Hello and welcome to the site. Thank you for your question.
You inherited the property on your son's demise. Although there is no written document to support the valuation, it was worth £85,000. This is the figure you could use for CGT purposes. In addition, you have spent some £10,000 on improvements. So your total cost becomes £95,000.
You say you have accepted and offer of £90,000 on the property.
There is a loss of £5,000 on sale of this property.
You should declare this transaction on your tax return as the sale proceeds are over £44,400 in supplementary pages SA108 - Capital gains and register the loss on sale. This would enable you to offset this loss against future capital gains.
Settlement of debts out of sale proceeds are out of scope in calculating the gain/loss to be declared. These are regarded as distribution of sale proceeds.
I hope this is helpful and answers your question.
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