CGT and Executors

[pqtaxation]

Yes, based on your description of the circumstances the NRBs available to your father’s estate s/be his own plus an entire one from his wife who predeceased him by many years – i.e. 2 NRBs at £325k each and so £650k (not £625k as you write). But what date did your mother die? -the NRB was never £185k according to the HMRC website at:

http://www.hmrc.gov.uk/rates/iht-thresholds.htm

On that basis of 2 NRBs, his death estate of £395k would not be liable to IHT. Hence your estimate of the OMV of the house at date of death of £350k has not been agreed (“ascertained” in their jargon) by HMRC as the base cost for calculation of liability to CGT on sale of house by beneficiaries.

You have not explained whether you intend to market the house at an asking price of £450k and expect to realise close to that price gross. But if you do expect to realise a significantly higher price than £350k within a year of death that must call into question your estimate of £350k for OMV unless there are some special factors –e.g you have made improvements.

I suspect, but of course do not know, that you may have been penny wise but pound foolish is not seeking any professional help and now thinking you have a possible CGT liability. There is probably no liability to either IHT or CGT (on sale of house) in the circumstances you describe. My suggestion is to choose a conveyancing solicitor at a firm with a good probate dept and run your circumstances past that firm for a negotiated fixed fee that covers both probate/IHT account review and conveyance.

[Peter D]

I'm even more confused. In what year was your Mums DoD. I think you mean £650K i.e. 2 * 325K.
Regards Peter

[mullet]

Father died leaving all to three daughters.

Please clarify. Either:

1. Father left all assets and money to three daughters. In which case each inherits a share of the property at their respective share of probate value at date of death. On disposal of the property each declares one third of the gain as an individual and three annual exemptions are available. CGT is personal liability.

2. Father left residual estate to three daughters, i.e. after all assets liquidated. In which case they are responsible for declaring the disposal as joint executors and CGT is estate liability with trust/estate rules applying.

[pqtaxation]

Either:

1. Father left all assets and money to three daughters. In which case each inherits a share of the property at their respective share of probate value at date of death. On disposal of the property each declares one third of the gain as an individual and three annual exemptions are available. CGT is personal liability.

2. Father left residual estate to three daughters, i.e. after all assets liquidated. In which case they are responsible for declaring the disposal as joint executors and CGT is estate liability with trust/estate rules applying.

Of course w/o knowing the terms of the testator's (deceased father's) will it is necessary to make a certain amount of guesswork .

But I'd disagree with Mullet's two generalisations at 1 and 2 as follows:

1 Only when the probate value has been ascertained does it become binding to use it as base cost for CGT (CGTA 1992 s274 from memory, but if not someone will correct that detail but my point will still stand). In OP’s particular case, it looks likely that the unascertained, probate value understated OMV at DoD and so a higher value (than probate value) can be used for base cost if the corrected (higher) OMV can be substantiated on CG34.

2) If the house falls into residue, the executors can appoint out legal and beneficial interests in it without selling it unless (unusually) the testators will required otherwise.

[Ciwulan34]

PQtaxation - in my first post I explained that a proper valuation of the property had been carried out ie by a Chartered Surveyor. This was submitted with the IHT400 and we have had a letter from HMRC accepting our figures. My question regarding mitigating our "possible" CGT liability revolves around the fact that in spite of all advice to the contrary, one of the sisters is insisting that the property be put on the market at £450,000 to 'test the waters' - if no success then the price will be reduced. I feel when we do eventually get a sale, that the accepted price will be near to the probate valuation. No renovations etc have been carried out and other estate agents agreed with the probate valuation, except the one who stated that £450,00 was achievable - and as a result of one sisters greed, it means that it is being put on the market at too high a price. However, if by some miracle, the house sold for £450,000, I was just trying to pre-empt CGT problems by finding out whether it would be a good idea to transfer the property into the names of the residuary beneficiaries (the sisters) prior to the sale so that there would be three personal CGT exemptions available.

I stated that the exemption available for mothers estate was £118,000 not £185,000.

Peter - sorry, typing error only, yes, I did mean £650,000 and the threshold for 1990 was £118,00.

Obviously, if the house sells for more than the probate value, I will contact HMRC and let them know and presume that the District Valuer will then get involved.

Thanks very much to all

[pqtaxation]

.... - in my first post I explained that a proper valuation of the property had been carried out ie by a Chartered Surveyor. This was submitted with the IHT400 and we have had a letter from HMRC accepting our figures. .... However, if by some miracle, the house sold for £450,000, I was just trying to pre-empt CGT problems by finding out whether it would be a good idea to transfer the property into the names of the residuary beneficiaries (the sisters) prior to the sale so that there would be three personal CGT exemptions available.

I stated that the exemption available for mothers estate was £118,000 not £185,000.

Obviously, if the house sells for more than the probate value, I will contact HMRC and let them know and presume that the District Valuer will then get involved.

Your clarification in your last post makes the circumstances much clearer.

If your mother died in the 1989/90 tax year the NRB then was £118k.

The only substantive open point is whether the letter from HMRC closing the case served to ascertain the house value at £350k apparently without their referring the valuation to the DV.

My suggestion on how you could take professional advice on that point stands as does how to get four AEAs if needed.

[Ciwulan34]

Thank you for your advice and your time

[maths]

Prima facie, without sight of all documentation, I suspect that the values on death have not been "ascertained" in which case the base cost for CGT purposes at date of death has not been agreed.

[Ciwulan34]

Thank you for your post - the letter from HMRC states that they have no further enquiries to make about the assets passing under the will - there is no inheritance tax to pay. They also state that we must inform them of any changes that affect the amount of IHT payable on the estate. It looks as if it is a standard letter.

When I telephoned HMRC earlier this week and told them about the situation, they said that if we had received that letter then they have accepted that value as being correct for the house. If it is sold for more than the probate value then that is because someone was willing to pay more - not necessarily that the property was worth the higher amount. CGT would then be payable.

I have been reading around this matter and feel that if the property is sold for more than the probate value, even though we had a good valuation of the property carried out, we should inform HMRC. Would they then substitute the sale price of the property for the probate price? If a new higher price was substitued, IHT still wouldn't be payable and therefore, presumably, no CGT. However, I have seen comments about the penalty system and am concerned!

[pqtaxation]

However, I have seen comments about the penalty system and am concerned!

No need for you to be concerned by penalties. I'm travelling internationally at moment but am due a airport transit later today when I'll try to explain why and also how this long thread is becoming the story of the "golfing executor".