CGT on Dad's House

[NewbietoMN]

Can anyone help with some advice on the valuation of a house for probate and CGT please? My dad passed away in June 2019. We applied for probate in 2020 which came through a few months ago.

When we applied for probate we had an estate agent value the house and it was valued at £370,000. We have just agreed a sale for £490,000. We did some work on the house (spending about £10,000) to get it into a better condition for sale.

I feel the original valuation was low since, even with the work we did, house prices in the area have not risen by over 30%. If the valuation for probate is revised up it won't mean we have to pay inheritance tax. However I believe we need to pay CGT on any increase between June 2019 and when it is sold, so a revised value for June 2019 would reduce the CGT liability.

Any advice on how to proceed would be much appreciated. Thanks.

You will need to find yourself a very good tax accountant , someone who deals with these issues who the can give you the advice you need
I spent an hour or two working through ways to minimise my bill
Remember you can claim back an annual tax allowance for yourself as well as the costs of the improvements - I saved all my receipts but in actual fact only had to list the works generally and approx associated costs, from what I can remember I could only claim improvements not cost of maintaining it - these can be down to how it's worded
My position was slightly different to you and much longer time
I didn't get the original valuation altered as I was told it could be worse but you will need to ask as each individual situation can vary

If you were living in it you shouldn't have to pay cgt anyway

Thanks very much crazylike. I wasn't living in the house so will be liable.

Yes, you need a tax adviser (l am one!) but any decent adviser will insist on using the probate value to calculate CGT.
Estate agents' valuations are worthless, so if you want to challenge the probate value, you need a professional RICS valuation. You will then need to inform HMRC.

Thanks very much Haver.

As @Haver74 said you will need a red book valuation for the purpose of probate. The Red book is the bible the RICS surveyors use.
We dealt with probate recently and paid a solicitor to check our work, she said our paperwork was all in order apart from the valuations she recommended a RICS report for the purpose of probate in all cases and charged us £800 plus vat for checking our forms. The valuations were just under £1000 for two properties. Some surveyors will charge a percentage others a set fee. You can negotiate.

You might already know this but the rules changed last year about when you have to report the capital gain - you now need to do it within 30 days of sale, not with your tax return as it used to be.

Thanks very much always and Elizabeth.

We called the HMRC inheritance tax helpline and explained that we believe the valuation of the house for probate was too low given the price it is selling for now. He asked what forms we had submitted for probate (IHT400 or IHT205) - we told him it was the IHT205 form. The response was that inheritance tax is dealt with separately to CGT so we should not revise the value used for probate, since revising it would not affect inheritance tax i.e. even with the higher value there would not be inheritance tax to pay so there is no need to fill in form C4 or otherwise tell the inheritance tax department. He said we should use the value we think the house was worth when filling in CGT forms. We’d thought the value should be consistent for inheritance tax/probate and for CGT but the advice was that we do not need to revise the value used for probate/inheritance tax.

Is this sufficient or do we need to speak to a solicitor or tax advisor? Thanks very much.