I have a query about Capital Gains after death, but before the administration of the estate has been completed. Once a valuation has been done for the probate and the probate granted, can the value of the property be updated should the house be sold for a higher price than the probate document? This is regarding capital gains on any possible difference between the initial valuation and the sale price as the estate would still be under the inheritance tax threshold.
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!
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.
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 our 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 situation
may 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.