I have a situation whereby a beneficiary has inherited a property. The estate has yet to be finalised so the property has not yet been placed in her name.
She and her husband live in Italy.
Due to the location of the house and the demand it may sell for more than its probate value. The initial plan was for the property to be rented but due to the income tax situation in both countries she has decided to sell.
Can members advise on whether it would be better for the estate to sell or is there some advantage of placing in beneficiaries name along with her husband to maximise capital gain allowances.
It usually makes more sense to transfer for allowances purposes - assuming they have no other UK source income, in both names they should get lower rate bands of tax (some at 18%). The beneficiary would need to gift half under spousal exemption.
UK situs property, where the vendor does not complete UK self assessment tax returns has to be reported to HMRC within 30 days of completion and tax paid on that date.
Any income tax liability arising should they retain the property will be offset under the double taxation agreement and so tax should only be paid once.
Lambert Chapman LLP
At the risk of sounding pedantic (but with good intentions) a return always has to be made on sale save for deemed no-gain/no-loss disposals (chiefly transfers between spouses). There are more exceptions covering the obligation to include calculations and timing of payments.
Osborne Clarke LLP
Before assenting the property to the beneficiary followed by an inter-spouse transfer and subsequent sale the tax position in Italy needs to be clarified.
There is little point in seeking to mitigate UK CGT by appointing the property to the beneficiary if the Italian tax charge on the disposal is greater than any UK charge.
Given Malcolm’s response would it be better for the estate to sell the property ?
Where was the deceased resident or domiciled.
I assume that the deceased was UK resident and domiciled, and that the only international element is the Italian couple.
I ask as if the deceased was “Italian”, a different set of considerations would arise.
Yes the deceased was domiciles in the uk