. We are selling the house and our solicitor has recommended we check whether any CGT is due on the proportion of the house we owned (ie 16.5%) from when we originally inherited Dad's share of the house nearly 20 years ago, based on the increase in value of the property since we inherited. I'm struggling to locate a scenario exactly the same as this on the forum. If CGT is due, then how do we make this clear on the Govt online system ie that we are paying/calculating CGT based on the 16.5% share? Does the system allow for additional information/text to be added to explain? Can you advise please?

Posted 9 months ago by 

Hi,
You will give the date acquired as the date your father passed away. A value will have been applied at that point and you take your share of this. You then add on your share of the new value at the time your mother died and this is your purchase price.”

[Deleted User]

Film_Critic said:

I am trying to clarify how to submit this. My Dad died 7 months before my Mum. They were tenants in common so when he died my sister and I inherited 1/4 of the house each while Mum retained the other half. When she died we inherited the other half between us (so another quarter each). There hadn’t really been any change in value at that point but the submission only allows you to put the value at inheritance (which I suppose would be the date of Dad’s death which for each of us for our 1/4 would be £62.5k but by the time we owned half each would have been £125k. The amount we sold for (our share each) was £140k so obviously if the gain was calculated from when we just owned 1/4 it would be the gain on £140k - £62.5k (minus expenses etc) but if calculated from when we owned the whole house between us would be £140k - £125k so clearly quite a big difference. 

I found (on the HMRC discussion forum) a similar scenario although I think the advisor uses the wrong terminology saying “purchase price” as it should be “value” and the submission form is not clear as it asks for the value when you inherited it so is that the value when I inherited the first part or the two parts combined which is what the HMRC response seems to suggest (see below)

“My 2 siblings and I inherited half of the family home (ie around a 16.5% share each) when our Dad died around 20 years ago. He left it to us in his will. None of us have been living there and Mum has continued living at the family home on her own (no rent or mortgage) until her death last year, when we inherited the other 50% of the house and are now the 3 equal owners of the property. We are selling the house and our solicitor has recommended we check whether any CGT is due on the proportion of the house we owned (ie 16.5%) from when we originally inherited Dad's share of the house nearly 20 years ago, based on the increase in value of the property since we inherited. I'm struggling to locate a scenario exactly the same as this on the forum. If CGT is due, then how do we make this clear on the Govt online system ie that we are paying/calculating CGT based on the 16.5% share? Does the system allow for additional information/text to be added to explain? Can you advise please?

Posted 9 months ago by 

Hi,
You will give the date acquired as the date your father passed away. A value will have been applied at that point and you take your share of this. You then add on your share of the new value at the time your mother died and this is your purchase price.”

The HMRC response is correct. Add together the 1/4 share value at father’s death to 1/4 share value at mother’s  death. That is your base cost. 

RAS

Film_Critic said:

I am trying to clarify how to submit this. My Dad died 7 months before my Mum. They were tenants in common so when he died my sister and I inherited 1/4 of the house each while Mum retained the other half. When she died we inherited the other half between us (so another quarter each). 

Are you sure about your interpretation?

Please can you quote exactly the wording from dad's will which refers to his leaving his half to his children, please? Any chance that it also gave mum the right to live there until her death?

The will may have created an IPDI trust in which case the only CGT liability would be on any increase since mum's death. That is one of the advantages of an IPDI trust.

RAS

Film_Critic said:

I am trying to clarify how to submit this. My Dad died 7 months before my Mum. They were tenants in common so when he died my sister and I inherited 1/4 of the house each while Mum retained the other half. When she died we inherited the other half between us (so another quarter each). 

Are you sure about your interpretation?

Please can you quote exactly the wording from dad's will which refers to his leaving his half to his children, please? Any chance that it also gave mum the right to live there until her death?

The will may have created an IPDI trust in which case the only CGT liability would be on any increase since mum's death. That is one of the advantages of an IPDI trust.

Film_Critic

They were tenants in common and had mirror wills so when one died the other retained ownership of their half living there until they died and the other half passed to my sister and me. In reality is was complex as we hadn’t had probate through for Dad and managed to do anything with regards to the land registry etc when Mum died so it was all quite difficult to sort out.

Keep_pedalling

Film_Critic said:

They were tenants in common and had mirror wills so when one died the other retained ownership of their half living there until they died and the other half passed to my sister and me. In reality is was complex as we hadn’t had probate through for Dad and managed to do anything with regards to the land registry etc when Mum died so it was all quite difficult to sort out.

It is usual for a will to also give the surviving spouse a right to live there for life, if your father’s will had such a clause then it creates a trust and you don’t inherit until the death of the second spouse. If, as is likely your father’s will contained such a clause then there can be no CGT liability. There are other implications to this so please check the wording of his will and tell us if such a clause was included.