Mr Dog's Estate: Losses on sale of equities and confusing IHT35 tax reclaim form

John_Pierpoint

I'm struggling with form IHT35.on behalf of the late Mr Dog.
http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=3369 f

The situation should be simple.
Mr Dog owned a reasonable slug of Barclay's bank shares, together with some other equities (fortunately he had decided that playing with shares was not a good idea for an elderly gentleman and was in the process of liquidating his shares)

These Barclay shares were almost certainly obtained when Barclays took over the former Woolwich building society. They were held as a PEP/ISA with automatic reinvestment of dividends.

When he died he was due a dividend of 473 GBP gross and his "Woolwich" administered PEP/ISA was set to automatically reinvest any dividends.

So when he died he was taxed on 4096 shares at 3.16 per share = 12,943 plus 473 gross divi both @ 40%.

When I liquidated the the holding on behalf of the multiple beneficiaries, I got
the proceeds of 4241 shares at 2.7575 per share = 11694.
This is a loss of 1,248.58 on the investment in Barclays and its dividends because the executor (me) was stupid enough to "invest" in falling Barclay shares.

To my way of thinking the investment of the 473 should appear in the post death trust accounts as the sale of 145 shares (generating a small capital loss) as a post death event and be ignored for IHT.

BUT that is too simple and is not the way the form appears to work.

In section 1 I have to report the above figures, when the real loss on the investment at death is 12,943 - 4,096 @ 2.7575 = 12,943 - 11,295 = 1,648
(NOT 1,249 as in the calculation above.)

There is also a section two that deducts and disallows any of the loss due to an investment after death (even though the dividend, already taxed at 40% IHT, is automatically converted to shares by the Barclays administered PEP/ISA in whch the shares were held).

Hay Ho it looks like more double taxation to me.

SeniorSam

John_Pierpoint wrote: »

I'm struggling with form IHT35.on behalf of the late Mr Dog.
http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=3369 f

The situation should be simple.
Mr Dog owned a reasonable slug of Barclay's bank shares, together with some other equities (fortunately he had decided that playing with shares was not a good idea for an elderly gentleman and was in the process of liquidating his shares)

These Barclay shares were almost certainly obtained when Barclays took over the former Woolwich building society. They were held as a PEP/ISA with automatic reinvestment of dividends.

When he died he was due a dividend of 473 GBP gross and his "Woolwich" administered PEP/ISA was set to automatically reinvest any dividends.

So when he died he was taxed on 4096 shares at 3.16 per share = 12,943 plus 473 gross divi both @ 40%.

When I liquidated the the holding on behalf of the multiple beneficiaries, I got
the proceeds of 4241 shares at 2.7575 per share = 11694.
This is a loss of 1,248.58 on the investment in Barclays and its dividends because the executor (me) was stupid enough to "invest" in falling Barclay shares.

To my way of thinking the investment of the 473 should appear in the post death trust accounts as the sale of 145 shares (generating a small capital loss) as a post death event and be ignored for IHT.

BUT that is too simple and is not the way the form appears to work.

In section 1 I have to report the above figures, when the real loss on the investment at death is 12,943 - 4,096 @ 2.7575 = 12,943 - 11,295 = 1,648
(NOT 1,249 as in the calculation above.)

There is also a section two that deducts and disallows any of the loss due to an investment after death (even though the dividend, already taxed at 40% IHT, is automatically converted to shares by the Barclays administered PEP/ISA in whch the shares were held).

Hay Ho it looks like more double taxation to me.

Hi John,

I really do hope that the beneficiaries are understanding enough not to hold you responsible for investing some of the proceeds of the estate in shares.

Executors do have a responsibility to protect the assets of the estate for the beneficiaries and share investment is usually frowned on.

Sam

wise_fool

SeniorSam wrote:

Executors do have a responsibility to protect the assets of the estate for the beneficiaries and share investment is usually frowned on.

You are sounding something of an expert despite asking in a previous post about the responsibilities of an executor. :eek:

But, I think you have misread JP's post. He has merely sold some shares at a loss that were automatically reinvested by Barclays/Woolwich - non?

In any case the will often expressly states that the trustees may invest in shares etc.

John, you are a very diligent man and you have my enormous sympathy and respect. :T

SeniorSam

wise_fool wrote: »

You are sounding something of an expert despite asking in a previous post about the responsibilities of an executor. :eek:

But, I think you have misread JP's post. He has merely sold some shares at a loss that were automatically reinvested by Barclays/Woolwich - non?

In any case the will often expressly states that the trustees may invest in shares etc.

John, you are a very diligent man and you have my enormous sympathy and respect. :T

wisefool......
I'm only going on what John said :-

"This is a loss of 1,248.58 on the investment in Barclays and its dividends because the executor (me) was stupid enough to "invest" in falling Barclay shares."

Sam

John_Pierpoint

Yes, I was being a bit ironic when I said "I" reinvested the 473 quid divi in Barclays shares. In reality the dividend went into the Woolwich PEP/ISA and got automatically reinvested into falling Barclay's shares.
The reality of the situation was that I spent 6 months un-tangling Mr Dog's affairs and then HMRC & the the court spent nearly another another 3 months checking my forms and organising the grant of probate.
While that was going on the value of all his share was falling about 30% but there was nothing I could do about it.

The form IHT35 is intended to stop the executor selling the losers and keeping the winners or bed and breakfasting the shares to realise the loss, reclaim 40% of that loss against the IHT already paid and then dish out the shares to the beneficiaries (all be it with a low aquisition price). Unfortunately "my investment" of 473 quid not only made a loss BUT also seems to get treated as a "reinvestment" and gets taken off my allowable losses for IHT reclaim purposes.
I tried three different ways of filling in the form but in each case the 473 quid reinvestment reduced my allowable losses.
Any way I've sent it off now, I'll let you know how big the reclaim cheque is when I get it.;)