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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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You've helped me a few times with questions relating to

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Hello. You've helped me a few times with questions relating to administering my late Father in Law's estate. I had a couple of things which are still on my mind...He died 3 years ago left everything to his wife... I've been helping my wife administer the estate.The family home was sold shortly after his death (owned by husband and wife), and the mother in law moved into a flat (which was just in the father in law's name). She's lived there for 2 years now... we've not updated the land registry with the MiL's name, as there is still a small mortgage on the property (in the name of my late FiL) which we will pay off shortly when it's sold.When the property is sold, how is it treated for CGT purposes? If it has increased in value since the FiL died, is there CGT payable? It is the MiL's sole residence, and is owned by her in all but name (at the land registry).... but would HMRC treat it as if it is still owned by the estate?Also, we have distributed all assets from the estate, aside from this flat... I'm aware that the mortgage should really have been paid off before that was done... but we do have funds in an account ready to do this. Is there a penalty for distributing the estate's assets before all liabilities are paid in full?Many thanks...Many thanks

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Strictly, executors should not distribute assets before settling liabilities of the deceased estate but there aren't any penalties of which I'm aware.

An estate is entitled to the annual CGT exemption for the tax year of death and for the next two tax years if the administration period lasts that long. If the flat is sold from within the estate, the gain will be calculated using the market value at death of your father in law as the cost for CGT puposes. Estate gains are taxed at 28% whereas gains made by an individual are taxed at 18% or 28% or a combination of the two rates depending on the level of their income.

If the flat is transferred to your mother in law, her cost for CGT purposes will be its market value at the date of death of your father in law. She will also qualify for main residence exemption from the date she moved into it which would cover two-third's of the gain.

Take a look here for more information on deceased estates and tax.

I hope this helps but let me know if you have any further questions.

Customer: replied 8 months ago.
Many thanks. We didn’t get a formal valuation at the date of death. Do you know what we need to do in this case? Can surveyors perform a retrospective valuation?

You could get a retrospective valuation or google "property sale records" for the postcode and look for sales of similar property 3 years ago.

Customer: replied 8 months ago.
Thanks Tony, and finally... on the sa900, do you only have to report a property sale if a gain has occurred (is this what a chargeable gain is defined as?)Thanks

Individuals have to report gains if they exceed the annual exemption or the total disposal proceeds exceed four times the annual exemption. The notes for the SA900 make no mention of the rules applying to individuals so I would report the disposal.

Customer: replied 8 months ago.
We disposed of another property a couple of years ago (no gain made... a loss in fact). It was a property which sold for £180k at auction. We didn’t report it on the sa900 that year as we presumed we didn’t need to. Are you aware of any penalty which may apply in this situation, even though no gain was made? Thanks

As no tax was due, there should not be a penalty.

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Customer: replied 8 months ago.
thanks for your help