Overleigh wrote:... I need to read more around the subject .... but I certainly have the gist of what is involved.
Yes, do read up about CGT but you have previously posted that the context is that you are co-executor of your late uncle’s (brother B in OP) estate on which IHT is payable . Hence the interplay between IHT at 40% and CGT at 28% and lack of availability of the executors’ exempt amount for CGT may be relevant.
The other responses did not mention the point about sister C having contributed to the financing of the purchase of the house in the 1960’s.
Overleigh wrote: Aunt A bought a house in Chester in the 1960's with financial help from her brother B and sister C. Aunt A was the sole owner.
If Aunt A was the sole (beneficial) owner then the help provided by B and C must have been either a gift or a loan. If the latter, presumably the loan was repaid on A’s death in 1985 from her estate and hopefully the accounts for her estate administration are available to you and will clarify the point. If not, possibly (but unlikely I'd guess) C acquired a beneficial interest which would save paying 28% CGT on its cost.
The house was held by B and C as joint tenants (with ownership passing by survivorship) rather than as tenants in common (with scope for executors to sell B’s 50% interest).
B’s estate has, you wrote, a liability to IHT and so the probate value of [the 50% interest in] the house will have to be agreed with HMRC (in which context that value is said to be “ascertained”) and the executor/ beneficiary has to use that ascertained cost for the 50% interest in calculating the capital gain on a later sale. Partial non-spousal interests are normally discounted - a 50% interest by about 10%. So a 50% interest in a house valued at £200k (ascertained) will be valued at £90k (200*50%* [1-10% discount]). That discount saves of £4k IHT (£10k *40%). However when the house is sold no discount applies. If the house sells for £220k gross and the executor were to sell the 50% interest the allowable sales costs, SP02/04 valuation allowance and annual exempt amount of £10.6k should mean no CGT is payable. But in your case the executor is not a party to the sale.
The 50% share held by C that was inherited from A had a cost of 50% of probate value in 1985 (but see above re point about probable loan/gift to A). The 50% C inherits from B would have a cost equal to (discounted) ascertained probate value.
If house sells for its ascertained entire value: C's gain on 50% share (after her annual exempt amount) inherited from A would be taxed at 18/28% and the ca. 10% discount on 50% share inherited from B is a gain to C taxed at 28% vs 40% IHT rate.