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Where Taxpayers and Advisers Meet

CGT and Executors

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm
Re: CGT and Executors

Postby maths » Thu Jun 28, 2012 7:15 pm

I'm not sure why HMRC accepted the IHT 400 when the IHT 205 should have been lodged.

In any event the letter you received does not mean that no IHT can be charged; if, for example, the valuation could be shown to have been prepared and certain material facts had not been disclosed (eg planning permission likely or pending) then the valuation at death would be revisited.

In addition, I'm reasonably clear the IHT has not been ascertained which means the base cost of the asset for CGT hasn't been agreed but it appears likely to be the valuation figure you obtained.

If in the event the property sold for £450K then this would be a material difference from the valuation and HMRC would need to be notified.

In this case the issue would then be whether the original valuation had been carried out in an acceptable manner; if it had then the fact of the £450K sale would be irrelevant. If not, then possible IHT would arise and possible penalties depending upon whether the information had been supplied carelessly, deliberately inaccurately, etc.(which from what you say doesn't appear to be the case).

pqtaxation
Posts:353
Joined:Wed Aug 06, 2008 3:38 pm

Re: CGT and Executors

Postby pqtaxation » Fri Jun 29, 2012 12:49 am

I'm not sure why HMRC accepted the IHT 400 when the IHT 205 should have been lodged ......

If in the event the property sold for £450K then this would be a material difference from the valuation and HMRC would need to be notified.

In this case the issue would then be whether the original valuation had been carried out in an acceptable manner; if it had then the fact of the £450K sale would be irrelevant. If not, then possible IHT would arise and possible penalties depending upon whether the information had been supplied carelessly, deliberately inaccurately, etc.(which from what you say doesn't appear to be the case).

In making the above claim that “possible IHT would arise", it is not clear how Maths has analysed the numbers in OP’s specific case.

As I understand those numbers: 2 NRBs available totalling £650k and a death estate comprised of other net assets of £45k and a house whose probate (at open market OM) value was estimated at £350k to make a total of £395k.

Thus there is headroom of £255k (= 650-395) before any liability to IHT would arise. Hence revising upwards the estimate of OMV of house by £100k to £450k would not engender a liability to IHT or even be close to doing so. Whether making such a revision can be justified is a different matter.

But like Maths, I doubt HMRC’s letter serves to “ascertain” the probate value of £350k (from memory a fairly recent first tax tribunal case confirmed this but I don't have case reference to hand). Rather that HMRC’s standard letter of closure just serves to reflect their recognition of that sizeable headroom and the unlikelihood therefore that their further enquiries would result in any liability to IHT.

It says nothing about the base cost for CGT.

I wrote in my last post of how this long thread was becoming the story (by analogy) of an executor golfer(EG). By that I mean consdier that original poster (OP) is a golfer who seems an intelligent person keen to learn. But unfortunately each part of the tax system is like a separate and difficult golf courses strewn with bunkers. In trying to go round the IHT (golf) course for the first time she seems to have fallen into each bunker - wasting time on preparing IHT400 rather than simpler IHT 205 form, wasting money on a professional valuation when because of the sizeable headroom written estimates of OMV from three (optimistic) estate agents would have sufficed, believing HMRC has agreed any values etc etc.

The professional adviser golfer (PAG)is not necessarily a better golfer (e.g. more intelligent) but has the significant advantage of having played the IHT course before and consequently knows where the bunkers are located and how to avoid them.

Hence my suggestion, if you follow my analogy, for OP/EG to consult with a solicitor firm of PAGs. I’d guess a couple of hours advice, including an introductory free session, as part of a conveyance +probate advisory package would cost only £200 +VAT incrementally over the conveyance only cost which would be much less I suspect than the wasted cost of the professional valuation. They would also know how to play the CGT golf course and where it overlaps with the IHT course.

Have to go to catch a plane.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT and Executors

Postby maths » Tue Jul 03, 2012 12:11 am

To maximise the number of annual exempt amounts (AEA) to be available to offset the gain expected to be realise on sale of house, I’d suggest to instruct the solicitor to create a deed to appoint out (say) a 25% interest in the house to each daughter so that on contracting to sale each daughter has beneficial interest in (say) 25% as does estate (which also has one AEA if sold within a set period after the death).
Not convinced that the 25% retained by the executors is not held as bare trustee for the 3 daughters in which case no annual exempt amount on sale by executors.

The assent of the 75% by the executors to the 3 daughters means that that the 75% is not required by the executors for administration purposes; it is difficult to defend that the 25% retained was required for administration purposes when this is clearly not the case.


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