Chargeable Gains on Prudence Savings Account

numbersrule

My brother and I are the two (only two) Administrators for our late uncle's estate.
Today I received letters from Prudential saying there is a Chargeable Gain on our uncle's Prudence Savings Account.
They have provided a Chargeable Gains Certificate which states the gain and the 'notional tax already treated as having been paid at the 20% basic income tax rate.
The letter also states that there may be a further tax liability if income is subject to tax at higher than the basic rate.
My brother is a higher rate tax payer.
We included the account date of death valuation in the IHT400 Calculation so we have already paid IHT on the Chargeable Gain.
I thought there was a fundamental tax rule that the same money cannot be subject to two different taxes.
Does this mean that we can make a Corrective Account C4 Claim for IHT refund on the portion of the Chargeable Gain which my brother will pay the higher rate tax differential on?

Thank you for taking the time to read this.  I hope my query makes sense.

Dazed_and_C0nfused

Is your brother being a higher rate payer relevant?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/taxation-uk-investment-bonds/

numbersrule

Dazed_and_C0nfused said:

Is your brother being a higher rate payer relevant?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/taxation-uk-investment-bonds/

Thank you for the link, but the link is for Investment Bonds.

A Prudence Savings Account is a Life Assurance Policy.   

PeterE17

The letter probably refers to the interest earned since the date of death valuation and as such is most likely subject to tax at 20%. It is the estate being taxed, not your brother. 

Take a look at the "administration period" notes on this gov.uk page.
https://www.gov.uk/self-assessment-tax-returns/returns-for-someone-who-has-died

numbersrule

PeterE17 said:

The letter probably refers to the interest earned since the date of death valuation and as such is most likely subject to tax at 20%. It is the estate being taxed, not your brother. 

Take a look at the "administration period" notes on this gov.uk page.
https://www.gov.uk/self-assessment-tax-returns/returns-for-someone-who-has-died

Yes, of course, I know the estate is being taxed at 20%.  But the letter says the Chargeable Event can trigger a higher rate liability, which I believe must be dealt with via my brother's next self assessment ( ie via his personal tax via a R185 as opposed to estate 20% income tax, which we will be dealing with via the informal notification procedure).

My understanding is that there is no mechanism for dealing with the higher rate tax directly through the administration period charging procedures.

It's nothing to do with a self assessment for someone who has died.  Our uncle never ever completed a self assessment and all his income tax affairs are in order and have been resolved fully via a simple tax rebate for last year.

Keep_pedalling

If this payout is part of the estate then your brother has no further liability, if it falls out the estate then he will need to declare this on his next SA.

Newly_retired

I agree with Keep-pedalling. Assuming this is part of the estate, your brother has no personal liability. If the account has been transferred into his name, then he may have tax to pay.

numbersrule

Thank you for your replies.  This has been reassuring because if true may mean there is no higher rate liability.  The estate income alone would not attract the higher rate if that is how it would be dealt with.
I am going to speak to HMRC tomorrow and will let you know what they say.
Thanks again

numbersrule

Keep_pedalling said:

If this payout is part of the estate then your brother has no further liability, if it falls out the estate then he will need to declare this on his next SA.

Newly_retired said:

I agree with Keep-pedalling. Assuming this is part of the estate, your brother has no personal liability. If the account has been transferred into his name, then he may have tax to pay.

The Chargeable Gain is within the estate.  The account has been closed and was not transferred into either of our names.

Keep_pedalling

numbersrule said:

Keep_pedalling said:

If this payout is part of the estate then your brother has no further liability, if it falls out the estate then he will need to declare this on his next SA.

Newly_retired said:

I agree with Keep-pedalling. Assuming this is part of the estate, your brother has no personal liability. If the account has been transferred into his name, then he may have tax to pay.

The Chargeable Gain is within the estate.  The account has been closed and was not transferred into either of our names.

In which case your brother owes no more tax. Did you declare the gross value on the IHT return or the net value the Prue paid out? If the former you should be able to claim some IHT back.

numbersrule

Having researched further it is now apparent to me that all taxable estate income from bank account interest, dividend distributions and for example life assurance chargeable gains, is all taxed at 20% basic rate income tax.

The estate does not have the benefit of any personal allowance.

Estate income cannot be charged higher rate tax via the informal notification procedure.

So when an individual beneficiary's income from an estate is sufficient to give them a total income for that tax year which exceeds the higher rate tax threshold then it triggers a higher rate tax liability for that individual.

This is why Form R185 exists.  This is a means whereby the Administrators of an estate can notify the beneficiaries of how much of their inheritance is estate income and how much tax the estate has already paid on that estate income on their behalf.

So, returning to my OP original question, can we claim back the IHT paid on the portion of the Chargeable Gain, which my brother will pay the higher rate tincome ax differential on?

I'll let you know what the HMRC say tomorrow.