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CGT / IHT

Does capital gains tax apply to inherited property?

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My client has inherited a house valued at £150,000. She was not related to the deceased. She believes that because she has inherited property that is a property in addition to her own home (which is mortgaged) that she will incur CGT on the inheritance. I have assured her that this will not be the case and any CGT will only incurred on any gain above it's present value when/if  the property is sold. The deceased owned the property since post WW2 times and she has read on gov.uk somewhere that she could be responsible for his gain. I cannot find anything about this. I can only find that she could be liable to IHT if  above the threshold but this of course in not the case. Is there anything I have missed?

 

 

Replies (16)

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By TaxAngel
03rd Mar 2021 15:03

I agree with you. No CGT will be payable on inheritance, only on disposal. It's spelled out quite clearly here: https://www.gov.uk/tax-property-money-shares-you-inherit/property

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By Kevin Kavanagh
03rd Mar 2021 15:05

Clearly only potential CGT on future sale; and any IHT is nothing to do with her either.

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RLI
By lionofludesch
03rd Mar 2021 15:20

Where do these folk get their ideas from ?

She's not liable for anyone else's taxes.

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Replying to lionofludesch:
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By I'msorryIhaven'taclue
03rd Mar 2021 15:49

Based on her deceased friend's long ownership of the property I'm guessing the client may be long enough in the tooth to remember Capital Transfer Tax, the forerunner to IHT.

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Replying to I'msorryIhaven'taclue:
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By I'msorryIhaven'taclue
04th Mar 2021 11:13

The point being that she may be confusing CGT with CTT. After all, their names are somewhat similar; and I seem to recall that a CTT liability upon death was not unusual. Try asking her about death duties - bet you she's unaware of IHT!

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Replying to I'msorryIhaven'taclue:
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By lionofludesch
04th Mar 2021 11:25

I'msorryIhaven'taclue wrote:

The point being that she may be confusing CGT with CTT. After all, their names are somewhat similar; and I seem to recall that a CTT liability upon death was not unusual. Try asking her about death duties - bet you she's unaware of IHT!

Or Estate Duty.

People take time to get used to new names for things.

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By lesley.barnes
03rd Mar 2021 15:51

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

Could it be this Report on capital gains simplification from Nov 2020? Recommedation 7 & 8 page 15. "the person inheriting the asset is treated as acquiring the assets at the historic base cost of the person who has died. "

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Replying to lesley.barnes:
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By lionofludesch
03rd Mar 2021 16:11

lesley.barnes wrote:

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

Could it be this Report on capital gains simplification from Nov 2020? Recommedation 7 & 8 page 15. "the person inheriting the asset is treated as acquiring the assets at the historic base cost of the person who has died. "

Jeez - how's that going to work in the instant case ?

Testator buys house donkeys' years ago, leaves it to friend. How's the friend expected to know what the testator bought it for ? Or what allowable enhancements he made ? And does friend get the benefit of the testator's PPR relief ?

It's hard enough to get details of capital transactions as it is.

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Replying to lionofludesch:
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By lesley.barnes
03rd Mar 2021 16:20

It won't it will be mind bending. The office of Tax Simplification strikes again. With any luck it will be buried in a deep dark hole.

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Replying to lionofludesch:
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By Tax Dragon
03rd Mar 2021 16:27

Recommendation 9: rebasing (to some random date).

Struggling to believe the OP's client has been reading OTS reports. But you never know. (Quite impressed Lesley has, to be fair. Oh the fun accountants have in lockdown!)

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Replying to Tax Dragon:
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By lesley.barnes
04th Mar 2021 09:37

I can't claim that I've been reading the OTS reports by choice TD. This thread is the third time in recent weeks I've heard about this. The first time a client got in touch and asked me he had heard about it but couldn't remember if it was radio, TV or a newpaper article. My reaction was the same as everyone else on this thread but he was so certain so I googled it thinking it might pick up a newspaper article - this paper from the OTS was the only thing I found. The second time was several weeks later when it was very briefly mentioned was on an online training course by the speaker as something that was being looked at and now this.

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By frankfx
03rd Mar 2021 17:27

OP
Why doesn't client believe or trust your assertions?

Page 1 of my capital taxes manual deals with CGT on death.

Indeed it also describes the CGT tax planning opportunities at death, page 2.

Why not share with your Doubting Tamara client some of your office research material?

Or a solicitor would willingly accept £300 to put her mind at ease.

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Replying to frankfx:
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By Paul Crowley
03rd Mar 2021 17:39

No decent solicitor would charge that little
Just think of the PII issue if he got it wrong

4 hours research needed

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Replying to frankfx:
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By lionofludesch
03rd Mar 2021 17:45

frankfx wrote:

OP

Or a solicitor would willingly accept £300 to put her mind at ease.

Who says she'd believe the solicitor ?

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Replying to lionofludesch:
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By frankfx
03rd Mar 2021 18:58

jarndyce and jarndyce

Perhaps she could spend the inheritance seeking an answer , with time the tax law may change !

Voila.

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By honesty
07th Mar 2021 15:23

Thankyou everybody for your help with regard to this matter.

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