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CGT Reporting / Estate/Probate

CGT Reporting / Estate/Probate

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One of our clients sadly passed away in January 2020. Currently, the estate has established the probate value. On 29th September 2021 one of his residential properties was sold. Question is Who should be declaring the CGT between the disposal date and the probate date?   Estate of the deceased or the beneficiaries (deceased wife, Brother and father as their names are on the completion statement). Please note, the properties have not been distributed yet. Probate and IHT400 submitted to HM Revenue and Customs by the lawyers. Thanks in advance.

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By Hugo Fair
14th Oct 2021 22:57

"Probate and IHT400 submitted to HM Revenue and Customs by the lawyers"
Presumably this means that Probate had not been granted as at date of property sale?

"the properties have not been distributed yet"
But have there been any (interim) distributions from estate to beneficiaries yet?
And who received receipts from sale of property - estate or one/more beneficiaries?

"Who should be declaring the CGT between the disposal date and the probate date?"
Depends on answers to above questions - but it sounds like the Estate should.

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Replying to Hugo Fair:
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By Humble
16th Oct 2021 12:34

Many thanks for your helpful advice and raising some valid questions. I have written to the executors and await their reply.

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By More unearned luck
15th Oct 2021 14:00

Assets sold by the exors, qua exors, during the period of admin: gain taxable on them.
Assets sold by the exors, qua bare trustees - (ie after an assent of the asset) during the period of admin: gain taxable on the legatees.
Assets sold by the exors after the end of the period of admin: gain taxable on legatees as exors are merely bare trustees.

The period of admin ends on one of the following:
the residue has been ascertained (you know how much the residuary legatees are going to get)
The date to which estate accounts have been drawn up
Any creditable date the executors assert

Plan before the transaction: don't seek advice until afterwards. The date of contract is the date of the transaction.

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Replying to More unearned luck:
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By Hugo Fair
15th Oct 2021 16:34

A much better (informed & explained) flowchart-like set of directions, than my attempt to 'do a TD' (by asking questions that might point OP in right direction - but provided no b&w answers)!

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Replying to More unearned luck:
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By Humble
16th Oct 2021 12:36

Thank you for your advise. I have been told by the executors that the law firm has filed IHT400 forms. I am trying to gather some more information based on the feedback I received from your good self. Its a learning curve and small steps of making progress.

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By More unearned luck
15th Oct 2021 14:08

How did the exors manage to sell before they had the grant of probate? Otherwise the date of grant of probate isn't relevant.

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By More unearned luck
15th Oct 2021 19:24

If exors sold qua exors then see SP02/04

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By Humble
18th Oct 2021 12:08

Hi,
I have now heard more from the client. There have not yet been any distributions to beneficiaries. The estate is still being dealt with - under the terms of the will - by the administrator.
My question please, do I (as the accountant) have to file this estate tax return or is it Solicitor's job who is dealing with estate's legal matters. The solicitor has filed IHT400 to HMRC.? How do we file estate tax return? Does it mean that it will be one of the three executors' name on the estate tax return? Its a earning curve for me as I have not come cross with such return before. Is there anything else I need to know?
Thanks in advance.

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Replying to Humble:
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By More unearned luck
18th Oct 2021 15:58

I take it that there is an administrator because the executors named in the will have all refused to act? Or are confusing administrators with executors?

It is the administrator/executors job to file any tax returns. They can appoint anyone they like to prepare the returns for them. You should ask him/her/them for instructions if you want to offer the service.

But is a return required? Google "HMRC: complex estates" to find the answer. If the answer is yes, then the admin/exor should give notice under s7 TMA 1970. HMRC would like (they are wrong to insist) this to be done via the TRS. If CGT is due on the disposal then a CGT return will be required in more or less the same way as it is for individuals. See the ATT advice on CGT returns. Any CGT return is in addition to any SA returns required.

Any return is likely to be made in the name of the PRs of the late [client name].

HMRC's trust and estate manual should give you some guidance, subject to the usual caveat that what HMRC say is the law isn't always correct.

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Replying to Humble:
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By Hugo Fair
18th Oct 2021 18:13

For the avoidance of doubt, the terminology is confusing enough without everyone (by which I mean solicitors in particular) using some of the terms to mean different things!

When a person dies, there are three periods of interest to HMRC:
1. The tax years preceding death - for which they may request returns that they feel 'should' have been made by the deceased.
2. The period from the day following the date of death and ending when personal representatives have taken all the steps necessary to complete the administration of the estate - for which HMRC will expect a return for each part or whole tax years in this period.
3. The ongoing period from the day following the completion of the estate's administration - for which HMRC will be 'interested' on an ongoing basis in the tax affairs of each of the beneficiaries.

The 3rd of those is obviously the responsibility of each individual taxpayer; whereas the 1st and 2nd are the responsibility of the personal representatives - typically the estate executor(s) - who may appoint someone else to do the data collection and tax computations.
FWIW the 2nd period is often referred to (particularly by HMRC) as the period of administration (when the personal representatives are settling the estate).

So from what you've said ... the estate is still within the period of administration.

Your responsibility for your client's affairs ceased on his death ... unless the executors appoint you, as agent, to deal with the returns for periods 1 & 2 above.

It looks like either the solicitors or the executors are performing all the estate administration tasks (up to the point of completion where accounts are prepared and final distributions made) ... so they will be able to tell you when the admin period has ended - which will only be relevant to you if you've been appointed to deal with the returns for that period!

P.S: I know it was a typo, but if this really is an "earning curve" for you, then you might be better observing but not acting for the estate. :-)

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