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Where Taxpayers and Advisers Meet

House sale tax liability

hpr23
Posts: 10
Joined: Sun Sep 06, 2015 11:16 pm

House sale tax liability

Postby hpr23 » Sun Sep 06, 2015 11:36 pm

Hi wondering if you can help.
My Parents bought a building plot around 20 years ago and built a house which they never lived in but rented out. My Dad died 5 years ago and I inherited his half share, the house being valued at the time at £400k. We are considering selling now but concerned about the tax liability. The house is still worth £400k so my understanding is I would have no tax to pay on my £200k share because of the 'uplift on death' rule, but what about my Mother, how much tax would she be likely to pay, what costs can be deducted from the taxable amount and is there anything that can be done to minimise her tax liability. Would living in it briefly enable her to apply a lettings allowance?
Any advice would be much appreciated, many thanks.

Peter D
Posts: 10668
Joined: Wed Aug 06, 2008 3:37 pm

Re: House sale tax liability

Postby Peter D » Mon Sep 07, 2015 11:32 am

How much was the property worth when you father dies. Your CGT liability is the gain from that value not £200,000. Regards Peter

Peter D
Posts: 10668
Joined: Wed Aug 06, 2008 3:37 pm

Re: House sale tax liability

Postby Peter D » Mon Sep 07, 2015 11:35 am

I have re-read you post and I missed the word 'no'. Yes if the value has not changed in the last 5 years then there would be no CGT on you. However you have to establish your mothers base cost after the house was built and of coarse the land. Regards Peter

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: House sale tax liability

Postby King_Maker » Mon Sep 07, 2015 11:42 am

Was the £400,000 Probate Value formally agreed with HMRC?

hpr23
Posts: 10
Joined: Sun Sep 06, 2015 11:16 pm

Re: House sale tax liability

Postby hpr23 » Wed Sep 09, 2015 8:01 pm

I assume it was formally agreed as the property was valued along with all other assets and grant of probate was given without them querying any valuations.
The land was 25k and the build costs I have no idea as I was very young when the house was built and there are no invoices or receipts to go from.

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: House sale tax liability

Postby King_Maker » Fri Sep 11, 2015 10:54 am

If no IHT was paid on your father's death, it is possible that HMRC did not formally agree its valuation.

hpr23
Posts: 10
Joined: Sun Sep 06, 2015 11:16 pm

Re: House sale tax liability

Postby hpr23 » Sat Sep 12, 2015 2:31 pm

Thanks for taking the time to make replies.
I had everything valued to obtain grant of probate, what is the point of doing that for HMRC to go and dismiss it several years later even though they must have been satisfied in 2010 to grant probate. If it was acceptable then, surely it must be now.
I was gifted my Father's half at market value, using a large proportion of his IHT allowance and bearing in mind the value of the house has not increased combined with the uplift on death rule I should be exempt from any CGT. If HMRC are going to be awkward and tell me my share was only worth £100k for example rather than £200k back in 2010 despite having his estate valued and accepted for probate then my Father effectively only gifted me £100k so his nil rate band could be further utilised or the unused proportion transferred to my Mother's nil rate band.
As much as the taxman would like to take everything, he can only have one or the other.
If not formally accepted, where would that leave me, and why did HMRC/solicitor/accountant not inform me at the time. I would be inclined to say malpractice considering they charge £200+ per hour.
Are you a tax professional yourself?, we require some tax planning for me and my family.

Many thanks

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: House sale tax liability

Postby King_Maker » Tue Sep 22, 2015 12:37 pm

I am not saying that the Probate Valuation is incorrect nor that HMRC will not accept it for your CGT purposes.

Only you cannot rely on the FACT that the Valuation is agreed with HMRC.

You are correct in thinking that you will have no CGT liability - based on the details given. You will still have to report your share of the sale to HMRC.

Your mother will have a CGT liability. Her living there "briefly" will not assist, as it will not have the quality of a permanent residence.


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