I am completing an online capital gains tax form to report the sale of a residential property. This was originally bought by my client ( husband and wife) - joint ownership. On the death of the husband , the wife inherited 50% of market value of residential property at date of husbands death. In entering the capital gains tax computation online, there does not seem to be anywhere to enter this on the online form ? I can complete the section for the wifes share of the 50% of the original cost and improvemnets but I am not sure how to enter the 50% market value of the property she inherited ? Do I just add it into the figure of orignal cost ? Any advice gratefully received !
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I think that the widow inherited a half interest in the property (if that is the correct concept for what happens on a death of a joint tenant) rather than a share in the market value. But she would have inherited the property was held TIC.
You don't enter the value as there is no box for it (as you know). When you reach the end of the process you have the option of rejecting the liability as calculated by HMRC's system. You do so, substituting your figure and you upload your computation.
Thank you so much for your response which is most helpful. Yes my understanding is the computation is split - 50% original cost and enhancements ( as would normally be the case) but the other 50% is the share of the property (originally held in joint names of husband and wife ) which the wife receives at the market value of the date of the husbands death.
Again many thanks !
Thank you so much for your response which is most helpful. Yes my understanding is the computation is split - 50% original cost and enhancements ( as would normally be the case) but the other 50% is the share of the property (originally held in joint names of husband and wife ) which the wife receives at the market value of the date of the husbands death.
Again many thanks !
MUL's answer works. No-one but no-one would object or complain if you adopted such an approach; nor would HMRC reject a return prepared on that basis.
But I don't think it would be wrong* to treat the acquisition of the 'second half' of the property as what it is - an enhancement.
* ie I think it would be right.
My slight concern with that is the lack of a white space on CGT returns, thus potentially allowing HMRC to argue more successfully than they did in Tooth that the return is deliberately wrong. The documents uploaded should make plain the constitution of the enhancement box and include a copy of the valuation report, otherwise there would be a delay in finality. There could be a delay in any case, of course, owing to the weasel word 'normally' in SP1/06.
The PV of inheritances from spouses are always* unascertained and thus open to HMRC challenge when the value matters for CGT purposes.
*Assuming domicile isn't in issue, I should have said.
Thank you Tax Dragon ! As you say I cannot see a problem with that approach either - I intend to attach a copy of the computation anyway giving full details.
Many thanks for your reply - much appreciated
Obviously next time tell the (married) clients that if they know one is dying then gift 50% so the dead one owns 100%.
Not only does Justin's death-bed planning work, but HMRC have said that they won't invoke GAAR when they come across such cases.
Surely there is a difference depending on whether the property was held as joint tenants or as tenants in common — and the OP is unclear on this point.