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Original poster

Tax - capital gains, income or inheritance?

63 replies

Twiglet2015 · 23/01/2015 20:35

If a property years ago was brought with the intention of renovating and selling but instead was let out after renovations. The property is then left to someone in the will. What tax will be paid once the original owner passes away.

OP posts:
LastNightADJSavedMyLife · 23/01/2015 20:36

Income tax on the letting income, inheritance tax when inherited, CGT when sold.

florencedombey · 23/01/2015 20:38

Potentially there will be IHT on the death (depends upon the value of the estate). All capital gains are wiped out up to date of death, so if the property is sold shortly after death, there will be no cgt. Income tax will be due on the rent.

sunnyfrostyday · 23/01/2015 20:39

IHT on the property value at death. CGT if the property subsequently increases in value before sale. Income tax on rental income at all times.

Original poster
Twiglet2015 · 23/01/2015 20:43

See the accountant is telling me it is income tax due (40%) due to mum being a higher tax payer and the property was brought under a business name with the INTENTION of being sold, but I can't get my head around it. Is he wrong then?

OP posts:
YonicScrewdriver · 23/01/2015 20:45

So it wasn't your mother that owned it but a company?

Who owned the company?

Sorry for your loss Flowers

YonicScrewdriver · 23/01/2015 20:46

Was the company the original acquirer or did your mum buy it and sell/transfer it to the company?

NitramAtTheKrap · 23/01/2015 20:46

It is possible, but you need to give us more facts.

It could be a bad accountant or a good accountant with the full story...

Original poster
Twiglet2015 · 23/01/2015 20:47

Sorry mother owned the company (buying and selling houses) but this is the last property and has been let the entire time 50+ years. The property has been left to me but not the company.

OP posts:
NitramAtTheKrap · 23/01/2015 20:49

Still confused. The property was owned outside of the company by your mother who also owned a company dealing in houses?

Original poster
Twiglet2015 · 23/01/2015 20:51

Mother owned the company and within the company there is the house.

OP posts:
NitramAtTheKrap · 23/01/2015 20:54

If the property is in the company it belongs to the company, not your mother and so can't be left to you. What am I missing?

YonicScrewdriver · 23/01/2015 20:55

Ok, I am not an accountant but your accountant should be able to explain it better than he/she has.

Is it possible that by leaving you the house but not the company, it now appears as if the property should've been taxed like a personal asset all along and/or during recent years?

Original poster
Twiglet2015 · 23/01/2015 20:55

She is the sole owner of the company. So she passes away and there is a house with no owner - in her will she has left the house to me so I presume that's legal?

OP posts:
Original poster
Twiglet2015 · 23/01/2015 20:58

She's not left the company to anyone.

OP posts:
NitramAtTheKrap · 23/01/2015 21:00

If the company owned the house before she died the company still owns it after she has died. Who has she left the shares to?

She can't leave you the house, she didn't own it, whatever her will says.

NitramAtTheKrap · 23/01/2015 21:01

Has she left the residue of her estate to anyone? Eg 'I leave everything else to x' because that's the person that would inherit the shares.

Original poster
Twiglet2015 · 23/01/2015 21:01

She has left the remaining assets to my brother (just a bit worried now that the company is technically his and therefore the house)

OP posts:
YonicScrewdriver · 23/01/2015 21:01

Let's say that she hadn't died but wanted to transfer the asset out of the company to herself.

If she did that at something other than market price, I think she would have had to pay CGT on the difference between what she paid to the company and market price.

If the transaction was at market price, the company would have made a profit on the sale and so that would incur a corporation tax liability, I believe.

YonicScrewdriver · 23/01/2015 21:02

Ah, x posted with the information about your brother - I had assumed you were sole inheritor.

YonicScrewdriver · 23/01/2015 21:04

How well do you and your brother get on? If you can agree something, it may be possible to make a deed of variation (but I think these are usually used in simpler circs!)

NitramAtTheKrap · 23/01/2015 21:08

I think you have a problem on the facts as I understand them.

Is your accountant qualified eg ACA, ACCA, CTA?

Has a lawyer given you any advice?

Original poster
Twiglet2015 · 23/01/2015 21:14

No advice from a lawyer. Mum has not passed away but has dementia so I cannot ask her. I've only seen the will briefly and am not allowed to view it again (I've asked). I just wanted to know where I stand. Me and my brother do not get on as I wouldn't give him a loan from mum (I have POA)

OP posts:
Original poster
Twiglet2015 · 23/01/2015 21:16

I have a sister too who is inheriting her house she lived in.

OP posts:
Original poster
Twiglet2015 · 23/01/2015 21:17

To add the executor of the will is the solicitor who wrote the will so could that go in my favour as he knew what she meant?

OP posts:
sunnyfrostyday · 23/01/2015 21:19

You will need a lawyer. Is your mother sole shareholder and director of the company? Who receives the rental income?