Estate admin practicalities

Estate admin practicalities

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Say you are dealing with a deceased's estate.  Deceased left a Will in which all assets pass absolutely (no Trust created).  For whatever reason the admin period is dragging, so that it spans 2 or 3 tax years.  The estate is worth less than £2.5m.  There is no prospect of chargeable disposals exceeding £250K (nor of any CGT liability).  There is no prospect of total Income Tax exceeding £10K over the admin period (but there will be some IT).  So HMRC Nottingham not interested and no SA record.

I get that we send a statement to HMRC Edinburgh at the end of admin, and at that point cough up the whole of the IT.  My questions regard how that Income is reported by beneficiaries.

Do we have to separate the income by tax year, produce R185 certs for each tax year, and the beneficiaries report that income in their own affairs by year? Or do they report everything in the same year as the executors provide the final summary to Edinburgh? Do we get a choice (I would assume not)? Does it make a difference if the executors hold on to all funds until finalising admin, contrasted with making interim distributions?

Regardless of the answer to the above, at some point the executors are going to have to provide R185 certificates to the beneficiaries. Suppose one of the beneficiaries can claim that tax back but is not himself in self assessment. So he completes an R40. My experience is that unless you quote a trust UTR on the R40 it will get rejected. But in this case there will not be one. How to get around that (apart from artificially registering for SA)? Am I overthinking this?

With kind regards

Clint Westwood

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By cparker87
03rd Oct 2015 07:42

at point of distribution
Unless there is a bare trust (like when the estate is ascertained but not quite distributed) then the estate as you say picks up the immediate liability.

Distributions during administration need an R185 and the beneficiary is taxes at the point of distribution.

Delaying income distributions can cause a bunching affect and therefore higher than necessary tax liabilities (eg if you delay payment and a significant portion becomes taxed at 40%).

I am not sure if the PR had legal obligation to the beneficiaries re that particular example but worthwhile considering in any case.

So really you can have the choice... But it depends what was actually distributed and when.

Re second query I'd suggest calling HMRC to explain.

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