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Where Taxpayers and Advisers Meet

IHT or CGT due on inherited property sale?

Adrien
Posts: 2
Joined: Fri Sep 11, 2015 1:52 pm

IHT or CGT due on inherited property sale?

Postby Adrien » Fri Sep 11, 2015 1:57 pm

In February 2014 my father died leaving me (his son) and my sisters his house. At the date of his death the property was valued at £1.2m by a surveyor.

As his estate was valued at greater than £325k, IHT was paid at the time. We are now (a year and a half after his death) looking to sell the house. Estate Agents have valued the property at £1.5m.

My question is: if we sell the house for £1.5m then will we just need to pay CGT on the £300k capital gain... or will HMRC require that IHT is re-calculated and the actual value of the house (£1.5m) be used for the calculation rather than the estimated value (£1.2m)?

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: IHT or CGT due on inherited property sale?

Postby section 44 » Fri Sep 11, 2015 2:26 pm

if we sell the house for £1.5m then will we just need to pay CGT on the £300k capital gain
yes

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

Re: IHT or CGT due on inherited property sale?

Postby King_Maker » Fri Sep 11, 2015 4:01 pm

Is there a good reason to support the £300,000 increase in 18 months? It may be that your Valuer (RICS, hopefully) will be able to assist here?

If not, HMRC will be wanting 40% IHT on the extra £300,000 not 28% CGT. Interest and Penalties could be payable on top.

Adrien
Posts: 2
Joined: Fri Sep 11, 2015 1:52 pm

Re: IHT or CGT due on inherited property sale?

Postby Adrien » Tue Sep 15, 2015 3:31 pm

Thank you for your posts. In answer to your question: there's no good reason for the house now (apparently) being worth £300k more than when it was valued 1.5 years ago. I put the discrepency down to (a) some imporvement in the housing market and (b) the estate agent being more 'bullish' than the surveyor. Of course we may not achieve £1.5m - it is just the estate agent's recommended marketing price.

I guess I could rephrase my question slightly to make it more hyperthetical: when selling an inherited house, at what point does CGT become applicable rather than IHT? Taking my situation we could envisage two scenarios at opposite ends of the timeline spectrum:
Scenario 1: A few months after my father's death we sell the house for £300k more than the valuation used for probate. In this scenario I am failry certain HMRC would require us to re-calculate IHT based on the true/realised value of the house.
Scenario 2: We decide to live in the house rather than sell it. 20 years in the future we sell the house for £300k more than it's probate value. I am fairly certain HMRC would expect us to pay CGT on the £300k capital appreciation (or nothing if it is our primary residence). I assume they would not expect us to revisit the IHT calculation 20 years down the line.

So at what point do we switch from having an IHT obligation to a CGT obligation? Is it down to length of time between grant of probate and the sale of the house? If so is there a specified amount of time? Apologies if I'm missing the point here... I'm quite new to this!

Many thanks,

Adrien


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