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Where Taxpayers and Advisers Meet

Foreign property value sold vs value submitted for probate

Joined:Fri Apr 30, 2021 2:37 am
Foreign property value sold vs value submitted for probate

Postby Jazla010 » Fri Apr 30, 2021 4:03 am


Really unsure about our tax position here. Our solicitor thinks we're liable for a chunk of capital gains tax but I wonder if I need to challenge her a bit more.

So: Lost dad last year March 2020. Prior to his death, he had inherited a property from my grandparents but had not tied up all the paperwork to transfer deeds into his name so was actually still in my grandma's name (being managed by a Trust). Property was abroad.

Our probate application took a while to sort but finally submitted December 2020. Its about to be May 2021 and we are still awaiting grant of probate... hopefully any day/week now.

The value we submitted for the foreign property was $875K (around £432k). This was based on a private sale offer we had received at time (which subsequently fell through) for that amount which was also in line with a local estate agent valuation (850k-900k) and a bit more than the chartered surveyor date of death valuation of 800k. We always felt that these values were on low side (private sale offer was originally 940k but they couldn't get their finances together so we dropped price to 875k but then fell through again). However we also recognise its a particularly unique property so difficult to put a price on.

Fast forward a couple months and we start investigating options to put house on open market... at this point the estate agent valuations are now in the region of $1-1.2mill. Apparently its a sellers market and auction is the way to go.

So that's what we did. We put the house up for sale and yesterday, following a 5 week marketing campaign, sold under the hammer for $1.3mill (£678K by yesterdays exchange rate)!!! Due for completion at the end of May - which we've been able to do as deed didnt ever transfer to his name.

Anyway this represents a difference of $425K/£246K (which is vastly more than we really thought possible (bids had been teetering at the 1 mill mark but then suddenly very quickly hiked up when 2 'big fish' bidders went head to head, I guess they spotted the development potential vs buying to live in.

Liabilities yet to be totted up but let's work on the basis that there is a £200-210K difference after liabilities for value submitted vs what it now is. How do we handle this?

My parents combined nil rate band had 625K left less the 432k house value, leaving £193k nil rate band unused.

So potentially the at sale house value takes us over the threshold in which case inheritance tax would be liable on £7-17K (thereabouts).

OR as our solicitor is advising- capital gains tax is due on the difference of sold price vs value submited (ie capital gains tax due on £200-210k (or thereabouts).

I feel like we have grounds to challenge solicitor view because grant of probate hasn't yet been issued, and it's less than 2 years since dad's death that we are wanting to amend value (13 months since dad's date of death). Plus also the final selling price takes us over the Nil Rate Band threshold.

Surely this is not entirely down to market conditions?

Very grateful for any thoughts on how to approach.... thanks muchly!

Lee Young
Joined:Wed Aug 06, 2008 3:26 pm

Re: Foreign property value sold vs value submitted for probate

Postby Lee Young » Mon May 17, 2021 5:34 pm

If inheritance tax (IHT) was not paid on the initial set of figures declared, but could be now if the sale price more accurately reflects the value of the property at the date of death, then you will need to confirm the new figures with HMRC. CGT is likley to be payable if HMRC accepts your lower inheritance tax date of death values, but they are only set in stone if accepted by HMRC, which they will not have been if no IHT paid.

If the increase is due to market conditions changing between date of death and sale then this is absolutely a CGT issue. IHT is just a snap shot value of the estate/particular assets at the date of death. Things change and therefore if a profit has been made then CGT is payable on that profit. The IHT value of the profit sets your CGT base costs, so this needs to be established before you can then argue over any CGT.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner

Partner, Frettens LLP
01202 491701

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