Falling House Prices? The Good News…

I am writing this story just a week or so before the General Election on Thursday 12^th December. Experience with recent elections mean that these days there are now far fewer electoral predictions made with any degree of certainty. Whatever the result of this election, the reality is that there will be a continuing degree of uncertainty for the foreseeable future, especially regarding house prices.

As a probate solicitor why do I have an interest in house values?

When someone dies, it is necessary to value their assets in order for a calculation of tax to be made for Inheritance Tax (IHT) purposes. In many cases, this includes the house where that deceased person lived.

In this country, tax has to be paid to HM Revenue and Customs before a property can then be sold on and the sale proceeds distributed amongst the beneficiaries.

However, as is already starting to happen in many parts of the country, what happens when the price of houses starts to fall? If tax is already paid on the sale of a deceased’s property is there a ‘double whammy’ if the property is then sold for less than the original valuation at the time pf probate?

The good news is that there does not have to be the ‘double whammy’. Provided that the sale of property concerned takes place within 4 years of date of death, then application can then be made for a tax refund of IHT.

The bad news is that any refund does not come automatically from HMRC. An actual application for refund has to be made. There are also specific rules that must be noted before any refund can be made, including the fact that no claim can be made if no actual tax was originally due. Additionally, the eventual sale price of the property must have at least a 5% or £1000 difference from the original probate valuation, whichever is the lower. A final word of warning is also due. Once a refund claim is made then it cannot be withdrawn and the eventual IHT bill could then increase as well as decrease.

Last year alone several thousand beneficiaries gained from applying for an IHT tax refund. However, as outlined above, the refund is not automatic and it comes with rules and regulations. The fall in value of a property may therefore all not be a negative, but the cost of seeking good legal advice in making application for an IHT tax refund will in most cases be more than covered by any cheque received from HMRC. If in doubt, seek legal advice!

For anyone seeking more detailed advice from Laura regarding applying for an IHT tax refund, they can contact Laura direct on 01761 409312 or at lablett@th-law.co.uk