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  • FIRST POST
    • katiepoppycat
    • By katiepoppycat 13th Jun 19, 6:17 AM
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    katiepoppycat
    is this a capital gain?
    • #1
    • 13th Jun 19, 6:17 AM
    is this a capital gain? 13th Jun 19 at 6:17 AM
    I've reached out to an accountant relative on this but I know there are some experts on here! We had an RICS valuation of my late Grandmother's house and we used that to calculate the probate value. The house sold for 30k more than that value. We didn't do any work on the house and the time between valuation and sale was 3 months. Is this sum subject to CGT? The estate is still below IHT so that's not a worry.
Page 1
    • Flugelhorn
    • By Flugelhorn 13th Jun 19, 7:26 AM
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    Flugelhorn
    • #2
    • 13th Jun 19, 7:26 AM
    • #2
    • 13th Jun 19, 7:26 AM
    I think according to this there is : The allowance is 12,000 for the estate which is a single entity so presume CGT is payable on the remainder of the profit ?

    Is there Capital Gains Tax to pay on the estate?
    The good news is that the estate doesn’t have to pay any Capital Gains Tax on the property or assets that weren’t sold (also known as ‘unrealised gains’) before the person died.

    But, if the property or asset is sold during probate and its value rose since the person died, there is usually Capital Gains Tax to pay.

    This tax is calculated on how much the increase is since the person’s death.

    Beneficiaries inherit the assets at their probate value.

    This means that when they sell or give the asset away, they will pay Capital Gains Tax on the increase in value from when the person died to when it was sold or given away.
    another link here https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2019

    The trick is to get the probate valuation right so that you don't end up paying CGT - having said that, there is still more money in the pot than you expected even after paying the CGT
    • Tom99
    • By Tom99 13th Jun 19, 7:51 AM
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    Tom99
    • #3
    • 13th Jun 19, 7:51 AM
    • #3
    • 13th Jun 19, 7:51 AM
    I've reached out to an accountant relative on this but I know there are some experts on here! We had an RICS valuation of my late Grandmother's house and we used that to calculate the probate value. The house sold for 30k more than that value. We didn't do any work on the house and the time between valuation and sale was 3 months. Is this sum subject to CGT? The estate is still below IHT so that's not a worry.
    Originally posted by katiepoppycat
    Since no IHT was paid you can use a different open market value from the one you used for probate if you feel that figure was wrong.
    Unless there is good reason to assume the house increased in value by 30k in 3mths I would make the assumption that there had been no or very little uplift over the 3mth period and therefore no CGT return by the estate was required.
    • Keep pedalling
    • By Keep pedalling 13th Jun 19, 7:55 AM
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    Keep pedalling
    • #4
    • 13th Jun 19, 7:55 AM
    • #4
    • 13th Jun 19, 7:55 AM
    It could be classed as a capital gain or an under valuation that is subject to IHT. You have not told us what the house sold for, a 30k gain on a 100k original valuation is obviously massively out, but on a 1M house it is more like the normal fluctuation you see on selling any house.

    In the former case you could probably get the original probate value amended and avoid CGT, in the latter you would be looking at a small GC liability, as amending the valuation would mean paying mor IHT
    • Tom99
    • By Tom99 13th Jun 19, 8:27 AM
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    Tom99
    • #5
    • 13th Jun 19, 8:27 AM
    • #5
    • 13th Jun 19, 8:27 AM
    It could be classed as a capital gain or an under valuation that is subject to IHT. You have not told us what the house sold for, a 30k gain on a 100k original valuation is obviously massively out, but on a 1M house it is more like the normal fluctuation you see on selling any house.

    In the former case you could probably get the original probate value amended and avoid CGT, in the latter you would be looking at a small GC liability, as amending the valuation would mean paying more IHT
    Originally posted by Keep pedalling
    Since no IHT was paid you cannot ask for the probate value to be amended. You must use Open Market Value to assess your capital gain but this can be a different figure to the probate value if the probate value was too low.

    According to HMRC IHT Manual:

    'When denying the claim, you should tell the person making the claim that this office has not considered the value of the relevant interests in land at the date of death for Inheritance Tax purposes. Accordingly the value has not been ascertained within the meaning of TCGA92/S274 and for Capital Gains Tax purposes they must calculate the chargeable gain on the disposal using the market value at the date of death'
    Last edited by Tom99; 13-06-2019 at 8:40 AM.
    • katiepoppycat
    • By katiepoppycat 14th Jun 19, 6:10 AM
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    katiepoppycat
    • #6
    • 14th Jun 19, 6:10 AM
    • #6
    • 14th Jun 19, 6:10 AM
    I'm going to have a good read of those links, bur for clarity, the house was valued at 230k and sold at 260k.
    • Tom99
    • By Tom99 14th Jun 19, 6:29 AM
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    Tom99
    • #7
    • 14th Jun 19, 6:29 AM
    • #7
    • 14th Jun 19, 6:29 AM
    I'm going to have a good read of those links, bur for clarity, the house was valued at 230k and sold at 260k.
    Originally posted by katiepoppycat
    The most comparable evidence when valuing a property is the sale of the subject property on the valuation date or very close to the valuation date.
    Your sale only 3mths from the valuation date at 13% more than the valuation in a flat market clearly points to the valuation of 230k being too low.
    Remember from the 30k gain you 1st take off costs before any chargeable gain at 28%:
    - 12,000 annual allowance
    - Sale costs say 2,500
    - Scale Fee probate costs 1% of probate value 2,300
    - EPC?
    So that give deductions of say c 17,000. That means the actual market value as at the date of death would need to be less than c 243,000 before any CGT was payable. Even that means a 7% increase in 3mths which still sounds too much.
    Last edited by Tom99; 14-06-2019 at 12:54 PM.
    • Marcon
    • By Marcon 14th Jun 19, 12:51 PM
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    Marcon
    • #8
    • 14th Jun 19, 12:51 PM
    • #8
    • 14th Jun 19, 12:51 PM
    This link might be helpful: https://www.litrg.org.uk/tax-guides/bereavement/how-estate-taxed-during-administration#toc-tell-me-about-the-estate-and-capital-gains-tax
    • nom de plume
    • By nom de plume 14th Jun 19, 1:27 PM
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    nom de plume
    • #9
    • 14th Jun 19, 1:27 PM
    • #9
    • 14th Jun 19, 1:27 PM

    To the extent the administration period continues into the next two tax years, the personal representatives will also receive the full amount of the annual exemption in each of the following two tax years. If the administration period lasts longer than this, there is no further annual exempt amount available.

    If I am interpreting this correctly there may be double the allowance if the dates between death and sale spanned over 2 tax years. Is that right?
    • katiepoppycat
    • By katiepoppycat 14th Jun 19, 2:55 PM
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    katiepoppycat
    It does rather look like the dates have fallen to allow me to use 2 years allowances . . . . . date of death was Jan 2019, and the house sale has not yet completed. We accepted an offer on April 12th ish. The chain collapsed a couple of weeks later and has now been resurrected with the same buyer.
    Last edited by katiepoppycat; 14-06-2019 at 2:59 PM. Reason: additional info
    • Tom99
    • By Tom99 14th Jun 19, 3:17 PM
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    Tom99
    It does rather look like the dates have fallen to allow me to use 2 years allowances . . . . . date of death was Jan 2019, and the house sale has not yet completed. We accepted an offer on April 12th ish. The chain collapsed a couple of weeks later and has now been resurrected with the same buyer.
    Originally posted by katiepoppycat
    No you cannot carry over an allowance from one year to the next.
    If the estate sells now the estate will have one 12,000 allowance.
    I think you can revise the market value as at Jan 2019 without any trouble.
    If there is more than one beneficiary you could transfer the beneficial interest from the estate to the beneficiaries before you exchange contracts with each beneficiary having there own CGT allowance of 12,000.
    You do this using an assent of equitable interest. Since you are not transferring the legal interest it does not need to be registered with the Land Reg so can be done quite quickly.
    Last edited by Tom99; 14-06-2019 at 3:21 PM.
    • katiepoppycat
    • By katiepoppycat 14th Jun 19, 3:32 PM
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    katiepoppycat
    Tom99 you clearly know your stuff! Thank you so much for your advice on this. I had no clue what was going on and it's hard to google my way through this. I've found form C4 which seems to be mostly about IHT but nothing else seems to fit the bill. Presumably I just fill this in detailing that the house was valued at 230k but is actually 260k and call that a nil tax amount?
    • Tom99
    • By Tom99 14th Jun 19, 3:43 PM
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    Tom99
    Tom99 you clearly know your stuff! Thank you so much for your advice on this. I had no clue what was going on and it's hard to google my way through this. I've found form C4 which seems to be mostly about IHT but nothing else seems to fit the bill. Presumably I just fill this in detailing that the house was valued at 230k but is actually 260k and call that a nil tax amount?
    Originally posted by katiepoppycat
    You only need to complete form C4 if a revised Jan 2019 value would mean you incurring more IHT.
    By the sound of it you are a long way short of any IHT liability and providing you are confident that using the correct Jan 2019 market value would not give you a taxable gain there is no need to report the sale to anyone.
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