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CGT acquisition costs

Is this fair

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Our client has sold a property which was originally acquired in 1998 jointly in equal proportions between our client and her husband. When her husband died in 2017, his share passed to her. There was no valuation made at the time.

I'm preparing separate CGT comps in respect of the two half shares, and taking an acquisition value at the date of her husbands death based on a straight time apportionment.

Does anyone see any issues with this approach?

Replies (17)

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RLI
By lionofludesch
15th May 2020 09:59

If the numbers are big enough and the market has not risen in a straight line, the services of a valuer may pay dividends.

If not, the plan seems reasonable to me.

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By Wanderer
15th May 2020 10:09

Problem I don't think is straight line apportionment is a valid basis.

I once saw a CGT computation (in the days of indexation) when the past valuation was arrived at simply by taking the sale price and 'jobbing back' by the increase in RPI - genius!

In your case I'd probably look for a 2017 valuation on the basis that it's the correct thing to do and proportionally the market probably rose at a faster rate prior to 2017 than after.

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Replying to Wanderer:
By SteveHa
15th May 2020 10:18

I take your point, but we are talking about a £12K gain on that half in the two years compared with £110,000 on the same half share since acquisition.

The CGT saving by increasing the base cost at death is likely to be overshadwoed by the costs of a valuation.

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Replying to SteveHa:
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By the_drookit_dug
15th May 2020 10:20

Go with your reasoning and disclose what you've done in the white space.

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Replying to SteveHa:
Hallerud at Easter
By DJKL
15th May 2020 10:22

What if 2017 valuation was higher than 2019 sale price, value dropped in that two years, not impossible?

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Replying to DJKL:
By SteveHa
15th May 2020 10:27

It's a fair point. I'll give her the option when I send the draft, and she can make the decision.

I don't see a scenario where HMRC are out of pocket, so don't expect too much issue from them, if I'm honest.

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By SteveHa
15th May 2020 10:10

I suspect that, in the two years since death, the rate of rise in value has probably slowed, but the numbers in those two years probably don't warrant spending on a retrospective valuation. She would probably finish up out of pocket.

Thanks for affirming my approach.

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Replying to SteveHa:
Hallerud at Easter
By DJKL
15th May 2020 10:20

Subject to where in UK the property is located valuation movement between 2017 and presumably 2019 could be very variable - e.g. if residential property I know that London behaved very differently from Edinburgh for those two years. (Our market was pretty strong for that two years but had been slower pre 2017 due to Indy Ref vote in 2014 then Brexit taking wind out of the market)

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Replying to DJKL:
By SteveHa
15th May 2020 10:22

I should have said, it is a London residential property (flat).

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Replying to SteveHa:
Hallerud at Easter
By DJKL
15th May 2020 10:28

Well, London prices have been reported as declining in 2019, so not inconceivable, depending upon precise dates/months that 2017 value is higher than say 2019 sale price.

https://s3-eu-west-1.amazonaws.com/airdrive-images/wp-content/uploads/si...

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By frankfx
15th May 2020 22:32

Not an answer to the question.

But if husband was in declining health leading to his death, wife could have transferred her share to H.
Then on H Death W gets full probate value as new base cost for CGT.

Not unlike high profile Ken Dodd , marrying on his death bed and leaving Estate to Wife, his lifetime partner.

HMRC do not disapprove of such 'planning'.

Aweb views welcome.

Thoughts:

Rightmove and others give an indication, on which to scope the range of values involved.
That in itself may support straight line , or surprise you in equal measure .

Surely the selling / sales agent can ' help' you with a broad brush figure?
Even after they have pocketed their fee.

Ask them , just to ensure that local price spikes in a two year time frame do not upset the simple straight line apportionment.
For instance , New Waitrose , New School have pushed prices north in Acacia Avenue.

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By penelope pitstop
16th May 2020 04:11

Why not go for a CG34 post-transaction valuation check.
HMRC will then do a CGT valuation for free.
You need to do it before the tax return is submitted and the sooner the better - there is a deadline.
Will save you the £500 to £750 formal FRICS valuation fee - and HMRC will not dispute it (you can though!).
Straight-line apportionment is a load of garbage in my opinion. What does that prove.

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By Inquisitive
18th May 2020 10:20

Doing a valuers job is not that difficult if the numbers are relatively small. Zoopla? Rightmove? have a wealth of info. And present that on a CG34. A little research can save a few hundred pounds. In London, I would have thought prices have either reduced or flatlined in your period.

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By pauljohnston
18th May 2020 10:44

I understand there are quite detailed figures from Land Registry about changes in house prices in an area so may be a search with this in mind will help

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By John R
18th May 2020 11:12

I have used the online Nationwide residential property index in the past. You can enter the purchase date and price and the valuation date or the sale date and price and the earlier valuation date so do both. It is broken down between different categories of property and regions. You may get different answers so an average could be taken. Obviously, it does not account for improvements. White space note definitely required (or note in computation). If it does not give the answer you would like, you can then suggest that the client may wish to pay for a formal valuation or do a CG34.

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By ruth.julian
18th May 2020 14:40

Was husband's share of property included in Estate Account for Probate/distribution? Or, as suggested use one of the property sites to get sold prices of comparable properties in the neighbourhood around the time of death. I did this for a family to confirm the valuation given by an estate agent at the time of death of their relative. No problems with CGT declaration when family sold the house 6 years on after letting it.

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7om
By Tom 7000
18th May 2020 14:51

is it not probate value ? No valuation done then for the forms you fill in at date of death?

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