Tricky Capital Gains Tax question can anyone help plz

[CGTNamechange]

Could anyone give me some advice, I'm trying to help out an elderly relative (ER) who's in a bit of a muddle. I'm reasonably clued up on the law/tax, but this is a slightly tricky one.

ER and ER's late spouse (ERLS) jointly owned a buy to let house, bought some time ago for eg 150,000. ERLS died two years ago, leaving their half of the BTL to ER. Value of house at the time of ERLS's death was 240,000.

ER is now about to sell the BTL, for about 250,000 and will have to pay Capital Gains Tax on the increase in value, which is fine of course, but will need to be calculated, reported and paid very quickly. The estate agent, solicitor and ER's usual accountant have all said "ooh no, we don't do Capital Gains Tax love"

Muggins here has a reputation for being good with numbers and forms, so I've volunteered to walk ER through the government website and at the very least get a back of the envelope figure which they can use to plan for the future while looking round for a solicitor/accountant who is prepared to touch CGT and actually sign it off.

But having looked at the website, I'm unsure.

Do you put the value at acquisition in at
a) 150,000 - the figure when they jointly bought it
b) 75,000+120,000 ie half of it purchased by ER, plus half of it inherited by ER at probate value?

I assumed it would be b) because that seems logical to me but I'm now consumed with doubts and HMRC website is very little help. Does anyone actually know please? Or can ideally point me to chapter and verse. Surely it can't be that unusual a situation.

I would phone up HMRC. I've had to for CGT before and they were very helpful

I think:

Purchase price : 150

Value when erls died : 240

Current value : 250

So 75 + 120 as purchase giving adjusted profit of 55 (Ie same as you!)

But definitely check the HMRC helpline

Again, I'm good at CGT but only as someone who has to handle it for my own er...

Thanks. Of course it's the worst possible time of year to be ringing them....

It’s b

https://www.theguardian.com/money/2016/oct/20/inherited-house-cgt-tax-bill

Not an expert on CGT but should you think about whether they owned the property as joint tenants (as I’d expect with a married couple) rather than tenants in common in which case I think she’d be seen as always owning the whole property as his share didn’t pass through his estate? If that’s the case then A seems more likely to me. Sorry can’t be clear but maybe worth considering.

I believe it’s b) - see the first example here

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30390

Basso I love you, I think that's exactly what I needed to see. Strange that they refer to the matrimonial home though, which wouldn't have CGT anyway. But it seems pretty unambiguous.

Its going to be a sod to fill in on the form but I hope it'll be fine to use a blended average as long as ER does their best in good faith.

Don’t forget stamp duty

I’ve forgotten it far too many times when working out CGT 😳

Only one half of stamp duty though as stamp duty forms part of cost so the half getting the uplift to probate value has valuation replacing cost

I would phone up HMRC. I've had to for CGT before and they were very helpful

Lucky you. For us it was a nightmare all living abroad from our parents.

Bunch of fucking thieves. Already paying it where we lived.

HMRC = Her Majesties Royal Coffers.

Can't blame Harry for fucking off out of the whole pantomime.

Yes that's a good point thanks. I remembered that only half the double glazing costs from 2015 would be allowable as expenses, but might have forgotten that only half the original acquisition costs were allowable - it's obvious once you say it.

@MariaLuna

The USA are the biggest thieves of all time- they make you declare taxes even if you don't lived there! I know so many accidental Americans who have the annual stress of declaring taxes when in some cases they have never lived in the USA, it's just one parent is American and thought they would get their kid a USA passport, or through circumstances they were born there to 2 non American parents and no longer live in the USA. Its a nightmare doing them as no us hank account

I think that if you've made improvements over the years you're allowed to claim them against CGT, plus previous years' allowances (three I think) if unused. Good luck

You can claim for any improvements that haven’t been included as repair costs against rent on half of the property but not then probate half. You can’t claim prior years allowances though only this years.

Thanks all. ER has fortunately now been pointed towards a small accountant who does do CGT and will be able to sign off the details of what's an improvement and what's maintenance, but you've helped me get to a place where I can do the back of the envelope spreadsheet to make sure roughly the right amount is put aside, and help sort out the necessary paperwork.

@CGTNamechange I cannot believe a firm of chartered accountants cannot calculate CGT. I would have gone elsewhere right from the start. Our accountants certainly would never say that. Was this some backstreet unqualified bod?

I know, I was very unimpressed. It's a one-man-band accountant/financial adviser who just does people's income tax returns apparently. I'd have thought that the conveyancing solicitors would offer as well - apparently it was a proper firm not a conveyancing bucket shop.

Anyway ER has been passed on to an apparently competent accountant now.

@CGTNamechange Yes. I saw you were getting proper advice now. We use the accountants my DH used throughout business ownership but clearly they are bigger. Even so, a chartered accountant should know! Plus I think we’ve declared a capital gain (shares, property) etc on our tax return!

Maybe they weren’t a qualified accountant, accountant isn’t a protected term like solicitor so anyone could set up and start calling themselves an accountant even if they’d never done anything on accounts or tax before ever

Don’t forget to also deduct solicitors’ fees/moving costs for acquisition and disposal from any gain.

But only half for the acquisition costs

I guess we have always needed a chartered accountant. The word “chartered” means something as it does in other professions such as engineers! I would not want the washing machine repair guy sorting out the underpinning on a house!