HMRC Form R185 (Estate Income) & Overseas Beneficiary

Toxteth_OGrady

I wasn't sure whether to post here or on the Cutting Tax board.

I am administering an estate as a lay executor. I will be distributing a residual legacy to an overseas beneficiary in due course once the IHT has been finalised.

Do I need to send a Form R185 (EI) Statement of Estate Income/Tax Deducted to the legatee?

Between the date of death and the date of distribution, the estate will have been accruing interest in an account taxed at source (basic rate).

Is there a way for an overseas beneficiary to claim back the tax on the interest (estate income) as a non-UK taxpayer?

g6jns_2

Toxteth_OGrady wrote: »

I wasn't sure whether to post here or on the Cutting Tax board.

I am administering an estate as a lay executor. I will be distributing a residual legacy to an overseas beneficiary in due course once the IHT has been finalised.

Do I need to send a Form R185 (EI) Statement of Estate Income/Tax Deducted to the legatee?

Between the date of death and the date of distribution, the estate will have been accruing interest in an account taxed at source (basic rate).

Is there a way for an overseas beneficiary to claim back the tax on the interest (estate income) as a non-UK taxpayer?

The beneficiary probably is liable to UK tax. The tax is being paid by the estate rather than the beneficiary. What country is the beneficiary domicile do in?

Toxteth_OGrady

@g6jns

Thanks for your reply. After many hours of googling and almost giving up I believe I have now found the answer.

HMRC Form R43 - Income Tax: claim to personal allowances and tax repayment by an individual not resident in the UK. gov.uk link

There is a section in the form that allows tax already paid on estate income to be reclaimed. From the guidance notes:

Estate income. This is income from the estate of a deceased person. If you receive either a specific sum of money or a specific asset from someone who has died, you do not pay tax on these, so you should not include them on form R43(2015). If the asset is one that produces income (for example, a bank account or a property that is let) and you are entitled to that income from the deceased's death, you should include it on form R43(2015), in the boxes that deal with the type of income concerned. For example, enter details of bank interest in the boxes in part C2 or gains realised on certain insurance policies in the boxes in part C8.

Residuary beneficiaries

Special rules apply to the income from a deceased person's estate paid to you if you are a beneficiary who has an interest in the residue. The residue is what is left in the estate after the personal representatives have provided for all legacies and expenses. The personal representatives should give you a statement on form R185(Estate Income) showing any payments to you treated as income and the tax treated as paid on that income. Please enter that information in part C6.

You do not have to send an R185(Estate Income) with your claim, but you should keep it safe in case we ask to see it.

Absolute interests

If you have an interest in the income and capital of the residue, you are treated as receiving an amount of income. This is based on your share of the estate income, after deducting allowable expenses. The personal representatives should give you a statement on form R185(Estate Income), showing the amount of income that should be included on your form and the tax treated as paid on that income. Please enter that information in part C6.

You do not have to send an R185(Estate Income) with your claim, but you should keep it safe in case we ask to see it.

G6JNS

Toxteth_OGrady wrote: »

@g6jns

Thanks for your reply. After many hours of googling and almost giving up I believe I have now found the answer.

HMRC Form R43 - Income Tax: claim to personal allowances and tax repayment by an individual not resident in the UK. gov.uk link

There is a section in the form that allows tax already paid on estate income to be reclaimed. From the guidance notes:

Noted but you should ask HMR&C what the position is regarding non residents. Depending on where they live there may be a reciprocal tax treay that prevents them having to pay tax in the UK and the country of residence.

Toxteth_OGrady

G6JNS wrote: »

you should ask HMR&C what the position is regarding non residents.

The R43 is a form solely for use by non-residents, so I'm not sure what you are getting at there.

In this scenario the UK basic rate tax has already been paid on interest accrued (deducted at source) by the provider of the estate's account.

I'm aware of bilateral taxation treaties but it's not clear to me how they would apply in this case, especially if the legacy is considered tax free in the beneficiary's country of residence (Australia).

Anyway I'll suggest to the recipient that they may have a choice. Either claim the already paid estate income tax back from HMRC using Form R43, which they can subsequently declare as gross foreign income on their domestic tax return.

Or, rather than an R43 claim, simply declare the net foreign income as already taxed when they complete their domestic tax return.

Does that make sense?

G6JNS

Toxteth_OGrady wrote: »

The R43 is a form solely for use by non-residents, so I'm not sure what you are getting at there.

In this scenario the UK basic rate tax has already been paid on interest accrued (deducted at source) by the provider of the estate's account.

I'm aware of bilateral taxation treaties but it's not clear to me how they would apply in this case, especially if the legacy is considered tax free in the beneficiary's country of residence (Australia).

Anyway I'll suggest to the recipient that they may have a choice. Either claim the already paid estate income tax back from HMRC using Form R43, which they can subsequently declare as gross foreign income on their domestic tax return.

Or, rather than an R43 claim, simply declare the net foreign income as already taxed when they complete their domestic tax return.

Does that make sense?

I have no knowledge of the Australian tax system so I can't comment on that. As I said before you should ask HMR&C to be sur. Get an answer in writing.