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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5148
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My wife and I lost our son four years ago and inherited his

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My wife and I lost our son four years ago and inherited his house. His brother and wife were living there at the time of his death and continued to do so (as I am his personal representative) I honoured the agreement they had that they could live there so long as they continued to pay the mortgage and loans outstanding on the property.
They moved out at the end of last year and the property has been unoccupied and I have kept up the mortgage/loan payments. Over the past 6 months my wife and I have improved the property in readiness for sale i.e new bathroom and kitchen, re wire and new damp course totalling around around 10,000.
Just before passing away my son had a valuation (although no written evidence exists) of £85,000. The property has now been put on the market for £92,500 and we have accepted an offer of £90,000.
My question are : Do I need to pay capital gains on any monies after the existing mortgage and secured loan on the house are settled?
Do I need to declare this to HRMC tax office etc
Regards ***** ***** Clark
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.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.
I currently do not complete a tax return as I am retired and on a company pension. Will I need to contact my own tax office to declare the sale of a second property?
Alan, thank you for your reply.

As you are not expecting to pay CGT on sale of second home, I would advise you write to your Tax Office and notify them of the loss on sale of it so it is registered for future reference (as I explained in my last posting).

They may require you to complete a Tax return and you advise you accordingly.

I hope this is helpful. and other Tax Specialists are ready to help you
I thank you for accepting my answer.

Best wishes.