Selling Property and Reporting Capital Gains Tax

Habib2342

Hello,

My mother passed away earlier ths year after a long battle with multiple illnesses. She left a will of which my brother and myself are the main beneficiaries.

I had no issue in drawing down her savings as probate was not required for these amounts. Probate is required to sell her house and I acquired the grant last week. We've found a buyer but the sale is subject to contract  and am currently awaitng the outcome of the mortgage valuation and/or homebuyer report before continuing with the conveyancing process.

As my brother and me will be inheriting the house, the proceeds of the sale will be split 50/50 after all other expenses met.

My main concern is how to report capital gains tax on this upcoming transaction. Do i hve to fill out the ca100 and ca 109 forms or can i report it online ? I understand I have 60 days to report the gain but can i file it after contracts are exchanged ?. In order to minimise the bill, can i claim the annual allowances for both myself and brother as we are both basic rate tax payers ?

Our mother also requested a trust fund to manage my brother's share of the estate as he has mental health issues which crop up from time to time and can have difficulty managing his money. Will he have to do a self assessment every year to report the income he gets from the trust fund ?

thanks. 

Habib2342

Also regarding the probate value of the house when reporting the gain.

On the IHT400 form, I took an average of 3 estate agent valuations of the house in the month after my mother's passing. Based on this, I applied and got the grant of probate.  But from what I've read online, this isn't the most reliable or accurate valuation and could raise red flags at HMRC. Should I pay for a surveryor to value the property at the date of passing to avoid any issues ?

Based on estimated calculations I don't think the bill will be anything more than a few thousand pounds, rather than the 10s of thousands I'd have to pay if HMRC didn't adjust their formula and overruled the acquisiton cost of the property.

Keep_pedalling

If her estate was well below IHT territory there is no need to get a paid for valuation, but you are better off going with the highest valuation rather than the average in those circumstances. 

Keep_pedalling

Who has been appointed trustee for your brother’s trust? It is them who will have to handle the tax returns rather than your brother. You might want to take professional advice with regards to the trust. 

poseidon1

Habib2342 said:

Hello,

My mother passed away earlier ths year after a long battle with multiple illnesses. She left a will of which my brother and myself are the main beneficiaries.

I had no issue in drawing down her savings as probate was not required for these amounts. Probate is required to sell her house and I acquired the grant last week. We've found a buyer but the sale is subject to contract  and am currently awaitng the outcome of the mortgage valuation and/or homebuyer report before continuing with the conveyancing process.

As my brother and me will be inheriting the house, the proceeds of the sale will be split 50/50 after all other expenses met.

My main concern is how to report capital gains tax on this upcoming transaction. Do i hve to fill out the ca100 and ca 109 forms or can i report it online ? I understand I have 60 days to report the gain but can i file it after contracts are exchanged ?. In order to minimise the bill, can i claim the annual allowances for both myself and brother as we are both basic rate tax payers ?

Our mother also requested a trust fund to manage my brother's share of the estate as he has mental health issues which crop up from time to time and can have difficulty managing his money. Will he have to do a self assessment every year to report the income he gets from the trust fund ?

thanks. 

Am only responding to the last part of your post related to your brother's trust fund. 

If the will trust clauses have been drafted properly to reflect your brother's status as a Vulnerable person, then HMRC has a special tax compliance regime for such trusts you need to acquaint yourself with - see link below

https://www.gov.uk/trusts-taxes/trusts-for-vulnerable-people

You have not indicated how much will be invested in the trust fund for your brother or whether you will be the primary trustee going forward. However, if  you are the responsible trustee you will undoubtedly require specialist trustee tax compliance advice and assistance with HMRC initial and subsequent annual filings. Income tax reporting for income received on trust funds, falls primarily on the trustee, especially in respect of trusts for vulnerable persons.

Suggest you seek out a STEP qualified Chartered Accountant who can assist and advise as appropriate.

As regard  trustee investment matters, if you are the trustee you have distinct duties in that regard you should acquaint yourself with. The link below provides insight in this area - 

https://www.farrer.co.uk/news-and-insights/trustees-duties-and-powers-when-making-investment-decisions/




EDIT : If you are treating the property sale as made by the beneficiaries as opposed to a straight forward executor's estate sale, then bear in mind the sale of your brother's half share is via his trust, and as indicated above his trust is responsible for paying any CGT arising with special rules for Vulnerable Persons to determine the extent of the trustee CGT exemption available.

It is my sense that you really have no idea how trusts work ( especially with regard to Vulnerable persons) , so probably  imperative you obtain specialist advice as advised.

20122013

Habib2342 said:

Also regarding the probate value of the house when reporting the gain.

On the IHT400 form, I took an average of 3 estate agent valuations of the house in the month after my mother's passing. Based on this, I applied and got the grant of probate.  But from what I've read online, this isn't the most reliable or accurate valuation and could raise red flags at HMRC. Should I pay for a surveryor to value the property at the date of passing to avoid any issues ?

Based on estimated calculations I don't think the bill will be anything more than a few thousand pounds, rather than the 10s of thousands I'd have to pay if HMRC didn't adjust their formula and overruled the acquisiton cost of the property.

My friend's was in a similar situation, and they got 4 valuations and used the highest vaulation but the house had lots of interests and sold £100k more than asking price and that did not do them any favors in terms of their tax bill. 

Did any of the agents showed you the SOLD prices of similar properties local to your mother's property, they need to be fairly recent (3 months?) this maybe be use a guide for your pricing. Paid surveyors will probably use the same method unless they are local and do lots of surveys., but estate agents seem to have access to more recent SOLD prices, as there seem to be a six month delay on the Land Registry. 

Habib2342

I'm waiting for the financial adviser to send through kfi document on how the trust fund will work. Hopefully that should come through in the next few weeks.

Regarding the CGT return, what do I use as a probate value ? Do I just use an average of the 3 estate agent valuations given to me ? Or should I pay for a surveyor to work out the probate value at date of passing ? 

poseidon1

Habib2342 said:

I'm waiting for the financial adviser to send through kfi document on how the trust fund will work. Hopefully that should come through in the next few weeks.

Regarding the CGT return, what do I use as a probate value ? Do I just use an average of the 3 estate agent valuations given to me ? Or should I pay for a surveyor to work out the probate value at date of passing ? 

I very much doubt a KFI document from an FA can possibly inform you how the trust works and certainly not if it qualifies for vulnerable persons tax treatment. As already advised you require a specialist  STEP qualified Trust Accountant to inform you accordingly.

As for valuation of the property at date of death, problem with estate agents is they may be tempted to  over value in the hope of your eventually placing the sale instruction with them.

 A red book valuation from a RICs surveyor at date of death, should give you a wholly  objective figure, which presumably the surveyor would substantiate if ever queried by HMRC in future. 

Habib2342

Well, I've already instructed an agent to market the property. Found a buyer within 3 days, so just currently waiting on the mortgage valuation report from the outcome to ensure there are no funding issues or worse case scenario a down valuation and they want to re-negotiate the price. 

Or alternatively do I just use an average of the 3 estate agent valuations i put down on the IHT400 form ? Would really like to avoid paying for a surveyor if there are other alternatives that satisfy HMRC.

poseidon1

Habib2342 said:

Well, I've already instructed an agent to market the property. Found a buyer within 3 days, so just currently waiting on the mortgage valuation report from the outcome to ensure there are no funding issues or worse case scenario a down valuation and they want to re-negotiate the price. 

Or alternatively do I just use an average of the 3 estate agent valuations i put down on the IHT400 form ? Would really like to avoid paying for a surveyor if there are other alternatives that satisfy HMRC.

If you have already notified a value to HMRC on the IHT 400 based on average valuations, seems to me you are  now committed to follow through with that figure for all subsequent compliance purposes.

Once solicitors and agents fees are deducted from the sale figure now achieved , will that show a taxable gain compared to the IHT 400 figure?


EDIT
by the way unless you have previously executed a legal Assent of the property to personal ownership for you and trust ownership for your brother, your sale will be as executor of the estate with just the estate CGT exemption to shelter any gain.

Habib2342

EDIT
by the way unless you have previously executed a legal Assent of the property to personal ownership for you and trust ownership for your brother, your sale will be as executor of the estate with just the estate CGT exemption to shelter any gain.

I haven't done this. I presume once all expenses have been met ( both myself and the buyer are using the same solicitor) all remaining monies will be held by the solicitor and then they will ask to which account/s the remaining funds are to be split into . Half of it will come absolutely to me and the other half will go into my brother's accounts and the trust fund. i am named as the sole executor of her estate after asking the solicitor to step down from executor dutie so I imagine the solictor once all legal formalties and expenses have been met, will ask me to send the remaining funds to.