Executor rental

Thegoosedrank25

Hi all,
I am the executor of my friends estate. Her house was not completed so the estate agent suggested renting it out to the buyers. The rent was £1000 per month and all the money was sent to the solicitors and eventually exchanged contracts with the tenants in February. My question is the solicitors say I have to get an accountant to declare to the HMRC the renting revenue. As I did not receive technically, any money as I passed it on. How do I do this as I don't want yo incur any penalties. I hope someone can help. 
Thank you

TonyMMM

The estate earned the income - as executor you will need to declare that to HMRC and pay the tax owed (from the estate funds). Doesn't need an accountant.

poseidon1

TonyMMM said:

The estate earned the income - as executor you will need to declare that to HMRC and pay the tax owed (from the estate funds). Doesn't need an accountant.

As above except since the solicitors were in receipt of the monthly rent, a proportion of their ongoing estate admin fees should be tax deductible against the gross rent. Get them to give you a figure for this.

Incidentally the tax reporting does not stop there. Whomever are the beneficiaries of the estate they will be entitled to net estate income after tax once you get around to making a distribution. Depending on their own tax profile they maybe due a tax refund, or tax at 40% if the income pushes them into that band.

See below HMRC link to the estate tax deduction certificate R185 (Estate income)  the executor is required to prepare for each beneficiary as and when the income is distributed -

https://www.gov.uk/government/publications/trusts-and-estates-statement-of-income-from-estates-r185-estate-income

Perhaps it is these compliance  formalities which is why the solicitors suggested you instruct an accountant.

Since the solicitors ducked out of doing this ( probably not their skillset ) I would suggest you get the same accountant to prepare the final estate accounts  ( in due course), using the solicitors client ledgers as source information. Any solicitor not happy to prepare estate tax returns should not be trusted with preparing the accounts.

Incidentally seek a STEP ( Society of Trust and Estate Practitioners) qualified firm of Chartered Accountants. Not all accountants are familiar with dealing with deceased  estate matters.

Thegoosedrank25

Thank you for all your help. It is most appreciated. If this matters does not need an accountant, do you know what forms I need to fill in? I will ask the solicitor for a statement of funds received. 

poseidon1

Thegoosedrank25 said:

Thank you for all your help. It is most appreciated. If this matters does not need an accountant, do you know what forms I need to fill in? I will ask the solicitor for a statement of funds received. 

If the estate fulfils the criteria of a simple estate and all administration is virtually complete as set out in the guidance below, you could get away a letter accompanied with a cheque for all taxes due.

https://www.gov.uk/probate-estate/reporting-the-estate

However, are you familiar with calculating tax for a rental property?  For example other than a percentage of the solicitors admin expenses, were there other property related expenses ( paid via the solicitors account) that are qualifying deductions in calculating income tax due on the rental property?

Furthermore, did the sale figure for the property exceed its original probate value thereby triggering a capital gain? Even if it did not, if the sale price exceeded £500k , you are not eligible to use the letter approach to report estate taxes due, and would therefore be required to complete  full blown estate tax returns SA900, depending on how many tax years these transactions span, in addition to the beneficiaries' tax deduction forms R185 I mentioned previously.

All in all perhaps you may indeed need the services of a Chartered Accountancy firm as suggested in my first post if this is all likely to prove a  steep learning curve for you.