Property sells for higher than probate value

Morning everyone

Can I just check whether the executor has a responsibility to inform HMRC of a much higher sale price over probate value.

Papers are still with HMRC and we will know by November whether they accept our valuation of the property. On the IHT 405 the executor indicated that the property would be “sold later”. Probate value based on valuations alone was stated to be £750,000.

He then put it on the market fairly soon after we made the Probate application. A sale price of £825,000 has been agreed.

I just want to check, does the executor need to inform HMRC about this development. I feel that morally he should but if he’s not under a legal obligation to do so I don’t want to advise him to do something that would incur more IHT. Maybe the district valuer will find out about this anyway but I just want to know what is the best practice in these situations.

I want to give the correct advice to my client but am really a bit unsure.

I appreciate there will be a CGT liability and have given my client the options- to execute a DofV so that property can be transferred into joint names of him and kids before sale but he’s not going to want to do this if it all ends up to be futile, i.e. if HMRC insist on higher probate value.

Your feedback would be very much appreciated thank you

Many thanks

I think you should wait until HMRC responds. I presume that the valuation submitted was made by a chartered surveyor.

I expect the DV will have been instructed. If the probate figure submitted is acceptable to the DV/HMRC then that will of course be the acquisition value for CGT. It’s just possible that the purchaser in this instance really wanted the property and was prepared to make the offer which has been accepted.

Patrick Moroney

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There may be an explanation for the increase in value other than ‘the probate value was inaccurate’. For example it is entirely possible that the house value has increased, and the probate value was the proper market value at the time of death or, as Patrick suggests, this was a special buyer who had reason to pay above market value.
Also, depending on who are the beneficiaries, consider a deed of appropriation rather than a variation. Appropriation can be simple and
inexpensive.

Agreed I would advise that he needs to report again gain within 60 days, if it completes before November when IHT clearance is likely then he will be using estimated figures for the CGT. if the property is not needed then I would appropriate to the beneficiary(ies) (and if married, consider a Deed of gift to the wife too so get double the allowance - make sure not a DofV if to a spouse, but a gift by the beneficiary as you do not want to lose any RNRB or TRNRB you have claimed already). alternatively if he wants to do tax planning and skip onto kids to do a DoV to add them (again check if any are married). this way i managed to get 13 allowances once to offset a large gain all accepted by HMRC.

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