UK property inherited from a Canadian citizen. Is this subject to Capital gains tax

My brother was born in UK but lived and worked for 40 years in Canada until his death. He obtained Canadian citizenship in 1980s but also owned a small flat in UK purchased in 1970s. I and my 3 daughters have now inherited this property along with some shares, bank accounts( mainly CAnadian and also some UK based). Have read through guidance covering Capital gains tax on Gov.co.uk website and it states that “ only individuals who are treated for tax purposes as resident in UK are liable to pay Capital Gains tax.” so l am just seeking confirmation that this is the case.

Hi,

Your late brothers UK estate would be subject to Inheritance Tax rules, not his overseas estate. 

How Inheritance Tax works: thresholds, rules and allowances

Inheritance Tax: general enquiries

As you inherited a share in the property, you and the other beneficiaries may be subject to Capital Gains Tax if you dispose of the property.  

Have a look at below, which includes a capital gains calculator.

Capital Gains Tax

Thank you.

The UK property was sold by the Canadian executor and the money was added to the estate which we have eventually inherited, after capital gains and inheritance tax were paid in Canada by the executor. We have just received the final payout but still unsure if we need to pay further capital gains tax in UK?

Hi Ardentinny!

No as this is your share of an inheritance.

Thank you

So, just to clarify. My brother died on 5/12/2012. He was a Canadian citizen, his main domicile was in Canada( this being noted on the IHT tax form submitted 6/11/14 to HMRC and on all probate documents),although he did have a UK passport as well as Canadian passport and owned a UK property. Inheritance tax was paid Nov 2014 as Uk property and money ( one bank account and some UK shares) was £6000 over the IHT threshold. There was also some rent accrued on UK property between July 13 and March 2016 when UK property was finally sold and all proceeds put into the Estate. Once the Grant of Probate was approved and sealed in both UK and Canada, the Canadian executor began a very long process of selling all assets and then gradually distributing the estate to all 4 beneficiaries ( myself and my 3 daughters ) over a period of time between May 2016 and Dec 2023. Capital gains tax has continually been paid in Canada on all of the Canadian assets but until the final distribution was made on 27/12/23 I did not realise that no capital gains has been declared or paid on the UK assets. I mistakenly believed that capital gains tax had been paid in both countries as and when it was necessary by the Canadian executed. Please can you let me know what l need to do about declaring and paying Capital gains tax on the UK assets, as this was a genuine error on my part. Will l have to pay fines as l have not declared Capital gains tax on time? I have read through HMRC guidance notes on Capital Gains and still not entirely sure that Capital Gains tax needs to be paid on Uk assets because of my brothers proven domicile status in Canada. HS282 guidance notes, paragraph “Residence status of the deceased”, states- “In general terms, only individuals who are treated for tax purposes as resident of the UK are liable to Capital Gains Tax. So, if the deceased was not resident in the UK before their death, then the personal representatives will not be liable on disposals even if they are themselves resident in the UK.” Would be grateful for clarification.

Hi,

As the UK property was not his main or only residence, capital gains would be due on the sale of the property. This should be declared by the estate for them to pay any taxes. You will therefore need to liase with the canadian exectutors to ascertain the position. As you did not sell the property, no capital gains is due to be paid by you.

Thank you.