Probate advice on property from a tax expert

As one of the few firms of chartered accountancy businesses in Yorkshire licensed to undertake probate work we at Garbutt and Elliot seen a significant increase in our work load recently. Covid 19 has clearly impacted many of our elderly clients but it is the next generation who have to pick up the pieces when dealing with property-related agencies.

Inheritance tax is a complicated area and an Inheritance Tax Account (IHT400 ) tip is that if you get several valuations of the property it is okay to average the highest and lowest figures. This useful tip is tucked away on page 70 of the 90-page HMRC guide to completing an IHT400

Many clients with valuable properties also fail to get a second opinion and this can result in paying excess IHT. I have seen valuers’ walk round a deceased’s property in less than 10 minutes and give a valuation later that day which shows little resemblance to the price achieved on a subsequent sale, often causing frustration for the family and additional work to put things right with HMRC.

I know from both professional and personal experience that many executors of a relative’s estate are likely to fall foul of rules and regulations when it comes to dealing with a private residence. Another tip for getting things right the first time is to pay the IHT applicable to the property. If you feel it is taking much longer to sell the deceased’s property post death remember you need to allow sufficient time to not only obtain probate, allowing up to a minimum of three months, but then allow another 15 months to market the property and achieve a sale.

The executors should, usually, be in a better position than other sellers who will be part of a mortgage chain or moving into another property. The only issue here though is HMRC expects an IHT payment from you within six months of death. So if it can take up to 12-18 months to get probate and achieve a sale, you must start thinking early about funding any IHT liability.

Six months will pass very quickly and limits time available for emptying the property and getting it in good order.

Fortunately,and once again hidden away on page 55 of the IHT400 guide, is the answer. HMRC will permit the executors to pay any attributable IHT in annual instalments,usually until the property is sold on the open market.

It does allow up to 10 years to pay the IHT but just remember that HMRC will levy a small interest charge on the tax instalments outstanding. This should not be a problem given the current low interest rate environment but it does allow the executors to reduce the initial IHT payment and avoid the need for a quick, often forced sale,at a lower value.

As soon as the property is sold on the open market the executors will be required to discharge any remaining IHT instalments immediately. It also pays to be aware of council tax issues.

Dealing with local authorities can be difficult especially when trying to clarify council tax liabilities post death. If the property is unoccupied after the relative’s death no council tax should be charged again until six months after probate is obtained. To give this council tax “relief” its technical term just look up “Class F Exemption” on your local authority website or call their council tax department.