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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15940
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My father was executor and a beneficiary in his sister's will.

Customer Question

My father was executor and a beneficiary in his sister's will. The will states that her house be "sold and the net sale proceeds be divided" between 3 beneficiaries (inc my father) @ 40%, 30%. 30% split. Just before her death (Dec '13) the property was due to be sold at auction and reserved at £100k. She passed before the auction date and the property was withdrawn. It was finally sold at auction in Feb 2015 for £135k, above the still £100k reserve price. Solicitor is saying that we have to pay CGT on the £35k; based on a single persons allowance, because the property was sold by the estate and not the 3 beneficiaries. The tax was calculated:
Gain - £35k
LESS
Personal Allowance - £11k
Legal costs of sale - £5,745
HMRC probate exemption (1% of probate value) - £1,000
Net Gain £17,255. Taxed @ 28% = £4,831.40
Is this correct? Isn't each beneficiary taxed and their £11k personal allowance taken in to account?
Also, for information, my father is 83 and, I assume, doesn't pay tax?
Many thanks for your help.
Kind regards
Patrick
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Your aunt died in December 2013 and the property was sold in February 2015. At that time, all her assets became the property of her deceased estate which was under the control of your father as executor. Therefore, the gain from any sale of the property is not a gain belonging to your late aunt as it (the property) was still owned by her at the time of her death.

The gain which is calculated using the probate value of the property as the CGT cost belongs to the deceased estate which gets one CGT exemption for the tax year in which the death occurred and one in each of the two following two tax years. However, an unused CGT exemption cannot be carried forward. Deceased estates also pay CGT at 28%.

Had the property been put into the names of the beneficiaries before being sold, then each beneficiary would have been entitled to offset their respective CGT exemptions against their respective shares of the gain and may only have had to pay CGT at 18% depending on the level of their respective incomes.

I hope this clarifies matters for you but let me know if you have any further questions.

Customer: replied 2 years ago.

Thank you Tony.

Expert:  TonyTax replied 2 years ago.
Thanks.