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taxadvisor.uk, Chartered Certified Accountant
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My mother died recently and left a will. There is no mention

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My mother died recently and left a will. There is no mention of her house in the will. She gave the house to her 5 children when she purchased it in 1995.
The inland revenue have indicated that the house should be included in the probate calculation thus making it subject to inheritance tax.
If this is the case is capital gains tax payable on the increased value between 1995 and her death. The potential gain is approx. £140 between 5.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

Were/are there any documents in place to confirm transfer of property to the children back in 1995?

Did she continue to live in the property after transferring it to the children? If so, did she pay market rent on the property or rent free?

Many thanks

Customer: replied 2 years ago.

Yes.

The deeds were registered with the land registry in 1995. We also have copies of correspondence between mum and her solicitor at that time.

In 2010 we found that one sister was not on the list of owners and we had a further deed drawn up to register her as having an interest. (advised that only 4 people could own 1 property)

Expert:  taxadvisor.uk replied 2 years ago.
David, thank you for your prompt reply.

The rules regarding gifts that you continue to benefit from are -
If your mother continued to live in the property after transferring it to the children (i.e. continue to benefit from the home herself e.g living free of rent) these gifts are known as a gift with reservation of benefit. In these instances the gift won't be exempt from inheritance tax, even if she lived for 7 years afterwards.

Based on above, the value of the property at the time of death would be added to the estate for probate calculation and subject to inheritance tax and not capital gains tax.

More information on this can be found here
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/ind


I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

As I understand, your answer is that the current sale value of the property will go into Probate and that there will, therefore be no Capital Gain to declare providing sale price matches valuation at time of death.

Expert:  taxadvisor.uk replied 2 years ago.
David, thank you fo ryour reply.

If the sales value exceeds the value of property at the time of death, only then would the gain be chargeable to CGT. You would offset the gains allowance aginst the gain and the excess would be subject to CGT.

I hope this is helpful and answers your question.
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Expert:  taxadvisor.uk replied 2 years ago.

I thank you for accepting my answer.

Your reward of a bonus is greatly appreciated.

Best wishes.

Customer: replied 2 years ago.

Sorry one more clarification.

Will each benefactor be liable for CGT on their share of the increase in value on the property since its value in 1995

Expert:  taxadvisor.uk replied 2 years ago.
David, the valuation dates are
date of death
and date of sale

If there is an increase in value (gain on sale) between these dates only then will there be a chargeable gain. The value at 1995 does not come in the equation.

I hope this is helpful.