Capital Gains Tax payment from Estate

[needingadvice]

My Mother created a Capital Gains tax liability just before her death by gifting to my sibling a home she owned but didn’t live in. (She lived in a rented pensioners cottages for the last few year). Estimate liability of around £15k but might be lower depending on the actual time she lived in the gifted property before moving out.
There is no money in the estate to pay this bill.

What happens now? What does HMRC do to recover this debt? Can they make a claim against my sibling who now owns this property?

[pawncob]

The executors are responsible for settling any CGT due from the estate. They should have made provision for the tax due.

[someone]

See this:
http://researchbriefings.files.parliame ... N05271.pdf

In particular section 3.2 on page 8.

If the estate has the money to pay the CGT bill then the estate is not bankrupt and the CGT (and any other debts) must be paid from the estate before distributing the residue. If I understand correctly, the executors are personally liable for any debts (up to the value that they distribute to the beneficiaries) for 12 years.

If the estate is bankrupt then according to that document linked above, HMRC can apply to the court to have the gift reversed (the rules are slightly different depending on whether the gift happened more or less than 2 years ago but I don't think it will matter in this case) and the property sold. The courts have full discretion in this matter (it's up to the court to decide what must happen, not HMRC). If the gift happened more than 5 years ago then I don't think there's anything that HMRC can do.

I think this is a case where paid for advice is absolutely required, especially if you are, or might become, an executor of your mother's estate as it would be all too easy for you to become personally liable for the CGT bill. I think you can refuse to be an executor but you cannot quit once you've accepted the role - see this: http://theprobatedepartment.co.uk/give-up-as-executor/

[maths]

Can they make a claim against my sibling who now owns this property?

Yes.

If the CGT due has not been paid within two years of the 31 January after the end of the tax year of death (by the executors) then HMRC may proceed against the donee of the gift. Theoretically, if the donee discharges the CGT charge he/she may then recover from the executors but in this case this would seem pointless.