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Where Taxpayers and Advisers Meet

General (Property)  Inheritance Tax Query

Mark Douglas
Posts: 2
Joined: Mon Sep 09, 2019 4:54 pm

General (Property)  Inheritance Tax Query

Postby Mark Douglas » Tue Sep 10, 2019 10:54 am

I would be most grateful if someone would be kind enough to provide guidance on my following query :-)

1) In 2006 my father transferred a property to myself and my brother at zero cost.
2) In 2008 my father passed away, he had no other assets.
 
We have retained and let the property for the past 10 yrs, paying income tax on the rental income.  

We have now received an offer of £ 500,000 and wish to sell the property.   As the sale proceeds will be split 50/50, I would be most grateful to know our likely inheritance/CGT tax position on the disposal.

Having "Googled" the subject, I am uncertain due mainly to the original date of transfer (2006) and his date of death (2008). My understanding is that the IHT
Nil rate is £ 325,000 and whether we would be entitled to incorporate the current residents Nil Paid Band of £ 150,000 (Tax year 2019/20).

Any guidance would be kindly received. 

Best wishes 

Mark  

pawncob
Posts: 4342
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: General (Property)  Inheritance Tax Query

Postby pawncob » Tue Sep 10, 2019 12:44 pm

Any IHT due on your father's death would have been due from his estate and settled by his Execs.
You inherited the property at probate value. The gain will be from probate value to sale proceeds and taxable at current CGT rates when sold.
Your IHT position will depend on your assets at date of death. No relief is available in respect of the property.
With a pinch of salt take what I say, but don't exceed your RDA

someone
Posts: 381
Joined: Mon Feb 13, 2017 10:09 am

Re: General (Property)  Inheritance Tax Query

Postby someone » Tue Sep 10, 2019 1:26 pm

Was it his home and did he continue to live in it after transfer to you?

I think your base cost is market value when it was transferred to you.

As it was a gift it will also have fallen into your fathers estate.

Your CGT will be assessed on difference between market value in 2006 and now. IHT will have been due in 2008 (less the 2008 IHT allowance).

Chucking the numbers into the Nationwide house price index suggests a value of 380k in 2006 and 400k in 2008 (whole of uk). Nil rate band was c300k so some IHT would, presumably, have been due and paid then.

AGoodman
Posts: 827
Joined: Fri May 16, 2014 3:47 pm

Re: General (Property)  Inheritance Tax Query

Postby AGoodman » Tue Sep 10, 2019 4:02 pm

For the avoidance of doubt, I think pawncob missed the gift so the CGT base cost is based on the market value 2006 rather than probate.

If no IHT account was filed in 2008-9, and any inheritance tax is payable as seems likely, there will definitely be 10 years of interest plus possibly penalties.

someone
Posts: 381
Joined: Mon Feb 13, 2017 10:09 am

Re: General (Property)  Inheritance Tax Query

Postby someone » Wed Sep 11, 2019 7:52 am

For the avoidance of doubt, I think pawncob missed the gift so the CGT base cost is based on the market value 2006 rather than probate.

If no IHT account was filed in 2008-9, and any inheritance tax is payable as seems likely, there will definitely be 10 years of interest plus possibly penalties.
If it is in London, and the gift was in the estate then it probably was well below the IHT threshold. If the property was in the estate then it's borderline (I'm unsure what is in the estate if it's a GWROB)

Unfortunately , if it's in London then there was a c20% increase in value between gift and death so there will be around 50k now liable to CGT when most, if not all, of that would have been in the IHT allowance.

If the OP (or his father) took IHT advice before the gift then there might be a claim against the advisor possible as there would need to be fairly unusual circumstances for the gift to have made sense for tax purposes.

Mark Douglas
Posts: 2
Joined: Mon Sep 09, 2019 4:54 pm

Re: General (Property)  Inheritance Tax Query

Postby Mark Douglas » Wed Sep 11, 2019 10:06 am

Many thanks for taking the time to provide this information :-)

Simply for reasons of being uninformed on these matters, my father had no Will and transferred the property in 2006 to myself & brother at zero cost.

For info he lived in the property until his death.   

At the time of his death (2008) no Inheritance Tax was paid on his estate (House + £ 5000 cash) and we did not engage the services of a professional such
as a Solicitor or Accountant.

I am sure there are many unknown variables here, although would suggest that the likely property value in 2008 is £ 300,000. 

Once again many thanks for being so helpful in advising on this complex subject !!!


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