Key Concepts Flashcards
How do PRs deal with any CGT and IT payable on estate’s assets?
1) CGT = if any gain is made on the sale of estate assets:
- the base cost for sale is the probate (market) value of the asset received at the time of death
- PRs pay rate of 20% (28% for residential property) and can deduct costs and AE
- CGT payable out of estate
- NO CGT is paid ono transfer of an asset to a beneficiary. Beneficiary may have to pay CGT is sell an asset they received from the estate and made a gain
2) Income tax = payable on any income received by estate during administration - e.g., rent due on property and dividends
- no income is payable if income earned is less than £100 and only from interest from savings account
- PRs liable for income tax: 7.5% on dividend income; basic rate (20%) on all other income
- relief can be claimed for interest on loans
Is death a disposal for CGT purposes
NO - death does not give rise to CGT liability
What is the Form R185?
PRs give a Form R185 to beneficiaries when estate income is distributed
NCPR 20
Deceased left valid will but no executors are able / willing to act
NCPR 22
Deceased died intestate
What assets does instalment option for payment of IHT apply to?
Instalment option: certain assets may be paid by 1- equal annual instalments
Applies to:
- land and buildings
- company shares/securities giving deceased control
- some unquoted company shares
- farms or interest in farming business
- business or interest in business
- timber
What is the deadline for submitting the account to HMRC?
12 months from end of the month in which death occurred
What is the deadline for paying IHT due?
6 months from end of the month in which death occurred, after which interest becomes payable on unpaid tax
When are PRs liable to pay CGT if they make a disposal/sale of estate assets during administration period?
If assets have increased in value since date of death = gain when they are sold
- if amount is greater than tax-free allowance = pay CGT
What happens to gains made by deceased during their lifetime in relation to assets they still own at date of death?
These are NOT taxed
- only post-death gains are chargeable
Chattel exemption
A gain made on disposal of tangible, moveable asset is exempt from CGT if disposal is for £6,000 or less
Exemptions and reliefs: lifetime only
- annual exemption
- family maintenance exemption
- small gifts exemption
- marriage exemption
- normal expenditure out of income
- taper relief
Exemptions and reliefs: lifetime AND death
- BPR
- APR
PA1A
Deceased did not will a will - NCPR 22 applies
PA1P
Deceased left a valid will - executors act under the will or administrators appointed by NCPR 20