Delaying estate distribution to gain a tax advantage

tetrarch

It would appear that the tax rates for estates are flat i.e. with no allowances, but with no progression either:

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem7413

"Income tax

Income is charged to tax at the rate appropriate to the nature of the income received, for example

• dividends are chargeable at 8.75%
• investment income (bank, building society interest etc.) is chargeable at 20%"

Thus, for an estate where the beneficiaries are 40% tax payers does it make sense to defer distribution until the last possible minute?

...and to extend the Machiavellianishness.

Let's assume that the estate is now fully in cash and under the reporting threshold. 

Would the executors (with the beneficiaries permission) be able to purchase high-yielding shares on behalf of the estate (in a separate brokerage account for instance) and thus only pay a lower rate of income and dividend tax?

I can't seem to find any mention of a CGT liability.

Regards

Tet

tetrarch

note: Sorry - There is CGT stuff, I missed that part

Keep_pedalling

I would be more concerned about capital losses with such a risky scheme.

tetrarch

The beneficiaries want to drip some of the inheritance into equities for the long term.

Let's leave that aside for the moment, does the TAX advantage of the cash element of savings make sense or am I in danger of falling foul of HMRC rules?

I'm thinking that delaying distribution for 18 months would enable another two allowances of ISA to be available for each of the beneficiaries the funds to be directly invested

Regards

Tet 

Keep_pedalling

I think you would be in danger of falling fowl of HMRC. The administration period is quite I’ll defined but I am pretty sure that HMRC would argue that bing in a position to distribute the assets but instead of doing that you purchased alternative assets that the admin period was effectively over. Worth looking at IRC v Sir Aubrey Smith 15 TC 661.

https://www.step.org/step-journal/step-journal-october-2012/end-affairs

And from the CGT manual

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30790