Process for paying CGT on a house when HMRC have not formally approved probate valuation

My mother recently passed away. Her will specified that her estate, including a house, was to be split equally between my two siblings & me. Our probate solicitor submitted an IHT400 form for her estate to HMRC. The estate fell below the IHT threshold so no IHT was payable. A probate valuation for the house, provided by a chartered surveyor, was submitted with the IHT 400. We now have a Grant of Probate & the house has been sold. We would like to follow the correct procedure in order to pay any Capital Gains Tax (CGT) that is due, as the property sold for more than the probate valuation. Our probate solicitor advised us to obtain a Deed of Appropriation to split the house sale proceeds into equal thirds so we could each use our personal CGT allowance on the proceeds - we did that. We have tried calling the CGT department but they weren’t able to fully answer our queries below: 1. Our probate solicitor has said that since there was no Inheritance Tax to pay, HMRC haven’t formally approved the surveyor’s probate valuation of the property, even though it was included with submitted IHT 400 forms - is that correct? 2. If HMRC haven’t formally approved the property’s probate valuation & CGT may be due then we have to complete form CG34 - is this correct? 3. If one of us with a share of the house completes a CG34 & obtains probate valuation approval from HMRC can the other two use that valuation approval or do all three of us have to separately submit a CG34? 4. Our probate solicitor says that HMRC require you to report & pay any CGT due on sale within 60 days of completion. However if HMRC haven’t approved valuation do you only report an estimate of CGT or do you report & pay then adjust payment later if valuation is subsequently changed by HMRC? 5. If CG34 is required, we’ve read it needs to be posted to HMRC. Do we need to include IHT400, as previously submitted by our probate solicitor, to HMRC? If so, does the whole IHT400 & associated schedules need to be posted or can HMRC look it up electronically? Grateful for any help - thank you.

Hi James Eddie,
1. In situations where a probate value has been returned for Inheritance Tax (IHT) purposes but has not been considered/ascertained by the Inheritance Tax office because the whole estate was below the IHT threshold, please refer to the guidance at CG16251:
CG16251 - Assets: checking valuations: value ascertained for probate                                                 
 2. For guidance on completing and submitting form CG34, please refer to the following guidance:
Post transaction valuation checks for Capital Gains (CG34)                                           
3. Yes, if one sibling obtains a probate valuation by submitting a CG34, the other siblings should use that valuation to calculate their CGT liabilities (and they don't have to submit their own CG34s)        
4. Each sibling should indeed report their CGT within 60 days, using an estimated probate value (which can later be amended as necessary when the CG34 valuation is received).      
Report and pay your Capital Gains Tax                                         
5. Please note that questions on Form CG34 make clear exactly what information is required in a range of circumstances.
Thank you.                                          

Dear HMRC Admin, Thanks for your reply. Below is how I’ve interpreted your answers. Please correct any that are wrong. 1. The probate value will not have been approved by HMRC. (The guidance CG16251 you referred to is part of the HMRC internal Capital Gains manual which appears to be for HMRC staff. Almost every other line of CG16251 refers to another web page making it extremely difficult to follow!) 2. We do have to complete CG34. 3. No interpretation needed - thank you for the clear answer. 4. We should each report and pay our own estimated CGT value but when reporting, say we’re waiting on CG34 valuation 5. We have to post CG34 to “PAYE and Self Assessment” but don’t have to include any IHT documents One more question has arisen. In working out the Capital Gain we would like to know whether the following could be counted as improving the property & therefore be deducted from the gain as costs (we have receipts & certificates to prove) : A. Removing an old inefficient boiler & replacing with a new top-of-the-range condensing boiler B. Removing very old electrics (fusebox, sockets, wiring) & installing a new Building Regulation compliant basic system C. Installing new 7 foot high permanent fencing (concrete posts & base with wooden panels) We have looked at the HMRC page “Tax when you sell property” but it doesn’t answer these questions. Thanks again.

Hi James Eddie

HMRC will accept probate values for inheritance tax and capital gains tax purposes.  
The completion of CG34 (Post-transaction valuation checks for capital gains) is not compulsory, however, if you would like HMRC to check your valuations, you can download the form at
Post transaction valuation checks for Capital Gains (CG34)
The replacement of a boiler, re-wiring of the property, replacing windows, doors, kitchens and bathrooms etc, fall under 'repairs and maintenance' and cannot be set against the capital gains liability.
Capital expenditure, such as when you 'add something to the property that was not there before', 'alter, improve or upgrade something that was existing' or 'include the purchase of furnishings and equipment for the property'.  Some examples are 'adding an extension' 'installing a security system if there was not one before' or 'replacing a kitchen with one of a higher specification'. 
Please take a look at Work out your rental income when you let property

Thank you

Dear HMRC Admin Thanks for your last reply. Could you clarify a couple of things please. 1) Why would anyone voluntarily complete a form asking HMRC to check a valuation done by a professional surveyor who has visited the property & how would HMRC check the valuation? 2) You say that ‘replacing a kitchen with one of a higher specification' can be classed as capital expenditure but in the paragraph before say that replacing a kitchen cannot be set against the capital gains liability which seems to be contradictory. We replaced a boiler with one of higher specification so can that be counted as capital expenditure? Look forward to your reply - Thank you.

Hi
Replacing a boiler with a new one with a higher specification, would not qualify for capital expenses, as the function of the boiler remains unchanged, ie heat the property.  
A function of a window is to let light in.  
This does not change, whether the previous window was single, double or triple glazed, so would  not qualify for capital expenses.
A replacement kitchen, where the replacement is like for like, would not qualify.  
A kitchen that has marble worktops, replacing a standard worktop; hot and cold water taps, changed to a single mixer tap, a cooker replace with a hob and fitted ovens and so on would qualify for capital expenses, as there is a change in function.  
These are grey areas and each one needs to be considered on its own merit.  
It is largely a question of fact and degree in each case whether expenditure on a property leads to an improvement.

Hello there, Thanks for answering my question 2) & explaining that improvements are a grey area. Are you able to answer question 1) which was: Why would anyone voluntarily complete a form asking HMRC to check a valuation done by a professional surveyor who has visited the property & how would HMRC check the valuation? Thanks again for your help.

Hi James Eddie,
We can't advise of the reasons why anyone would voluntarily ask HMRC to check their valuation, as that is down to the individual.
However, some people, for example, may want the piece of mind that their valuation is accurate enough for HMRC and that it will not result in repercussion further down the line.
Thank you.