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bigduckontax, Accountant
Category: Tax
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In 2004, I paid £56,000 inheritance tax on behalf of my wife

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In 2004, I paid £56,000 inheritance tax on behalf of my wife (I was the sole bread winner) who inherited a property from her father when he died at that time valued at £385,000. My wife on receiving the property post probate transferred the deeds from her father's name into both our names I divorced my wife in 2010 and was forced out of the family home, and was prevented from selling the property at that time owing to a court order until my daughter became 18 or left secondary education. In the interval I bought and sold a flat. In April this year the court order crystallized and we sold the property for £475,000 (making a profit of £90,000) and my ex-wife and I shared the proceeds of the sale after usual conveyancing expenses. I am assuming that I would be liable to £45,000 capital gains on this property at 28%, and wanted to know if I can offset my loss with :
1. Some of the inheritance tax in lieu of stamp duty
2. The estate agency fees on selling
3. The solicitor’s fees on transferring the deeds on inheritance and the selling of the property
4. Money I paid installing a new kitchen, a fire place (that did not exist), plastic soffit boards (previously there were wooden ones) - I have receipts for all these items.
5. Any other cost I might offset.

I am a 40% rate tax payer.



Hello Tom, I'm Keith and happy to help you with your question.


My immediate questions are was the property ever let and did you ever occupy it as your sole or main domestic residence?


However; offsetting the GGT load:


1. No.


2. Reduces the selling price.


3. Transfer costs inflate the value on acquisition thus reducing the capital gain. Solicitor's fees on selling reduces the selling price still further.


4. Added to the acquisition price to reduce the capital gain still further.


That exhausts the available expenditure. Although these costs are not substantial they do reduce your exposure to CGT; as the TV advert says 'Every little helps.' You also have your Annual Exempt Allowance of 11K, assuming you exchanged contracts for the sale in the 14/15 tax year. That knocks nearly a quarter off, say 3K, better than a poke in the eye with a sharp stick.


I do hope I have helped to relieve a little of the gloom.

Customer: replied 3 years ago.

I did occupy the property as prime residence from 2004 to 2009, when I separated on divorce and moved to rented before buying a flat. My wife remained in it under court order with my daughter until we sold it in April this year. So it was her prime residence. Can you just clarify something, the gross CGT is £90,000, before I deduct any of what we discussed, is this shared 50 50 with my ex wife and I as it is in joint names, so I am liable to pay £45000 gross, or am I liable to pay the whole £90000 as my wife does not pay CGT as it is her prime residence on selling ? We shared the sale proceeds of the house 50 50.

You only have a CGT liability on half the gain, 45K

However, another adjustment is needed as for a period it was your sole or main domestic residence and you are entitled to an element of Private Residence Relief (PRR). In general terms you occupied the property for six tenths of the ownership period (you should work this out exactly in months to get an accurate adjustment factor) so PRR is 60% of the gain, 45K @ 60% = 27K. Take off the annual allowance of 11K leaves 16K for CGT purposes @ 28% = 4.5K owing. Then there are all the other little adjustments to be made to the original 45K which will reduce it still further.

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Customer: replied 3 years ago.

Truly happy :) Thanks for this advice.

Delighted to be of assistance. Thank you for your support.