Executors cannot claim for property sales above probate
value
31 January 2013
HMRC has revised its inheritance tax manual to
make clear that executors should not submit claims for a higher
sale value for land or buildings sold within three years of the
date of death.
Tax inspectors are now instructed to deny all
such claims whether or not there is tax attributable to the value
of the land. If there is no such tax ‒ either because the estate is
too small, or the sold land is exempt or attracts 100 per cent
relief ‒ then no ‘appropriate person’ exists to pay the tax or
claim any associated relief under s.191 of the 1984 Act. HMRC says
this view was upheld in Stonor decision in 2001.
If the estate was taxable, HMRC will reject
the claim on the grounds that section 191 is only intended to
provide relief from inheritance tax. ‘Any claim to substitute a
higher sale price where the estate is taxable must be rejected as
invalid. If the taxpayer or agent continues to insist that a higher
sale value be substituted the claim must be referred to Technical’,
says the new guidance, again citing Stonor as its authority.
The implication is that, for capital gains tax
purposes, the executors must calculate the chargeable gain on the
disposal using the market value at the date of death.
The new manual at least resolves the dilemma
of whether executors should report such a sale. ‘Now, provided they
obtained a RICS valuation for probate, it is quite clear that HMRC
will not accept any increase in value,’ says the Institute of
Chartered Accountants in England and Wales.
Sources
HMRC
HMRC (IHT
manual)
Institute of Chartered
Accountants in England & Wales