Help on estate income tax/IHT

[DamoUK]

I've been administering an estate for nearly 3 years (since Dec 2019) as it got complicated, but am now at the stage where I've gathered all the money (everything was sold so the estate can be financially divided on a simple % distribution between 10 people).
I originally had a solicitor but he made so many mistakes I was forced to sever the relationship.
I'm now at the point where I want to distribute money, but I think there may be more tax to pay, here is a very brief summary of the situation and approx values:

• Original estate valued for probate at £800k, around £200k inheritance tax paid
• House valued at £190k, sold for £250k - I paid capital gains tax on the difference as advised by HMRC within a few days of the sale
• Shares/Investments valued at £500k at time of death. Once redeemed, they totalled around £540k as it was 12 months after death before it was all completed.
• Everything else in the estate balances to within £1k of the values given for probate when totalled together, so I'm not too worried about those.
• I sorted income tax/self assessment to the date of death shortly after the death.

But, as there is more money realised from the shares (and house sale), I'm not sure whether I need to do an IHT adjustment, do any other kind of return (I've seen something about a form SA900 for HMRC which refers to Capital Gains Tax) or whether I'm best to get someone to help me, if so should that be a solicitor, accountant or who (and how would I find someone?)? As I need to distribute all the money, I want to make sure everything is done correctly so I don't end up out of pocket because of a mistake. I'm getting quite stressed about it all and need some advice!

TIA

[Sam101]

With an estate of £800,000, how have you calculated £200k Tax?

If this is the second death and husband and wife had both nil rate bands well as residential allowances, then that amount of tax dows seem too much. Would you care to enlighten the forum members before other questions are dealt with?

[DamoUK]

Hi, Of course, apologies for the lack of clarity, I didn't want to overwhelm what was already a lengthy explanation.

This is the estate of my unmarried and childless uncle, who died intestate. The person who would have been the sole beneficiary due to the laws of intestacy has written a deed of variation to share the residue out to other members of the extended family and given me power of attorney to act as executor.

Note that the ££ values I gave are all rounded for ease of explanation, rather than being the actual values. The value of inheritance tax paid was correctly 40% of the value of the estate above the threshold based on the estate valuation when applying for Letters of Administration (that was all hindered by Covid lockdowns, one of the reasons it's taken so long).

HMRC advised that there was no need to vary the value of the house for inheritance tax and that the additional income from that would be covered by Capital Gains Tax - which has been settled. BUT the shares returned considerably higher return than they were valued at time of death and I'm not sure what to do about that value and/or if SA900 needs to be completed (it's not been requested despite paying the Capital Gains Tax in December 2021) or what I need to do to "close" the estate once the money is distributed. I'm nervous about distributing the money in case there's more taxes/fees to pay.

[Sam101]

Many thanks for the additional details, it always helps to get a better picture.

It would appear that have correctly dealt with the estate as far as the Revenue is concerned, but the delay before distribution means a further gain. Can you say what the gain is and how many beneficiaries there are?

This question was asked on Google ....... What happens to shares left in a will?
When a shareholder dies the right to his interest in the shares will pass to whoever inherits them under his will or intestacy. The deceased shareholder's rights will be administered by his or her executors (if there is a will) or administrators of the estate if the shareholder has died intestate.

Therefore, you can distribute the shares to the beneficiaries and leave them to deal with them as they wish.

Perhaps others may wish to comment on this as I am not 100% sure if this is accurate.

[sederunt]

Depending on circumstances you may have to:

• pay capital gains tax on share value increase
• pay income tax on divided income
• submit an estate tax return
• notify beneficiaries of the amount of tax paid in respect of their legacies

There is useful information on 'Low Incomes Tax Reform Group' website under 'Bereavement ' then on dealing with tax during period of administration.

[dslippy]

Remember that on an intestacy everything in theory is converted to cash, and divided according to the rules. The beneficiaries choosing to take shares in lieu of cash need to be accounted for properly.

[DamoUK]

Thanks for everyone's help. As there are so many possibilities, after many hours on the phone, HMRC have advised to wrap it all up into Capital Gains Tax! Which makes it relatively easy, I just need to write to them with the details. I enquired about doing an estate adjustment (form C4), but they weren't really interested unless there was a decrease in value on anything in the estate. They've also advised that I can optionally request a clearance certificate (using IHT30) which essentially says they're happy with the everything in the estate and that IHT is accepted.