Incorrect DOD property valuation mistake

Vicky_Rowe

Hi all, 

I've phoned the HMRC CGT tax office and spoken to the Probates court and am still stuck on what best to do.

When my mum passed, 2 months ago, I stupidly used the valuation which the mortgage company had provided in a driveby valuation prior to death (unsure how "prior" to death it was). I thought it seemed reasonable for the area and so used it for probate - £239,000. Probate has been granted and no IHT is due as it's well under the threshold with a net value of approx. £166,000.

I had a valuation done yesterday with a local estate agent with a view to selling and they've given a valuation of £270,000, which was a shock. I am now worried that the extra £31,000 difference will be seen as an increase in property value between DOD and sale. Even with the increase there is still no IHT due.

I know that I need to fill in a C4 form to HMRC to amend the estate, but am worried now that I'm going to be stung with a CGT bill for the increase, when there probably wouldn't have been one.

I've asked the estate agent if they can give an estimated value at DOD (as it was only a few months ago) and wait to hear.

My question is, if I fill in the C4 form to show an increase of £31,000 and attach the email from the agents to show there was an error on probate, am I still likely to get a CGT bill?

The probate office have advised not amending probate unless one the mortgage company or someone else reject it.

I know that I can use the £3,000 annual allowance towards the CGT bill if there ultimately is one but I'd rather correct the error and there not be a bill for my stupid mistake!

Any help would be hugely appreciated!

NorthYorkie

The value submitted for probate purposes is only binding for Capital Gains purposes if it has been "ascertained" for inheritance tax purposes. As the value of the estate is below the taxable threshold for inheritance tax, the value put on the house will not have been "ascertained" (see CG32230 - Death and Personal Representatives: Valuation of assets at date of death and associated liaison with Specialist PT-IHT: Ascertained values: Valuation of assets: no value `ascertained' for IHT purposes - HMRC internal manual - GOV.UK).

You can therefore adopt £270,000 as the value at the date of death, which, after all, was only a couple of months ago.

Vicky_Rowe

Thank you. So do you mean that you wouldn't bother filling in the C4 form? I understood that I had to register the sale price of the property with HMRC after it has sold, so will they not query that then as I had put £239,000 on the application for probate?

Sorry if I'm missing the point of your reply. You've been very helpful, I'm going round in circles and confusing myself now!

Keep_pedalling

As you would not have had to submit an IHT return for an estate of this value then form C4 is not applicable. 

You are also worrying prematurely as you have not sold it yet so may not even meet that valuation. If it does then you can deduct selling costs and the annual allowance from the gain. 

Vicky_Rowe

Ah, ok. The tax office told me the C4 was applicable even though there was no IHT.

I am a bit, I admit, but it will definitely be higher. I know that much. I deducted the selling cost and allowance as well and still came up with a slight bill. I guess I'm just trying to make sure (as executor) I am doing my best in the way of correcting my error.