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An executor has many responsibilities when winding up the estate of a deceased person. As they become the temporary owner of the deceased’s assets (unless the asset is jointly owned with someone else) this means that they are responsible for completing and lodging an estate tax return with HMRC if this is required and also paying any tax liability on capital gains made on the sale of the deceased’s assets. The exception to this rule is if an asset is transferred to a beneficiary and they sell the asset making a gain, the beneficiary may be liable for the tax on that gain.

If you are an executor of an estate in Scotland and looking to obtain Confirmation and to wind up the estate, contact our solicitors for a quote on 0141 222 7951 or complete our online enquiry form.

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In order to calculate a gain, the base cost of the asset must be ascertained which when dealing with an estate is the date of death valuation, this is also the value at which the beneficiary is deemed to have appropriated the asset if transferred to them. A formal valuation of a property is recommended as HMRC, will be more likely to accept a valuation obtained by a professional valuer. A gain is made if the asset sells for a price more than the base cost. Executors have the usual Capital Gains Tax (CGT) exemption that individuals have (for the tax year 2021/2022 is £12,300) for the tax year in which the deceased died as well as the next two years. They are entitled to the exemption in the tax year in which the deceased died no matter how short the period from the date of death to the end of tax year is. Any gain over and above the annual exemption is chargeable to CGT, this is at a rate of 28% for properties and 20% for other assets (in 2021).

There are a few ways an executor can maybe reduce a CGT bill for an estate:

  • Transfer an asset to a beneficiary rather than the estate selling it as then the beneficiary can use their own CGT annual exemption amount. A beneficiary would need to be careful of this if the asset is a property and they are going to be buying another property as they could be liable to pay Additional Dwelling Supplement;
  • If selling more than one asset that will result in a gain, they can try to split the sales into more than one year to use both years annual exemption;
  • If selling various assets, some of which will make a loss and others which will result in a gain and those gains will be covered by the annual exemption of one year then they should consider keeping the sales of the assets which will make a loss for another year which will not be covered by the exemption;
  • The entitlement to SP02/04 if a property or shares are sold at a loss within a certain period after death then they may be able to claim relief for IHT paid on those assets; and
  • If selling an asset classed as a chattel exempt from CGT.

If after considering all of the above there is a chargeable gain then an executor must complete an estate tax return and pay CGT to HMRC. This is usually done near the end of the administration period however please note that since 6th April 2020, any chargeable disposal of residential property requires a CGT return to be made and paid within 30 days of completion of the sale. If there is no CGT to pay but the estate is relying on capital losses to stay within the CGT exemption then an executor must report all gains and losses to HMRC. 

Contact our Executry Lawyers in Glasgow today

If you are an executor of an estate in Scotland and looking to obtain Confirmation and to wind up the estate, contact our solicitors for a quote on 0141 222 7951 or fill out our online contact form.

This page is for guidance only, WAF will not provide advice on CGT or complete tax returns however we can instruct an accountant to deal with this for you.

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