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bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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One parent died in 2012, and other in Nov 2014.The estate is now joint

Customer Question

One parent died in 2012, and other in Nov 2014.
The estate is now jointly owned by my sibling and I.
Estate value is approx. 1,000,000. With 900,000 in property (3 units, 2 rented + main home soon to be rented) approx. 70K of IHT left to pay in instalments.
I wish to purchase my siblings half.
I now have contradictory advice- accountant suggesting wait for 2nd anniversary, then purchase the main property –probate @500k.
Then purchase other 2 units in 2017/18 tax year. Keeping CGT to a minimum.
This seems black and white no issues.
Any gain over probate before Nov 2016 would have to be taxed IHT @40%
I plan to offer probate plus a gain that reflects the current market.
My Solicitor has just advised that the HMRC will allow a gain in line with for example the Halifax price index and therefor there would be no taxable gain to claw back into IHT.
To complicate matters further the new Stamp Duty regulations for rental / additional homes will mean I will be paying an additional £15
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to be able to help you with your question.
If you are acquiring second homes then there will be an additional 3% on stamp duty as a general rule.
Why do you think you are subject to CGT, you are buying not selling? It would be helpful if you could expand on that point. I think I know where you are heading. The seller has an Annual Exempt Amount (AEA) of 11.1K which is not cumulative making selling in successive hears more advantageous.
Customer: replied 1 year ago.
Thanks yes I understand the general principles and wish protecting my siblings tax liability.
However solicitor has suggested that there would be no extra IHT due even if I paid half of £560,000 on a probate of £500,000 as stated in question. Accountant says If transaction occurs before 2nd anniversary of death then 40% of 60,000 would be due from estate.
I am in a position to buy before April 1st thus saving 3% stamp duty.
Thank
Lee
Expert:  bigduckontax replied 1 year ago.
Well Lee, the conveyance before next April does absolve you from the extra 3%.
IHT is payable by the executors or administrators from the assets of the deceased often by selling some of these. Presumably that is why you are intending to pay the IHT yourself to preclude a forced sale. IHT is not payable on the gain. There is no CGT on death, all assets of the deceased being aggregated and exposed to IHT at a flat rate of 40% over 325K. Additional IHT is not payable if the executors sell at a later date with a gain over probate value. Here is the Money Advice Service's comment:
'The estate only has to pay Capital Gains Tax if the personal representatives sell an asset and its value has risen between the date of death and the date when the asset is sold. But the personal representatives do have a tax-free allowance (£11,100 in the tax year 2015/16) for the tax year of death and the following two tax years and so not all gains will create a tax bill.'
I am at a slight loss to understand your accountant's train of thought.
Customer: replied 1 year ago.
Thanks for the information,
I have been basing my plans on the 2 year IHT window. Thus minimising Cgt.
If indeed the revenue would allow a 13.3% gain I would do the purchasing now with no extra IHT no CGT and no extra Stamp Duty.
I am trying to find a 2nd opinion specifically on the IHT gain within 2 years. Would that be a tax lawyer as well as yourself?
Lee
Expert:  bigduckontax replied 1 year ago.
The gain, if there is any dispute, would be calculated form a selling value determined by the Valuation Office Agency (VOA), a part of HMRC staffed by Chartered Surveyors whose main function is to assess dwellings for Council Tax Bandings and business premises for business rates. However, they are also informed of all transactions in land and thus have a comprehensive knowledge of values, both current and historic.
I am only an accountant, not a lawyer. I have explained the CGT position if the executors make a gain on sale. This is a 28% tax, not the 40% of IHT. In fact very few estates are liable to IHT which does not kick in until 325K, unfortunately this estate is over that level.
If one parent bequeathed their whole estate to the other, a very common position, then on the decease of the survivor then the first person's 325K could be added to the second making an exemption of 650K possible. This may well substantially reduce the bite of IHT in the system.
Customer: replied 1 year ago.
Thank you Keith
You have certainly confirmed all the rules around the IHT and CGT issues.
I guess what I am asking will only be answered by HMRC in hindsight when it's too late to change anything. Unless I can get my sibling to agree to a sale at the existing probate values with a separate agreement to pay them extra if I should sell any of the properties at an above "index" gain.
Thank you for you time
I did send enquiry to a property lawyer on the just answer website, perhaps I worded question too vaguely? Can you redirect?
Lee
Expert:  bigduckontax replied 1 year ago.
Please be so kind as to rate me before you leave the Just Answer site.
I will try to arrange a transfer.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3384
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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