Can I pick your collective brains with a situation I have not come across before.
Situation is this: Will gifts a property subject to tax to beneficiary A. Thanks to the increase in popularity of costal properties that we have seen over the past year or so, the property is selling for a substantial gain. The DV has agreed the DOD value but the IHT on it is still outstanding and will be discharged on sale later in the year.
Client is asking whether the IHT payable on the property can be taken into account in the CGT calculation to reduce the gain, owing to the fact that the tax is specifically charged against the property. Having by and large dealt with tax free gifts to date and certainly not gifts subject to so much IHT and gain, I am not sure whether the IHT paid can be taken into account against the base cost or otherwise.
Capital gains on the disposal of a property are charged on the increase in value over probate value. Costs are deductible but these are things like legal fees and the costs of changing titles or estate agents. I am not aware of IHT taxes ever being allowable as a deduction.
And I think that must be the case because if it were allowable in some why then every sale at probate value would amount to a loss, which I am sure HMRC wouldn’t be to happy about.
Sorry to disagree with the great Paul S but I have a niggle that while the full IHT may not be deductible I do recall you can claim something - and there’s some formula for calculating it. Might be worth looking into this more. Think it may be linked to the probate costs.