CGT on Death

[Alash]

OK here's the history:

Man Dies in 1988 leaving land to his 3 sons.

One son dies in 2002 intestate with a wife and 3 children
Probate completed soon after death.
Land Sold 2006 Gain on disposal was deemed at 475k of which 20% CGT calculated at approx 95k.
As he is now passed some years I cant understand why my deceased father is laible for CGT. Surely this is passed to us 2/3 his wife and 1/3 split between us three children and would this not then enter inheritance tax which being in the first threshold should be exempt?

They did get an accountant however as they are all alive their calculations are appropriate for them.
It says on the letter that my Father's estate is laible for CGT of 96k. Do we just split as above and can we use our CGT personal exepmtion for the year if it is now us that must pay. On letter as it's the estate that's laible it says that no exemption available.
Really confused! Hope someone can advise.

Here's another question if the CGT was calculated based on the value of the land when his Father passed 1988 then why would that not be the case when our father passed which would be 2002 values.

 

[Brendan Burgess]

Hi Alash

I am not a solicitor or tax expert, but this is my understanding of what probably happened here.

Just to be absolutely clear, there are two relevant taxes: CGT (Capital Gains Tax) and CAT (Capital Acquisition Tax) also known as inheritance tax.

The death of the grandfather seems irrelevant in this case.

So Father acquires land in 1988 and dies in 2002. There is no CGT on the increase in value of the land between 1988 and 2002 as disposal on death is not a disposal for CGT purposes.

The land was sold in 2006, so there will be CGT on the increase in value of the land between 2002 and 2006. It sounds to me that the land was sold by the estate. The estate would be liable to CGT. This happens often when there is a delay in the distribution of the assets to the beneficiaries.

Probate completed soon after death.

Are you sure about this? If the land was actually conveyed to the beneficiaries soon after death, then the beneficiaries would have the liability to CGT, and not the estate.

would this not then enter inheritance tax which being in the first threshold should be exempt?

The inheritance tax and the CGT are two completely separate taxes. The Inheritance Tax would be calculated on the value of the land at death in 2002. (Experts might confirm this?) The gain from 1988 to 2002 is irrelevant. The increase in value from 2002 to 2006 is irrelevant. It seems that you have not had any CAT/Inheritance Tax liability.

When the Grandfather passed away in 1988, they probably had a CAT liability but not a CGT liability.

Brendan