CGT and inheriting half share of house


CGT and inheriting half share of house

Postby Overleigh on Thu Nov 10, 2011 3:59 pm

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.

Aunt A died in 1985 and left the house to her brother B and sister C. The house was then owned by them as joint tenants. Brother B lived in the house while sister C lived in another part of the country.

Brother B died in August this year so sister C became the sole owner of the house. She already owns her own home so she is selling the second house in Chester.

I am unclear of her CGT liability. I presume she is liable for CGT on her half share of the house from 1985 to 2011? Is there any CGT liability on the half share that she inherited on the death of her brother?

To suggest some rough figures, the house in Chester might have had an approximate value of £50,000 in 1985 when she became a joint owner, and an approx value of £200,000 on the date of her brother's death. (The £200,000 will be the value entered on the IHT form.)

If she sells the house for, say, £220,000 would she be liable for CGT on the half share that she has owned since Aug 2011?

Conversely, if she sells for only £180,000 does that 'loss' (the difference between £200,000 and £180,000) have any bearing on CGT calculations?

And finally, does the fact that sister C contributed towards the original purchase of the house in the 1960's have any relevance?

As you will gather I am completely new to CGT. Any help would be much appreciated.
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Re: CGT and inheriting half share of house

Postby tom 7000 on Thu Nov 10, 2011 4:08 pm

Yes you pay CGT on the gain in value from Probate to the actual sales proceeds.
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Re: CGT and inheriting half share of house

Postby mullet on Thu Nov 10, 2011 6:58 pm

This is a "single column" CGT computation; although the asset was acquired at two separate times only one asset is being sold. So it is disposal proceeds (less disposal costs as usual) less 50% of the probate value at 1985 and less the probate value of the other half at August 2011. The "top line" is simply the disposal proceeds, so yes - if it is sold for £20,000 less then the gain will be £20,000 less. It is a single asset, not two halves.

Remember that if the probate values are unascertained then HMRC are at liberty to review them by referring to the District Valuer, but only as part of the enquiry process.
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Re: CGT and inheriting half share of house

Postby Overleigh on Fri Nov 11, 2011 9:09 am

Thank you very much tom and mullet. I need to read more around the subject as I am not quite sure what is meant by 'single column' and 'top line' but I certainly have the gist of what is involved. Thank you again.
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Re: CGT and inheriting half share of house

Postby mullet on Fri Nov 11, 2011 6:08 pm

All I mean by "single line" is that you have one figure for disposal proceeds. I have seen CG computations where an asset (as in your case) has been acquired in two parts at two separate times. The computation had two columns, starting with 50% of the disposal proceeds in each and with the respective "half acquisition" in each column. That computation resulted in two different rates of taper being applied. It could have resulted in one gain and one loss. All this would be wrong - single asset, single figure for disposal. Sorry for any confusion.

Top line - sorry, this is simply the amount of money that you get for the asset - same as disposal consideration.
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Re: CGT and inheriting half share of house

Postby pqtaxation on Sat Nov 12, 2011 12:29 am

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.
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Re: CGT and inheriting half share of house

Postby Overleigh on Sat Nov 12, 2011 11:29 am

Once again thank you pqtaxation for a very detailed response. It will take me some time to digest all you have said. I am not only a co-executor of the estate of B, but also have power of attorney (with respect to the sale of the house) for my aunt C. My aunt C's short term memory is poor but she may have remember the terms upon which she helped her sister A buy the house in the 1960's. I suspect it was an informal verbal arrangement and, if the financial help was regarded as a loan, I suspect the only repayment ever made would have been the bequesting of the house by A in her will. (Sister A only had a few hundred pounds to her name when she died.)
As it will be a while before the house is sold I guess I have time to get my head around this one!
Thank you again.
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