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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am executor of my late aunts will, she had 4 daughters as

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I am executor of my late aunts will, she had 4 daughters as beneficiaries.
She died in December 2013, her house was valued at £220k, I have just sold it last week for £300k.
I am about to send out cheques to the daughters for £75k each are they liable for the Capital gains tax ?.
I cannot see how I can pay any tax liable as I do know the tax status.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Was the property put into the names of the beneficiaries before it was sold?
Customer: replied 2 years ago.

No

The property was in my Aunts name only on the deeds.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

OK

My initial request should have read that "I do not know their individual tax status" as I think one is self employed and another does not pay tax.

Expert:  TonyTax replied 2 years ago.
Hi again.

Had you put the property into the names of the beneficiaries before it was sold, they would each have had a share of the gain to report of £20,000, the first £11,000 of which would have been exempt from CGT, leaving each of them with a net taxable capital gain of £9,000 on which they would pay CGT at 18%, 28% or a combination of the two rates depending on their respective income levels. Take a look here for the rules for working out the rate of CGT to be paid by individuals.

As the property was sold whilst it was still an asset of the estate, there is a gain of £80,000 of which the first £11,000 will be exempt from CGT leaving a net taxable gain of £69,000 on which CGT at 28% (£19,320) will be payable on 31 January 2016. Take a look here and here for confirmation of the CGT rate paid by personal representatives or trustees. As executor you would need to retain £19,320 to settle the CGT liability.

You will need to call the HMRC Deceased Estate Helpline on 0300(###) ###-####to get a tax return SA900 to report the gain and any estate income (the 2014 form is here and the 2015 form will be published shortly).

I have heard of cases in the past where the deceased estate sold a property whilst it was still owned by the deceased estate but a letter of intent was sent to each beneficiary before the disposal stating that the property was being sold "on behalf of the beneficiaries to save it being transferred into multiple names" and HMRC accepted that the property had been "sold by the beneficiaries" which enabled them to each claim the annual CGT exemption and to lower the overall CGT liability. Whether this is a possibility in your case, I cannot say.

Some executors have tried to argue that once the estate liabilities have been settled, that they are merely holding the property in a bare trust form for the beneficiaries in which case any gains are those of the beneficiaries and not of the estate. You would need to consult an estate/trust lawyer for a view on that. The wording of the will may be relevant. My own view is that the horse has probably bolted.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 2 years ago.
I have to go out for a short while but will be back in about 30 minutes to answer any further questions that you may have.
Customer: replied 2 years ago.

As it was spread over the 2 tax years can I claim two tax allowances and why would I have to pay at 28% as the executor?

I am retired and only pay tax a the basic rate

Expert:  TonyTax replied 2 years ago.

You cannot spread the gain over two tax years or claim two allowances I'm afraid. Executors pay CGT on behalf of the deceased estate at 28%. See page 5 here for confirmation of the rate for 2013/14. It is the same for 2014/15 as you can read here.

The CGT is not a personal tax liability of yours so your income and tax rate are not relevant. As I said above, deceased estates pay CGT at 28%. The CGT should be paid from the cash you hold from the sale of the property.

Customer: replied 2 years ago.

Can I claim for any maintenance of the property over the last16months and improvements made to increase the value of the property and gaining planning consent to also increase the resale value?

Expert:  TonyTax replied 2 years ago.
You cannot claim for the cost of general repairs and maintenance I'm afraid.

You can claim for improvements to the property which enhance its value. I'd include the planning consent costs in such a claim. Take a look here for the HMRC manual reference to enhancement expenditure.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15881
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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