- Emmanuel Macron’s tax rise will apply to all second home owners in France
- Could you be affected by the charges? Please email your story with photos to rory.tingle@mailonline.co.uk
A British couple say they may be forced to sell their 15th century French holiday home after Emmanuel Macron announced a tax raid on second homeowners.
Creative director Simon Amster, 55, and his wife bought the five-bed 15th century hideaway in the village of Sauveterre-de-Bearn near Biarritz for just 50,000 euros (£42,000) eight years ago.
The couple, who live in Lewes, East Sussex, currently pay 1,400 euros in annual property taxes. But they are among 86,000 British households with second homes who now face a significant tax rise thanks to President Macron’s latest reforms.
It’s another post-Brexit slap in the face for Brits who have invested in property in France – after new travel restrictions limit visa-free stays in the EU to just 90 days in any 180-day period.
The Amsters, who have two children aged 11 and 13, say they are now considering selling the home to avoid paying thousands more each year in property taxes.
Could you be affected by the charges on second home owners in France? Please email your story with photos to rory.tingle@mailonline.co.uk
Mr Amster said: ‘Macron’s tax hikes have made us consider selling. All these additional costs mean our second home, which used to be a source of pleasure, is now a source of worry.
‘My wife’s mother lives in the neighbouring village so it is really useful for us to have the house so we can look after her if we need to.
‘There’s also a lot of uncertainty about how badly these taxes will affect us. We’re expecting quite a big jump, maybe around 20 per cent.
‘It’s a first world problem, but it makes what used to feel like a relatively affordable holiday something which is now a serious financial concern.’
Under the new rules introduced by Mr Macron, tax on second homes could be increased by up to 60 per cent, even though British people are only allowed to visit for a maximum of half a year under the new post-Brexit rules on visa-free travel.
Despite this, the French now want to raise the financial burden on some 86,000 UK households. This will see the residence tax going up by between 7 per cent and 60 per cent.
It used to be paid only by those whose principal home was in France, but a reform introduced by president Macron’s government saw it extended to second homeowners.
‘The new tax will go up most in areas where local people have the most difficulty buying their own properties,’ a French government source told the Mail.
‘This includes many places that are popular with foreign second homeowners. Foreigners who choose to buy second homes in France should not be subsidised by taxes paid by French people.’
Last year, the residence tax was an average €775 (£664) for a house and €943 (£808) for a flat, but this will go up considerably.
There are already 156 councils in Brittany, which is hugely popular with Britons, which have been given authorisation to increase the residence tax by up to 60 per cent.
The surcharge is applicable in places where the housing market is under pressure and where locals struggle to buy or rent homes. It is designed to discourage second homes.
The surcharge was initially limited to 1,136 councils in big cities and tourist resorts, but has now been extended to a further 2,263 authorities in rural areas.
France’s second local tax, called the Property Tax, which applies to both main and second homes, is also going up by double digits. Paris council, for example, has voted for a 51.9 per cent increase, while the Alpine city of Grenoble is imposing a 25 per cent rise.
A survey of more than 700 second homeowners published this month by The Connexion newspaper found that almost two thirds of Britons had considered selling up because of the 90-day rule.
• An earlier version of this article stated that the Amsters currently pay €1,400 a month in residency taxes. This has been amended to correctly refer to that figure as an annual one.
- Buyer’s agent predicts prices to soar
- Stage three tax cuts to trigger more lending
An Australian property expert has warned house prices are set to skyrocket with several factors behind a potential new boom.
Niro Thambipillay, a Sydney-based investor and buyer’s agent, predicts the price surge will happen in 2024.
He believes the surge will be triggered by the upcoming stage three tax cuts coinciding with a predicted drop in interest rates.
Interest rates were placed on hold by the Reserve Bank of Australia for a second straight month in August, but remain at an 11-year high of 4.1 per cent.
Many commentators expect them to begin to fall in coming months after climbing 12 times since May 2022.
The stage three tax cuts, which come into effect from July 1, 2024, will mean anyone earning more than $50,000 will have extra money in their pockets.
Mr Thambipillay reasoned this would mean more people would have extra cash to invest in things like the property market.
He claimed the drop in interest rates and cut to taxes will convince banks to lend more money, including for home loans.
‘You’ve got increased borrowing capacity from tax cuts, you’ve got increased borrowing capacity from potential interest rate falls, you’ve got not enough supply at the moment to meet the existing and ever-growing demand and property prices have already risen,’ Mr Thambipillay said in a TikTok video.
‘What do you think will start to happen from the second half of next year?
‘I think in many areas, not all, but in many areas, property prices will start to rise really quickly and that’s why I believe that right now if you can afford to its the best time to get in to an investment property.’
Mr Thambipillay said recent property price rises have already proved the resilience of the housing market.
Nationally, property prices increased 2.3 per cent in the first six months of 2023 after declines in the second half of 2022.
According to forecasting from PropTrack, this trend will continue, with solid price rises likely in Sydney, Melbourne, Adelaide and Perth this year and more modest returns next year.
House prices have risen in Sydney for the sixth straight month despite an interest rate surge because of record-high immigration – making it hard for first homebuyers to enter the real estate market.
In Australia’s most expensive capital city market, the median value rose by another one per cent to an even more unaffordable $1,333,985 in July, CoreLogic data showed.
In other major capital cities, the house prices began rising again in March.
Melbourne house prices have been rising for five straight months, increasing in July by another 0.3 per cent to $923,881.
In Brisbane, house prices last month rose by another 1.4 per cent to $819,832.
Perth values rose by one per cent to $625,969.
Adelaide’s recovery began in April but monthly increases since then have been bigger with prices in July rising by another 1.4 per cent to $722,793.
Darwin prices rose for the third straight month in July, increasing by 0.5 per cent to $583,913.
Mr Thambipillay was a property investor before he became a buyer’s agent.
In 2002 he bought an investment property in Western Australia after deciding against buying in Sydney based on his own research.
He claimed to have doubled his money in just 18 months.
While Mr Thambipillay’s clip was viewed a massive 296,000 times, not everyone agreed with his conclusions.
One commenter said they wouldn’t invest in Australian property because of economic trends in China.
‘Local figures mean nothing,’ he claimed. ‘The supply chain of China is about to fall over,’ he said, predicting it could lead to a recession.
The creation of a new 30 per cent tax bracket in the stage three cuts, for Australians earning $45,000 to $200,000-a-year, means middle, average and higher income earners will benefit.
Those on $80,000 would get back $875 with their tax returns for the 2024-25 financial year were compared with 2023-24 and 2022-23.
Australians on $60,000 – a level slightly below the middle income of $65,000 – are getting back $375.
But higher income earners will do a lot better, with those on $120,000 getting back $1,875.
Those on $200,000 are getting back a very generous $9,075.
The key change in the stage three tax cuts is that the number of tax brackets will be slashed from five to four on July 1, 2024 for the first time since 1984.
Others who responded to Mr Thambipillay’s TikTok thought the money gained from the tax cutswould be better spent elsewhere than in the property market.
‘I’d rather forego a tax cut and get dental covered under Medicare,’ one said.
I am working in Australia and had invested ₹15 lakh in a residential property in India in January 2018. I now plan to sell the property for ₹18 lakh. Can the buyer deduct tax at the time of payment despite this transaction leading to a capital loss due to indexation?
—Name withheld on request
There has been a fair amount of debate in the past on whether TDS (tax deducted at source) is to be made on the entire amount of sale consideration or only on the portion of income chargeable to tax. The debate has been settled by the Supreme Court in the case of GE India Technology Centre (P) Ltd. v. CIT and has been reiterated by subsequent Supreme Court judgements. The Supreme Court ruled that TDS can only be made if the non-resident is liable to pay tax under the tax law in the first place. Further, it has also ruled that an application to the tax officer may be made by the payer when the latter is certain that TDS is applicable but not sure of the amount of payment chargeable to tax in the hands of the non-resident and hence the amount of TDS. When the payer is fairly certain, then she or he can make their own determination as to whether TDS is applicable and, if so, what should be the amount thereof.
In your case, since the cost and proposed sale numbers are readily available, the capital gains computation can be made and it would result in a capital loss under tax after indexation [Indexed cost = ₹1,500,000 / 272 * 348 = ₹19,19,117]. Taking this into account, ideally the buyer is not required to deduct TDS, nor is there any need to approach the tax officer to make this determination. You can share all documents with the buyer of your property, so that the buyer can correctly compute the capital loss amount. The net proceeds can be remitted to you after obtaining a CA certificate in Form 15CB and filing Form 15CA.
However, in practice, for the risk of being deemed as an assessee-in-default, the buyer typically insists for the seller to obtain a lower/nil tax deduction certificate from the tax officer in order to prevent any litigation at a later point. In the absence of this certificate, the buyer would deduct tax at source on the gross sale consideration even when there is a capital loss.
Harshal Bhuta is partner at P.R. Bhuta & Co. Chartered Accountants.
The Castle Hill Avenue neighborhood in Great Barrington, where homes tend to sell for prices close to $1 million. Town officials will hold public talks about whether to impose a 1 percent “real estate transfer fee” for sales of over $1 million. The money would go into the town’s affordable housing coffers.
GREAT BARRINGTON — One town official looking to funnel more money toward people who need help paying for housing is proposing to tack on a fee to all real estate deals over $1 million.
The 1 percent “real estate transfer fee” would be split by buyers and sellers. The cut would be taken off all kinds of real estate including single family homes, land and commercial sales, though transfers between family or for use as affordable or workforce housing would be exempt.
Select Board Vice Chair Leigh Davis presented her proposal to the board at its meeting Monday as she continues to spearhead affordable housing initiatives along with members of the board’s Housing Subcommittee of which she is chair.
Davis says the plan is worth it — such a small price for such a high reward. The data she pulled from the town Assessor’s office, she says, bears this out.
Had the 1 percent “fee” been in place for the 148 real estate sales last year, Davis notes, it would have generated more than $200,000 for the town’s Affordable Housing Trust Fund.
Four other municipalities have such a measure and others are working on it. A bill pending in the Legislature would give towns flexibility about how to tailor a fee policy to the community.
Whatever the board and voters decide, it won’t be quick.
The Select Board will hear public comment before taking a vote to pass the measure to voters at the annual town meeting in May, said board Chair Stephen Bannon. Davis said it could take years before the policy takes effect, and the governor will have to sign off on it.
But Davis, who works for a nonprofit that creates and manages affordable housing, said the need to fill the town’s Affordable Housing Trust Fund’s coffer is urgent.
She cited a housing crisis in which people who can’t afford housing costs or even find available apartments or homes, and said it is worth putting the measure in motion to pay for various strategies that would either create new affordable housing or keep elderly people on fixed incomes in their homes.
It’s also a way, she added, to make sure the town’s restaurants and shops can be staffed.
“The displacement of longtime locals and our workforce continues,” Davis said, also pointing to a Washington Post analysis of national real estate data showing that 45 percent of homes bought last year in Great Barrington, Egremont and New Marlborough were paid for with cash. “If this isn’t a call to action, I don’t know what is.”
Evidence that there is plenty of wealth in these hills is not isolated to these three South County towns, whose all-cash home purchases were at the 45 percent level since around 2017, and down from previous years.
The housing market has tipped out of balance in what is a “national housing affordability crisis,” CNBC reported last month. The news site ranked Massachusetts as the fourth most expensive state in the U.S. to live in.
The proposed “fee” — which by many definitions is really a tax since it is not payment for a service and is compulsory — points back to whether the town should tax the rich or property rich in town.
Not everyone thinks so. One resident opposed to the idea wondered why such a fee is limited to real estate when only the rich can afford to shop at many places in town.
“If the aim here is to get a transfer of wealth from the wealthy in Great Barrington, why not put an extra tax on Guido’s [market]?” said resident Trevor Forbes, who said he found it ironic that another “tax” was proposed at a Town Hall known for its Revolutionary War-era uprising over British rule and taxes.
Some people are simply house rich from a property purchase made decades ago right after World War II, said resident Michelle Loubert, who said she believes the proposal is divisive.
“And lo and behold, maybe today, it is worth a million dollars,” she said. “They may not have a lot of money in the bank.”
But Fred Clark, who is chair of the Affordable Housing Trust Fund, said this fee is another tax, like that paid for a car purchase or for excise taxes that maintain infrastructure.
Except that it is worthy, Clark said, and would help the community “come to the aid of our neighbors,” and would use the real estate market to “help balance” a lopsided situation.
Latest figures from HMRC show that Capital Gains Tax receipts hit a record £16.7 billion in tax year 2021/22 – that’s up 15 per cent on the previous record year.
The number of payers was also up 20 per cent to 394,000, more than doubling in a decade. This means that CGT is not just for the super wealthy, as 214,000 people paid CGT on gains of up to £25,000.
The CGT free allowance was cut from £12,300 in 2022/23 to £6,000 for this tax year, prompting Helen Morrissey – an analyst at business consultancy Hargreaves Lansdown – to say it’s time to sit up and take notice.
“With record numbers of people paying capital gains tax and tax free allowances plummeting, CGT is no longer a tax most investors can ignore. Although almost half of the total CGT paid is on super gains of £5 million or more, this tax is not just for the super wealthy as 214,000 people paid CGT on gains of up to £25,000” she says.
“Buy to regret landlords continue to suffer the worse combination of the capital and income tax regime” she observes.
Some 139,000 taxpayers reported 151,000 disposals of residential property in the 2022 to 2023 tax year with a total liability of £1.8 billion. This is similar to the previous year but is a 56 and 60 per cent increase from the 2020 to 2021 tax year which reflects the increase in activity seen in the property market following the first year of the pandemic.
Morrisey gives these ‘CGT trap beaters’:
- Make use of your CGT allowance every year, before you lose it – Higher rate taxpayers pay 20 per cent on capital gains on investments and 28 per cent on gains from property. In the current tax year, you can make gains of £6,000 before you pay tax on them.
- Offset losses against gains – Don’t forget, you can offset any capital losses you make during the tax year against gains. If your total taxable gain is still over the tax-free allowance, you may be able to deduct any unused losses from previous tax years. If just some of your losses reduce your gain to below the tax-free allowance, you can carry forward the remaining losses to a future tax year.
- Shelter as much of your portfolio in ISAs as possible – If you have investments outside an ISA use the Bed and ISA process (also known as Share Exchange) to move these assets into an ISA. Once in an ISA you won’t pay tax on either gains or income. Because the dividend tax rate is generally paid at a higher rate than the capital gains tax rate, it’s often worth prioritising income producing investments when making decisions about how to use your ISA allowance.
- Plan as a couple – If you’re married or in a civil partnership you can transfer investments into their name without triggering CGT, so you can both take advantage of your allowances. And if your spouse or partner can realise gains within the basic rate band they will pay 10 per cent on gains (or 18 per cent on residential property).
- Consider a Venture Capital Trust – These aren’t right for everyone, because they are very high risk, so should only ever be considered as a small part of a large and diverse portfolio. However, if you use these schemes, they are CGT free and you can get up to 30 per cent income tax relief on the amount you invest – which can reduce your overall tax bill.
Generally, commercial real estate has an advantage over residential property in terms of higher rental yield. Not only does one get lucrative rental income, but there is also the potential for capital appreciation that makes commercial real estate a good investment option.
Unlike equity investments that fluctuate with market trends, commercial real estate investments typically guarantee a predictable return, reducing investment risk. Further, the stability comes from long-term tenancy agreements in commercial real estate.
AryamanVir, CEO of Aurum WiseX, said, “Investing in A-Grade commercial real estate comes with a suite of benefits. High returns top the list, with investors looking at a healthy net internal rate of return (IRR) of 12-17%. This includes a steady 7-9% from monthly rental income and the possibility of capital appreciation. This return spectrum significantly outshines residential real estate’s 2-3% rental yield.”
Tax considerations: Investing in commercial real estate in India carries significant tax implications that every investor should know.
So, if you are thinking of selling commercial property after five years, AryamanVir says investors must consider these five critical tax consequences while dealing with commercial real estate investments.
• Capital assets and gains: Commercial properties are capital assets. Profits from their sale after 24 months are long-term capital gains (LTCG), taxed at 20%. If sold within 24 months, it’s short-term capital gains (STCG), taxed as per your tax slab.
• Tax relief through Section 54F: The Income Tax Act provides a tax relief option under Section 54F. If you reinvest the entire proceeds from the sale of your commercial property in a new residential property within a specified time – one year before the sale, two years after the sale, or within three years if you’re constructing a house – the capital gain on the sale is exempted from tax. This benefit is not available if you already own more than one residential property at the time of sale, purchase another residential property within one year, or construct one within three years after the sale.
• Section 54EC bonds: You can invest the capital gain from the property sale in certain bonds like NHAI or REC within six months to get tax exemption. The cap is Rs 50 lakh, and these bonds must be held for five years.
• Capital Gain account scheme: This scheme provides a solution for those who cannot invest in a new property before filing their income tax return. Under this scheme, you can deposit the unutilized sale proceeds in a separate bank account. This amount can be used later for purchasing or constructing a house within two or three years, respectively, to avail of the tax exemption as per provisions in Section 54. However, if the funds are not utilized within this timeframe, the amount is treated as capital gain from the previous year in which the period expires.
• 2023 Finance Bill Amendments: There’s a Rs 10 crore cap on deductions under Sections 54 and 54F, and the maximum deposit in the Capital Gain Account Scheme is also Rs 10 crore. Understanding these points can guide your commercial real estate investments and tax planning.
BUENOS AIRES, July 25 (Reuters) – As Argentina’s inflation rate soared past 100% and the value of the currency slid, IT worker Luis, 33, found an economic lifeline: renting out his apartment on Airbnb for coveted dollars and finding a way to hide his earnings from the tax authorities.
Luis’s apartment in Buenos Aires brings in around $800 a month, 60% more than his salary in IT, which was paid in pesos and worth just $490 at the black market rate by July last year, when he quit to try freelancing.
The income Luis earns from his Airbnb rental is paid in dollars into a digital account on US payment platform Payoneer, he said. Luis said he then buys dollar-denominated stablecoins on overseas crypto markets, which he barters for pesos on peer-to-peer exchanges in Argentina — all under the radar of Argentine tax and financial authorities.
“I was working so much, putting in extra hours [in IT], and I said, ‘to hell with it,” said Luis, who only used his first name to avoid being identified by tax authorities. “I’m going to do my own thing, work for myself and earn more.”
Thousands of Argentine property owners are turning to Airbnb and other short-term rental platforms to boost their earnings against runaway inflation — and many are avoiding foreign exchange controls and income tax on their earnings, Reuters has found.
Reuters interviews with 18 hosts, real estate agents and officials, analyses of previously unreported rental data and reviews of landlord chat groups showed that while some property owners do declare their income, many keep these transactions off the books, taking advantage of regulations that rely on landlords to come clean.
Many of the hosts, Reuters found, were struggling professionals rather than large-scale landlords, looking to stay afloat amid an economic crisis that has left 4-in-ten Argentines under the poverty line.
When hosts exchange dollars to pesos on informal markets, they divert funds from the official economy, contributing to a drain on foreign currency reserves that has left the country struggling to make payment on debt and imports.
The short-term rentals trend has pushed up local house prices and made it harder to find homes available for rent in pesos. Buenos Aires now has 1,200 homes available for rent in pesos, according to a registry maintained by the Argentine real estate chamber, down from about 8,000 in 2020.
Argentine hosts on Airbnb can receive payments to a local or overseas bank account as well as Payoneer and Paypal, options on one host’s account reviewed by Reuters showed and Airbnb confirmed.
Deposits to a local bank account are converted from dollars to pesos at the official exchange rate. Argentine law also requires banks to report deposits that exceed $400 a month.
Opting for payment through an overseas bank account or a global platform — and converting at a black market rate — offers an 88% better return and allows hosts to circumvent tax authorities, according to a central bank source. But the source said that would be illegal.
“The only way that one is not legally exposed using Airbnb is making a transfer to a local bank,” the central bank source, a payments expert who was not authorized to speak on the record, said.
BOOM IN SHORT-TERM RENTALS
The terms and conditions listed on the websites of Airbnb, Paypal and Payoneer hold individuals, not companies, responsible for reporting income to local tax authorities.
Airbnb told Reuters in a statement that guidance published on its website advised hosts to register their short-term rental properties with Argentine authorities.
Doing so was the responsibility of each host, as is the obligation to use legal payment methods, the company said.
“Hosts must comply with all applicable regulations as clearly required in Airbnb’s terms of service that all users must agree to in order to create an account on the platform,” said Airbnb in a statement.
The company does collect information from hosts who use a US payment method for its own reporting to the Internal Revenue Service (IRS) in the United States, according to information on the company website.
Airbnb said about 40% of hosts in Argentina used the platform to “help to maintain the expenses related to the current cost of living.”
Payoneer declined a Reuters’ interview request. PayPal said that “as a global payments company, we adhere with applicable laws and regulations.”
Argentine tax authority AFIP said that it “always encourages people to declare” income.
Ramiro Raposo, Argentina-based Vice President of growth for U.S.-based cryptocurrency payment firm Bitwage, said using the digital tender to transfer assets into Argentina was legal, though it was up to users to then declare their earnings.
“Evading taxes is clearly not legal, but that has nothing to do with us,” he said.
Argentina’s short-term rental market has been booming since the adoption of a 2020 law that sought to protect renters by limiting landlords to a single rent hike per year.
Instead, the law led to an explosion in the short-term rental market.
Data shared with Reuters by AirDNA showed that more than 18,500 properties in Buenos Aires were listed on Airbnb in June. The Buenos Aires tourism department told Reuters, however, that just 570 properties were listed on the city’s register of short-term rentals in June.
AIRBNB IN POLITICAL SPOTLIGHT
“We’re seeing owners increasingly turning to temporary rentals, because they are in hard currency, in dollars,” said Ariel Yeger, a real estate agent who said short-term rentals now make up 90% of the agency’s listings.
He said property owners paid in dollars can earn double the rent of a long-term contract in pesos, because short-term renters with access to hard currency have more purchasing power.
Renters include remote international workers; students and medical tourists from nearby countries and Russians fleeing the war and potential military service, he said.
Gaston Levy, 38, an administrative worker and part-time DJ, said he worried about finding a place to live when his lease ends in February. His landlord was threatening to raise the rent, despite laws only allowing one increase a year.
“It seems impossible to me to buy an apartment earning in pesos, or renting a place if the prices is in dollars,” he said.
In a chat group for Argentine landlords reviewed by Reuters, hosts discussed the best ways to get paid on Airbnb and to exchange the funds back into pesos without being detected.
“It’s a game you have to play,” said a 29-year-old host earning about $1,000 per month who asked not to be named to remain under the radar of tax authorities.
Gustavo who rents out an apartment for $1,500 a month for temporary stays via a local real estate broker said he accepted pesos, but at the black market rate. The government rate is a “fiction,” he said.
“Hopefully soon, there will be just one exchange rate and that will be better for everything,” he said.
The rentals law and the growth of the short-term rental market have come under fire from legislators and presidential candidates in the October general elections.
The four most prominent presidential candidates have spoken out against the rentals law and ruling Peronist coalition legislator Ana Maria Ianni has proposed fining Airbnb if hosts do not register with Argentine authorities.
“It’s a platform that is causing a lot of harm around the world in this regard,” said Ianni, who is vice president of the Senate’s Tourism Committee.
The aim was not to put Airbnb out of business, she said. “What we want is that when they offer a property for tourist accommodation they do so by complying with this registry.”
Airbnb declined to comment on Ianni’s proposal.
Reporting by Anna-Catherine Brigida and Eliana Raszewski; Editing by Adam Jourdan and Suzanne Goldenberg
Our Standards: The Thomson Reuters Trust Principles.
- Overpaid inheritance tax must be claimed proactively from HMRC
- You can recover thousands if you sell a property for less than anticipated
- How much is inheritance tax, and how do you claim refunds: Find out below
A rising number of families could qualify for inheritance tax refunds on property sales, as prices slump below valuations when their loved ones died.
Overpaid inheritance tax must be claimed proactively from HMRC, but you can recover thousands of pounds if you sell a property for less than anticipated within four years of a death.
Inheritance tax is also refunded on investment losses, but only if you sell for a lower value within the first year after a bereavement.
Interest rates hikes to combat inflation have sent mortgage rates soaring, which is dampening property prices for all sellers, including those selling a deceased relative’s former home.
The latest Nationwide house price index estimated that prices fell 3.5 per cent year-on-year in June.
Inheritance tax must usually be paid within six months of a death, and it is 40 per cent on the portion of someone’s estate that exceeds certain thresholds.
These are £325,000 if you are single, £650,000 jointly if you are married or in a civil partnership, or a joint £1million if you pass property to your direct descendants.
The Conservatives are reportedly considering including a pledge to abolish inheritance tax in their next election manifesto in a bid to drum up votes.
> How inheritance tax works and 10 ways to relieve the burden on your loved ones
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HOW THIS IS MONEY CAN HELP
‘Although thousands of families reclaim overpaid inheritance tax every year, it’s likely that many miss out,’ says Sean McCann, chartered financial planner at NFU Mutual.
‘In a rising market reclaims are normally made when a property is overvalued on the inheritance tax return or its condition deteriorated between the time of death and subsequent sale.
‘The current downturn in the housing market is likely to lead to even more bereaved families selling property at a lower price than the value at which inheritance tax was paid.
‘It’s crucial to remember that the refunds need to be actively claimed as HMRC won’t automatically reimburse the estate.’
A freedom of information request by NFU Mutual found around 3,000 families claimed a refund on overpaid inheritance tax on property and land in 2022/2023, and 2,000 on investment losses.
The total number of claims for overpaid inheritance tax was up 22 per cent on the previous year.
How to claim an inheritance tax refund
‘Inheritance tax is based on the value of assets on the date of death and must normally be paid within six months.’ says McCann.
‘If the executors or personal representatives subsequently sell a property at a lower price within four years of the death, or shares or other qualifying investments within one year, they can reclaim inheritance tax.
McCann says you can seek advice from an accountant or adviser, but refund claims can only be made by the ‘appropriate person’ or persons responsible for paying the inheritance tax.
So, this means an executor if there was a will, or administrator if someone dies intestate.
Claims for refunds of inheritance tax on property and on shares must be made separately, notes Ammo Kambo, a financial planner at wealth manager RBC Brewin Dolphin.
‘Losses and gains on property cannot be used against losses/gains on shares.’
Property refund claims
‘If executors sell land or property within three years of death – four years if death occurred after 16 March 1990 – they are able to make a claim that the sale price be used rather than the death value,’ says Kambo.
‘If there are several sales, relief can only be claimed on the net loss of total sales of land or property.
‘If land/property is sold to a beneficiary or one of their relatives, it may not be possible to make this claim.’
What info do you need to gather and where do you apply for a refund?
McCann offers the following checklist:
– You will need to include every sale of land or property sold by the ‘appropriate person’ in the four years after death.
– You will need to include the value of the property at the date of death, the sale value and the name of the purchaser.
– A claim can be submitted up to seven years after the death (although sales must be in the four years after death)
– HMRC advise that you shouldn’t make a claim until all the land and property to be sold by the ‘appropriate person’ has been sold.
– For claims on property that has fallen in value use inheritance tax form IHT38.
Shares and other investment refunds
‘If the executors sell any quoted shares of the deceased’s estate within 12 months of death, they can make a claim that the total sale price should be used rather than the value of the shares at the date of death,’ says Kambo.
‘All shares sold within 12 months of death must be revalued in this way.
‘You cannot choose to make a claim only on the shares that have fallen in value – the executors need to have suffered an overall loss in order to claim the relief.’
McCann says it is important to check if you have overpaid inheritance tax during times of stock market volatility, because reclaims can amount to thousands of pounds.
He notes that because all qualifying investments sold by the executor in the 12 months following death have to be included in the claim, not just those that have fallen in value, if some have increased in value this will reduce your refund.
McCann says under these circumstances it may be more advantageous for executors to pass the shares or investments that have increased in value direct to the beneficiaries rather than sell them.
‘This means you make a claim only for those shares that have fallen in value, maximising the amount reclaimed. This is common practice. I’m not aware of cases where this has been challenged.
‘Where a challenge is more likely is where property is sold at under market value, particularly to family members.’
Legal and money experts have recently warned about probate delays leaving many bereaved families out of pocket on reclaiming tax on investment losses because they breach the one-year deadline.
Applying for probate is a vital step to gain control over an estate after someone dies, allowing executors to access bank accounts, settle debts and sort out bequests.
McCann says: ‘In order to sell property, shares or other qualifying investments, the executors will need the grant of probate.
‘Probate delays eat into the 12-month window available to executors to sell shares or other qualifying investments. There is a danger that executors could run out of road.’
What info do you need to gather and where do you apply for a refund?
McCann offers the following checklist:
– You will need to include every sale of a ‘qualifying investment’ sold in the 12 months after death (not just those sold at a loss).
– ‘Qualifying investments’ include shares listed on a recognised stock exchange at the date of death, UK Government stock (gilts, or UK government bonds) and holdings in unit trusts.
– You will need to include the value at the date of death and the sale value.
– A claim can be submitted up to five years after the death (although sales must be in the 12 months after death)
– For claims on shares or other qualifying investments use inheritance tax form IHT35
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On June 27, 2023, the firm’s Emerging Companies Practice (ECP) announced that Neuron, its proprietary cloud-based software platform for start-up clients, now has the ability to generate simple commercial non-disclosure agreements (NDAs) within its corporate governance module. Users may now work with Wilson Sonsini attorneys directly through Neuron to complete a single form, and their legal team can quickly generate an NDA tailored to exact specifications.
This latest enhancement follows Neuron’s addition of the corporate governance module in late 2023. At that time, Neuron was expanded to include corporate governance offerings such as employment and consulting agreements, offer letters, and other agreements enforceable in all 50 states. That release allowed clients and their ECP legal teams to manage corporate governance and board management activities through the Neuron platform. In addition, the ECP launched an innovative fixed-fee subscription for Neuron clients, providing emerging company clients with consistent pricing so they can develop reliable budgets while still accessing world-class legal services.
For more information, please visit https://ecp.wsgr.com/neuron.
City asked to reconsider role in commercial developments
Recently, I responded to the City of Flagstaff (COF) appeal to residents regarding current budgeting priorities and objectives. Earlier this year I had the opportunity to attend the City of Flagstaff’s budgeting retreats. Over multiple days, I learnt a great deal regarding the anticipated spending on operations and capital projects for fiscal year 2023-2024. The days were filled with charts, tables and diagrams.
At the end of one day, a COF staff member presented the refurbishing and rebuilding of a commercial property owned by the COF. The property is located before the entrance to Buffalo Park and it is primarily leased to the USGS. He proceeded to tell the budget meeting attendees, City Council and City Staff primarily, that a new investment in the USGS buildings would cost over $50 million. This amount was higher than prior year estimate of over $35 million! But not to worry, USFS and the COF were close to agreeing to a five-year lease with a five-year renewal! Not one question from the audience! Not a peep! Not a graph, table or diagram! I was stunned! I do not believe any commercial developer would spend over $50 million with a potential five- or 10-year lease in the future.
Developing commercial property is NO WHERE to be found in the Flagstaff Key Community Priorities and Objectives used in the COF budgeting. The COF mission does not mention the COF developing commercial property.
If the COF remains in commercial building business, this presents numerous conflicts of interest for the COF. This situation today is like having the fox guarding the hen house given the COF enforces and creates the building codes!
The COF should divest all commercial property; the residents tax dollars can be better spent on actual COF’s Priorities and Objectives.
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