CGT responsibility of executors

[Julie1111]

I was joint executor of my brothers will with another woman he had an affair with. ( Ms X ) my brother and I had been renting a property out together and when he died MsX and I got probate, We paid his taxes for the last year of his life and Ms X had everything he owned as per will. His share of the rent after expenses was split 50/50 with her for many years. The title deed wasn't changed and she had a beneficial interest as she took rent, the house is now being sold and she has signed so it's obvious to all she has an interest.
I now find out she has never declared her share of the rent, not filled out a self assessment and probably will not want to pay the CGT. I wonder if I should just stop it at 28% or should I not involve myself ? I am worried the tax man may hold me jointly responsible for not changing the title and as jt executor may hold me liable for the CGT. I don't think she had enough income to pay tax on the rent but was that my responsibility too, if she did? ( I always paid mine by SA )

[TaxAdviser2018]

On the basis that you and your brother were the beneficial owners then Ms X would not be required to report any income from the property to HMRC. This is because only the beneficial owners are liable to tax on the income arising from the property.

If your brother gifted Ms X an amount equivalent to half of his share of the property income, there may be Inheritance Tax (IHT) implications if it is deemed to be a gift on the amounts transferred within seven years of his death. Where annual gifts made by your brother to Ms X (and others if relevant) were (a) below £3,000 or (b) the amount of income gifted was regularly paid to Ms X/others and did not result in your brother's capital being reduced (i.e. regular gifts out of income) then no IHT should be payable.

On the basis that Ms X owned your brother's share at the date of sale and you continued to own your half share, you would both be required to sign the TR1. If the property is still in yours and your brother’s name, you should instruct a suitably qualified conveyancer to prepare a TR1 re-registering the property in yours and Ms X’s name under a tenancy in common and register a restriction on title at the same time.

Any capital gain arising on Ms X's share of the property will be based on her share of the sales price less her share of the cost of sale and the amount she inherited the property at, i.e. the probate value. The gain will be taxed at 28% after taking into account her annual capital gains tax exemption and any available capital losses.

Ms X is responsible for the tax on any income and gains arising on her. Under no circumstances should you be.

In respect of the title, on the basis that you and your brother were on the title at the date of sale, the solicitor carrying out the conveyance can advise you on executing a TR1 in yours and Ms X names prior to executing a TR1 (probably) immediately subsequent to the initial TR1. Where you are the only living registered name on the registered land title, you would be deemed to be holding it on trust for yours and Ms X benefit. You may need to provide a copy of the Will and IHT250/IHT400 and grant of probate should HMRC enquire into property in order to demonstrate the beneficial and legal ownership.

[Julie1111]

Thanks for replying.