Capital Gains after death but during administration.
There is no CGT at the point of death – any capital gain is wiped out, and the value is rebased.But that only applies to assets still owned at the date of death, not to assets which may have already been sold and the CGT not yet paid.Only Inheritance Tax is an issue at that time in terms of assets, though there is often a requirement for an income tax return.If the sale price indicates that it may have been undervalued for probate, there could be a serious issue if that brings the estate into paying IHT. There could be penalties, personal to the executor, and the estate still has to pay the IHT. That can be difficult if it has already been paid out! The most common problem is capital gains tax on probate sales a trap for unwary executors. HMRC do understand the issues, so talk to them if necessary, and before distributing the proceeds, What The taxman does NOT understand is executors thinking they can get away with not paying capital gains tax when it is due. They may assume it is a deliberate fraud.But I don’t think this is your issue, as I understand it. Yes, any gain in value after the probate valuation is subject to Capital Gains Tax.
Capital Gains Tax after death – the most common cause:
Very often, the family will think that the sale price of probate property could be increased by carrying out repairs and modernisation. Sometimes this works, and sometimes it doesn’t – there is often a fight to buy the property “to do up” as it is assumed to be cheap, though often it isn’t when you bear in mind the cost of the work. Any increase in value after the date of death is potentially subject to Capital Gains Tax (CGT) and if proper records have not been kept of the costs of the renovation work, capital gains will be applied to the whole gain. Unpaid labour will not be taken into account, and any attempt to claim for labour could result in a request for tax and national insurance records, so if you take this route, do it formally.
If Capital Gains Tax is not paid
In this case, it is the responsibility of the executor/ administrator to pay the Capital Gains Tax (and use their personal CGT allowance.)That said, it is usually possible to avoid the administrator being lumbered and to potentially increase the tax free element of the gain. If that is appropriate (and often it is really not a problem as the gain is fairly small) then you could tax advantage of a (paid) consultation with a tax barrister. At the time of writing (Jan 2016) the telephone consultation fee is £60 or £150 for more substantial estates. This does not include tax calculations, just advice on the situationmay be resolved. Sometimes that is all you need, other times more work would be needed.It is a complex area (which is why we have suitably experienced staff on board) so please just take this as general guidance. For non UK residents, the situation is more complex.Best wishes,TPD