CGT on inherited property?

A question about : CGT on inherited property?

Hi,
Sorry if this has already been asked,I couldn't see another post similar.

In January 2003 my Parents inherited my Grandmothers house as the only beneficiaries.

The house needed upgrading and they still aren't sure whet they want to sell it,or keep it and rent it out.
They have delayed making a decision as they have had quite alot of other things going on,so have just left the house empty but continued paying council tax on it.

Now 18 months later they have been told my an IFA that they may have to pay CGT on the proceeds if they decide to sell,as the house has risen considerably in value and they have owned it for such a lengthy period of time.

Can anyone tell me if it is true that CGT will be due on a sale,as I always thought that tax was only payable on an inherited property if the estate was over the IHT band?

Thanks.
Sarah

Best answers:

• I've now registered!
  Thanks for that.Yes,they did go through probate and the house was then valued at Ј95,000.Its current value before they improve it is around Ј150,000 so it looks like they are going to have a hefty CGT bill if they sell
• One quick point, renting a property out only reduces the amount chargeable to CGT if you have actually lived there at some point.
  It is an add on to the principal private residence relief (PPR) rather than a stand alone relief.
  Moving in for a while will mean that the last three years of owning the property will be tax free, however three issues with this
  1. your parents would actually have to move in
  2. spouses can only have one main residence between them so only one moving would not work.
  3. Any time which this house counts as their main residence, means that it will be lost for their other home.
  I've just had a thought - as your parents have not owned the property for more than 2 years, they can make an election to the Inland Revenue to choose which house they want to be their PPR. Once made, this election can be revoked or changed for another property at any time. SO I'm fairly sure that they could nominate your grandmother's old house, leave this as their PPR for a few months (just a reasonable time) and then either sell (meaning that their first house will automatically be their PPR again) or change the election. Assuming that they are not planning to sell their first house any time soon, the few months of gain is likely to be covered by their annual exemption when they do eventually sell.
  I have had clients who have nominated their London pad as their PPR as this is more likely to increase in value adn they are more likely to sell it sooner rather than thier country house which they actually live in.
  This would be worth investigating further. For a smallish fee a local tax advisor should be able to advisefurther and deal with the paperwork.
  Sorry if this sounds really complicated but it should work.