IHT paid but estate worth more than declared
Discussion
oblio said:
If a property was valued at £200k for IHT purposes and the IHT paid at that level but then the property ended up being sold for a higher figure, how realistic is it that the Inland Revenue would find out and chase them for the extra IHT?
The buyer will presumably be making a SDLT filing with HMRC?Doofus said:
As above, it's not additional IHT, it's CGT because the estate has already been valued, agreed and taxed.
Googling suggests otherwise. Where a property is valued for IHT and the tax paid, and the property or any estate assets are subsequently sold during the period of estate administration for a higher price, HMRC can come back and seek a reassessment of the estate value taking account of the increase in the value of the property and other assets. Whether or not further IHT is payable will depend on the total new value of the estate and if the allowances have been exceeded.That's my interpretation of the requirements.
R.
I had similar as an executor. The key thing is that IHT is based on value on the date of passing. For example shares are the share price that day. In my case the house increased in value from the date of passing to when it was sold, the estate had to pay some CGT. Which has to be paid very quickly after the sale if I remember correctly.
The Leaper said:
Doofus said:
As above, it's not additional IHT, it's CGT because the estate has already been valued, agreed and taxed.
Googling suggests otherwise. Where a property is valued for IHT and the tax paid, and the property or any estate assets are subsequently sold during the period of estate administration for a higher price, HMRC can come back and seek a reassessment of the estate value taking account of the increase in the value of the property and other assets. Whether or not further IHT is payable will depend on the total new value of the estate and if the allowances have been exceeded.That's my interpretation of the requirements.
R.
Aren’t there two different issues being described here:
1) an incorrect valuation when the estate was valued at the date of death (additional IHT needs to be paid)
2) a subsequent increase in the value of an asset between the date of death and eventual sale (additional CGT needs to be paid)
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1) an incorrect valuation when the estate was valued at the date of death (additional IHT needs to be paid)
2) a subsequent increase in the value of an asset between the date of death and eventual sale (additional CGT needs to be paid)
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Sport_Turismo_GTS said:
Aren t there two different issues being described here:
1) an incorrect valuation when the estate was valued at the date of death (additional IHT needs to be paid)
2) a subsequent increase in the value of an asset between the date of death and eventual sale (additional CGT needs to be paid)
/
Yes but the value for IHt purposes would only be checked if a district valuer was asked to review as I understand it.1) an incorrect valuation when the estate was valued at the date of death (additional IHT needs to be paid)
2) a subsequent increase in the value of an asset between the date of death and eventual sale (additional CGT needs to be paid)
/
My experience was that CGT was paid.
In theory, you want to maximise IHT allowance and then rinse a little bit via CGT allowances although that would be playing the system.
Thanks all
Speaking to my mate he advises that the property was valued at 200k simply because it was a bit of a wreck so difficult to put a price on. It formed part of the estate which was liable to IHT as it was over the allowances. The property sold for 16.5k more than was submitted to the authorities for IHT purposes.
As such now some 6.6k is due on the overage of 16.5k based on 40% IHT.
My question relates to whether this will get chased by the authorities or not? How would they know what the property sold for? Do they have a mechanism for checking back?
He's basically wondering if he can score for the 6.6k I reckon rather than pay it as tax.
Speaking to my mate he advises that the property was valued at 200k simply because it was a bit of a wreck so difficult to put a price on. It formed part of the estate which was liable to IHT as it was over the allowances. The property sold for 16.5k more than was submitted to the authorities for IHT purposes.
As such now some 6.6k is due on the overage of 16.5k based on 40% IHT.
My question relates to whether this will get chased by the authorities or not? How would they know what the property sold for? Do they have a mechanism for checking back?
He's basically wondering if he can score for the 6.6k I reckon rather than pay it as tax.
oblio said:
My question relates to whether this will get chased by the authorities or not? How would they know what the property sold for? Do they have a mechanism for checking back?
Once again: the buyer will have made a stamp duty return to HMRC.That SDLT return will say what it sold for.
Whether it's CGT or IHT depends on who did the valuation. If it's a RICS person &/or the District Valuer has agreed the valuation, then it would be CGT on the increase in value. If the valuation was done by a mate down the pub, then HMRC might have a different opinion & may contend IHT due (at 40% rather than the lower CGT rates). And they may want interest on IHT paid late.
But the OP wanted to know what the realistic chances of HMRC knowing about it / following it up. As Arnie said, "Do you feel lucky?".
But the OP wanted to know what the realistic chances of HMRC knowing about it / following it up. As Arnie said, "Do you feel lucky?".
oblio said:
Thanks all
Speaking to my mate he advises that the property was valued at 200k simply because it was a bit of a wreck so difficult to put a price on. It formed part of the estate which was liable to IHT as it was over the allowances. The property sold for 16.5k more than was submitted to the authorities for IHT purposes.
As such now some 6.6k is due on the overage of 16.5k based on 40% IHT.
My question relates to whether this will get chased by the authorities or not? How would they know what the property sold for? Do they have a mechanism for checking back?
He's basically wondering if he can score for the 6.6k I reckon rather than pay it as tax.
If the house was sold during the period of administration of the estate of the deceased person, my understanding is that, as well as a possible IHT payment, CGT is due on any increase in value, less allowable costs eg estate agent and solicitors, less any remaining portion of the available CGT allowance of £3000 per year. The CGT rate is 24% and must be paid within 60 days of the sale of the house.Speaking to my mate he advises that the property was valued at 200k simply because it was a bit of a wreck so difficult to put a price on. It formed part of the estate which was liable to IHT as it was over the allowances. The property sold for 16.5k more than was submitted to the authorities for IHT purposes.
As such now some 6.6k is due on the overage of 16.5k based on 40% IHT.
My question relates to whether this will get chased by the authorities or not? How would they know what the property sold for? Do they have a mechanism for checking back?
He's basically wondering if he can score for the 6.6k I reckon rather than pay it as tax.
It's an individual's, and executor's, responsibility to know when tax is due. Deliberately not paying tax is a criminal offence as far as I know.
R.
R.
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