CGT on sale of inherited property
Discussion
Strange one, and not me in this situation, but a friend who I have told to get professional advice, but want to give her some advice better than pub talk for her to mull over the weekend.
The situation is she inherited a property (but only 20%) of a property, the other 80% went to a charity.
Few months later it went on the market as the charity wanted their money out. It is a property with an ag tag, so bit harder to sell and value. Went on the market at £650k one year ago, now sold for £900k.
Do they take the uplift of the £650k to £900k, so £250k, then as she has a 20% share, she pays 40% of that 20% so £20k before any possible deductions of legal fees, maintenance, allowances etc?
Or do they value it a year ago completely differently? And as she is a normal PAYE person, is the onus on her to submit a tax return? I get a slight impression she thinks if she ignores it, she wont be chased....
The situation is she inherited a property (but only 20%) of a property, the other 80% went to a charity.
Few months later it went on the market as the charity wanted their money out. It is a property with an ag tag, so bit harder to sell and value. Went on the market at £650k one year ago, now sold for £900k.
Do they take the uplift of the £650k to £900k, so £250k, then as she has a 20% share, she pays 40% of that 20% so £20k before any possible deductions of legal fees, maintenance, allowances etc?
Or do they value it a year ago completely differently? And as she is a normal PAYE person, is the onus on her to submit a tax return? I get a slight impression she thinks if she ignores it, she wont be chased....
If she’s contemplating ignoring it and seeing what would happen, I see no benefit in your helping accurately calculate liability.
There is a liability.
Does she want to actually calculate it and do it properly = help her.
Or, does she think she’ll be able to wing it, steer well clear. Tell her she’s mental, good luck, but you’ll not get involved or offer any advice other than this is crazy & could backfire spectacularly. But it’s her life her choice.
I’d not get involved unless she really wants help.
There is a liability.
Does she want to actually calculate it and do it properly = help her.
Or, does she think she’ll be able to wing it, steer well clear. Tell her she’s mental, good luck, but you’ll not get involved or offer any advice other than this is crazy & could backfire spectacularly. But it’s her life her choice.
I’d not get involved unless she really wants help.
It would depend on what the probate value of the property was.
Also as most of it has gone to charity its possible there would no IHT anyway so you could get the probate value revised and there would then be no CGT due.
I suggest more information is needed and paid professional advice would be worthwhile.
Also as most of it has gone to charity its possible there would no IHT anyway so you could get the probate value revised and there would then be no CGT due.
I suggest more information is needed and paid professional advice would be worthwhile.
stuthe
said:
said: If she’s contemplating ignoring it and seeing what would happen, I see no benefit in your helping accurately calculate liability.
There is a liability.
Does she want to actually calculate it and do it properly = help her.
Or, does she think she’ll be able to wing it, steer well clear. Tell her she’s mental, good luck, but you’ll not get involved or offer any advice other than this is crazy & could backfire spectacularly. But it’s her life her choice.
I’d not get involved unless she really wants help.
Basically this, she explained the problem to me, but ended the conversation with "or can I get away with it".There is a liability.
Does she want to actually calculate it and do it properly = help her.
Or, does she think she’ll be able to wing it, steer well clear. Tell her she’s mental, good luck, but you’ll not get involved or offer any advice other than this is crazy & could backfire spectacularly. But it’s her life her choice.
I’d not get involved unless she really wants help.
I told her not a chance, that they will track it back to her, and the fine would be possibly the same as the original liability.
I will go back to her, but if she mentions "getting away with it" I will wash my hands of the situation.
Just wanted to know if my very rough calc in my head was about right, It is just the uplift from original estate agents price, ti actual sale price, can she go back and say it should have been valued at X not Y, as it clearly sold for Z!
springfan62 said:
It would depend on what the probate value of the property was.
Also as most of it has gone to charity its possible there would no IHT anyway so you could get the probate value revised and there would then be no CGT due.
I suggest more information is needed and paid professional advice would be worthwhile.
Thank you, so not necessarily the estate agents £650k value, but the probate value would trump that. Also as most of it has gone to charity its possible there would no IHT anyway so you could get the probate value revised and there would then be no CGT due.
I suggest more information is needed and paid professional advice would be worthwhile.
joestifff said:
Do they take the uplift of the £650k to £900k, so £250k, then as she has a 20% share, she pays 40% of that 20% so £20k before any possible deductions of legal fees, maintenance, allowances etc?
..
As discussed already, the uplift will be against the probate valuation but the rate of cgt is generally 20% not 40 although residential property is typically 28%. Whether an agricultural tie avoids the higher residential rate or if part of it going to a charity makes a difference I don’t know. ..
Also, if the property is still part of the estate (rather than already transferred to your friend and the charity as joint owners) then I understand it is the estate that is liable for the cgt so any talk of avoidance seems unlikely as it would be the executors that would deal with it before distributing the 80/20 split and they would potentially be personally liable if they did not do it.
https://www.financialadvice.net/what_happens_when_...
Was the estate settled ? The most likely tax is iht ( if applicable) which is 40%
Given the limit is 325k and if she was married and her spouse did not use his allowance then you are upto £650k.
Charitable giving reduces this so the best thing to do is ask the executors as there is not enough info to determine the tax position
Was the estate settled ? The most likely tax is iht ( if applicable) which is 40%
Given the limit is 325k and if she was married and her spouse did not use his allowance then you are upto £650k.
Charitable giving reduces this so the best thing to do is ask the executors as there is not enough info to determine the tax position
Thanks all
She has been in touch with an accountant to help her through this. I hoped she’d do the right thing, and she is.
She only got 20% of the sale proceeds from this. The rest went to charity. There wasn’t any other assets or money left at all.
Reason for the disparity between valuation and sale is purely that it was a strange one to sell. Very run down, very remote and more importantly had an ag tag.
I advised her about questioning the probable valuation.
Just want to thank you all for help. You put her mind at ease, and I found it an interesting query!
She has been in touch with an accountant to help her through this. I hoped she’d do the right thing, and she is.
She only got 20% of the sale proceeds from this. The rest went to charity. There wasn’t any other assets or money left at all.
Reason for the disparity between valuation and sale is purely that it was a strange one to sell. Very run down, very remote and more importantly had an ag tag.
I advised her about questioning the probable valuation.
Just want to thank you all for help. You put her mind at ease, and I found it an interesting query!
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