R185e questions

nige123

Should an executor issue R185s automatically to all residuary beneficiaries, or is it only necessary for those who request one unprompted, or should they all be offered one?

The estate that I am administering has made distributions in the tax years 2010/2011 and 2011/2012 with a final distribution to be made in the current year. No R185s have so far been issued. If I issue them now for the earlier tax years, and any higher rate taxpayer dutifully reports their meagre share to the taxman, will they risk being penalised for late reporting?

If any beneficiary claims a tax refund is that likely to trigger a request from HMRC for a detailed estate account (the estate is below the single IHT threshold)?

One of the beneficiaries is an accumulation trust. Can the trust reclaim tax paid by the estate?

And a final, trivial, question - can the completed forms be sent out by email, or do beneficiaries need to have original signed copies?

jimmo

I am not qualified to answer your question but would suggest that it would be good practice to issue R185s to each beneficiary each year regardless of whether you are obliged to or not.

If you pick your way through the HMRC website you can find instances of when you are obliged to inform the beneficiaries. Form R185 is not compulsory but is probably useful.

See Trustee obligations for Income Tax and Capital Gains Tax here.

http://www.hmrc.gov.uk/trusts/trustee/responsibilities.htm#3


It may be perfectly obvious to you which beneficiaries, if any, will need an R185 but, strictly speaking, their personal tax affairs are none of your business and it might be easier to issueR185s to everyone rather than risk having to deal with individual requests in dribs and drabs.

In your particular case however I would suggest that what’s done is done. If any beneficiary is liable to higher rate and they failed to ask you for an R185 it seems very likely that they also failed to declare their income. It is not your fault if they received money from the estate and failed to appreciate the tax consequences.

An accumulation trust is unlikely to be able to claim a repayment of tax paid by the estate because the accumulation trust is liable to tax on its income (and probably at a higher rate)

http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM1566.htm

http://www.hmrc.gov.uk/manuals/tsemmanual/tsem1567.htm


And finally, strictly speaking, if anyone wants to claim repayment of tax they need to provide the original certificate, not a copy. Having said that it is perfectly obvious to me that the form P60 I receive each year from my pension payer is a word processed document on A4 paper and I defy anyone to spot the difference between the original and a copy I have made using my printer.

nige123

jimmo wrote: »

In your particular case however I would suggest that what’s done is done. If any beneficiary is liable to higher rate and they failed to ask you for an R185 it seems very likely that they also failed to declare their income. It is not your fault if they received money from the estate and failed to appreciate the tax consequences.

It's kind of you to try to make me feel better about this, but I can't imagine that if I was in their position I would even consider that part of my legacy might be (and indeed might not be) interest, unless I had had personal experience of probate.

jimmo wrote: »

And finally, strictly speaking, if anyone wants to claim repayment of tax they need to provide the original certificate, not a copy. Having said that it is perfectly obvious to me that the form P60 I receive each year from my pension payer is a word processed document on A4 paper and I defy anyone to spot the difference between the original and a copy I have made using my printer.

When I claimed a refund of tax overpaid by the deceased, using form P40, HMRC didn't ask to see certificates.

Do the original P60s bear a handwritten, as opposed to printed, signature?

nige123

jimmo wrote: »

An accumulation trust is unlikely to be able to claim a repayment of tax paid by the estate because the accumulation trust is liable to tax on its income (and probably at a higher rate)

The trust's investments are structured so as to generate no income, so its only income will have been that received from the estate. This is well below the £1000 "standard rate band" for trust income so I take it that there will be no additional tax to be paid above the 20% already paid?

nige123

Where tax has been paid in a later tax year than the year in which the interest was received (thank you B*rclays), is the tax shown on the R185 for that earlier tax year?