Tax

Question 1

Who bears primary liability for tax for gifts (LCT / PET)?

Answer 1

Primary liability falls on the donee rather than the estate

• the donee is liable to pay any IHT on the gifts. The tax on gifts made more than three years before deceased’s death will be tapered

Question 2

What happens if donee fails to pay tax?

Answer 2

The estate is liable

Question 3

Appointment of an accountant

Answer 3

An executor may delegate the completion of tax returns to an accountant
- but the executor remains responsible for the content and payment of any tax

Question 4

What is the role of the accountant?

Answer 4

The accountant should be instructed by the executor to complete tax returns, including all deceased’s income up to date of death.

The executor is responsible for payment of any income tax due

Question 5

What is the position for CGT?

Answer 5

• Gains accrued during the deceased’s lifetime will drop away as there is a tax free uplift on death.
• Disposals of assets during the administration will be chargeable to capital gains tax on any increase in value since the date of death.
• The beneficiaries will take assets at probate value for capital gains tax purposes when they are transferred.

Question 6

What gains are chargeable?

Answer 6

• Gains which accrue during the administration of the estate
• Disposals by beneficiaries of the assets they receive from the estate

Question 7

When can a beneficiary disclaim a gift?

Answer 7

A beneficiary can only disclaim before acceptance - the option to disclaim is lost if the git is accepted

• a variation can still redirect the gift