Capital Gains Tax assistance required.

I am one of two executors, alongside my older brother, for my late mother's estate, of which we are both beneficiaries, as are another brother and a sister. The value of my mother's house has increased since it was reported to HMRC for Inheritance Tax (IHT) purposes, potentially resulting in a Capital Gains Tax (CGT) liability upon sale at the increased price. I seek clarity on the steps to follow after the sale is finalised. As per my understanding, there is a £3,000 allowance, and the ability to deduct solicitor and estate agent fees from the property's increased value, with CGT due at 18% on the net amount. The property's value gain is expected to be a maximum of £45,000 before allowable deductions. Is it necessary to report the difference between the reported value and the actual sale price to the IHT department, or should I just pay the CGT due? For completing this payment, should I simply access the HMRC page titled "Use a Capital Gains Tax on UK property account to report and pay any tax due on UK property" and follow the subsequent instructions? Additionally, as a person registered for self-assessment, is it required to report this in my next tax return, and if so, what amount should be reported considering the CGT payment is made from the estate rather than as an individual taxpayer? Could you also detail any forms that need to be completed? Thank you for any assistance provided.

Hi Davidc,
For the gain, plesae refer to:
Report and pay your Capital Gains Tax
You do not report any increase at the time of sale to IHT.
Thank you. 
 

Thanks for the reply and clarifying the reporting process. Can you further advise if I need to report this gain as an individual tax payer through my annual self assessment tax return and if so what amount should I declare, or is the process complete once I pay the full amount through the appropriate CGT portal?

Not HMRC...this is dependent on whose name the property is being sold. If it is being sold within the estate then there is one CGT return and one calculation...and it needs to then form part of the estate tax return also. I note there are 4 beneficiaries. What often happens in this situation is the property is divested from the estate in to the beneficiaries individual names before sale, meaning that each beneficiary can then use their own CGT allowance (so £3000 exempt x 4, if the individuals are not using their allowance elsewhere for the year) and the rate of tax can then be lower for larger gains (dependent on beneficiaries other income), but this may not be the case here. You should speak to your solicitor as to whether it may or may not be beneficial to remove/transfer the property from the estate prior to sale or not, but will need to know your siblings other income estimate for the year to determine this.

Hi Clive. Thanks for you reply. The IHT forms were returned and there was no tax to be paid and even with the increase in value of the property the estate is still well below the threshold for paying tax. The property and other belongings are being sold by the executor's as directed in the will. The funds will then be distributed to the beneficiaries and the CGT will also be paid from the estate. My only remaining concern is that I need to complete a self assessment return each year and am unsure if I need to declare this gain? I don't think any of the other beneficiaries are required to complete a self assessment return.

Hello David. Noted re the IHT. The situation is that if the estate is selling the property then you need to do a CGT return on behalf of the estate, in this situation it goes on the estate CGT return only, not on any of the beneficiaries returns. If the property is divested there would need to be a CGT return for each of the beneficiaries. Under no circumstances should you put the full amount of the estate gain on your own return, You would only complete your own CGT return if the property is divested to you and the other beneficiaries first. Whilst 4 CGT returns might seem excessive if divested, each benefiicary could claim their annual CGT allowance against the gain if not used elsewhere, which is not possible within the estate, though this needs to be balanced against whether or not the gain would then split in to 18%/28% for any of them versus the estate amount. You could be paying more tax by selling the property in the estate than needs to be paid, or you may not be, but determining this is not possible without income details of the beneficiaries and knowing whether any of them use the annual CGT allowance elsewhere.

Ooops, thats 18%/24% not 28%...I jumped back a year

Hi Clive and thanks for the response. None of the beneficiaries are higher rate tax payers and I do not believe that any would be earning more than £25,000 p.a. gross. I have come to the conclusion that the guidance provided in the "Report and pay your Capital Gains Tax" page and in the section "If you’re reporting on behalf of someone else or an estate" is probably the best option for us and although we may end up paying some more tax, it looks like the easier route as HMRC will calculate what is owed as part of the process. Once the property is sold I'll complete all the required forms and pay what is owed and report back to this site for others to understand if this process is the correct path for them to take.