IHT411 Dividend or interest due to date of death

Pugs2025

Hi

I’m stumped as to what I need to do for this part of valuing the shares on IHT 411. The deceased had shares with 20 different companies. 

I have made a list with each company and : 

- Number of shares
- unit price at date of death 
- value at date of death 
- which registrar each is with 

but how do I find “dividend or interest due to date of death” ? 

I’ve googled and it mentions XD but I’m just still struggling to understand what this means and what steps I need to take to work this out for each company. I’d be really appreciative of some guidance on this one. 

Thank you 

Keep_pedalling

There is a considerable gap between a dividend being declared, going ex_dividend and being paid, and it is the shareholder who holds the share when it is goes ex-dividend who is paid not the shareholder at the time of payment.  If you die between the ex dividend date and the payment the value of each share is in two parts the share value at the time of death and the as yet unpaid dividend. 

For National Grid shares went ED on the 21st Nov with a payment date of 14th Jan. if a holder of those shares died on the 22nd Nov, then there executor would to declare the dividend on the IHT return.

https://www.nationalgrid.com/investors/shareholder-information/dividends/ordinary-shares

If you do a search for each company’s  dividend payments you should be able to find which companies were ED at the time of death and the value of the dividend. 

Pugs2025

That makes so much more sense. Thank you! I really appreciate your help. So if I have understood correctly - for each company i’ll work through and check if the person died between the ex dividend date and the payment date, and if that’s the case i’ll put the dividend amount on the form. 

poseidon1

Not wishing to introduce further complexities with regard to inclusion of accrued dividends and interest at date of death on the IHT return, there is also the additional complication of whether you include the gross ( untaxed) amounts or apply basic rate tax ( 20% for interest and 8.75% on dividends ) to the gross and insert the net amounts less notional basic rate tax.

This  is on the basis of providing a degree of tax relief, on the same income being ultimately axed on a receipts basis in the hands of the PRs.

This was debated at length by professional solicitors and tax practitioners in the specialist Trust discussion forum link below -

https://trustsdiscussionforum.co.uk/t/accrued-income-up-to-date-of-death/16415

The discussion does seem to be almost akin to the question of ' how many angels dance on the head of a pin', but in the end and based on what at that time was originally shown in the accompany notes to IHT400 , one was permitted to deduct 20% from accrued interest and by extension 8.75% from dividends and report the net result on the IHT 100. 

However most unhelpfully the IHT 400 notes are now completely silent on the issue of reporting net, thereby inferring ( deliberately or otherwise)  that gross seems to be the default requirement.

Professionally and personally, I would continue to report on a net basis and declare upfront this is what was done.

It is as well to note, that in the past when both dividends and bank interest were received with tax deducted at source, it was always these net amounts reported on the IHT return, so a notional deduction  for basic rate tax now seems wholly consistent. however  I would not do this for divs/interest in an ISA since it would not have been taxed on the deceased and  that income continues to escape tax on the estate for up to 3 years post death.

By the way it does not seem to matter that unwrapped accrued divs/interest may escape being taxed on PRs if below the annual £500 de minimis ( used to be £100), that is perhaps the unintended consequence of HMRC providing that relief to PRs.

I am little surprised your query does not arise more often given that DIY probate by non experts is becoming more common and actively encouraged on this forum. Perhaps individual share ownership is still very much a small 'minority sport' so the x div question is rare, but most deceaseds have bank deposit accounts, so one can only speculate has to what others have been doing by way of the IHT reporting in  that regard.

In passing and as an aside, IHT on divs and interest may soon be a problem for administrators of SIPPs if the chancellor ultimately has her way in extending the IHT regime to pension pots, with no concessionary changes for the treatment of accrued income..

ColinGala

This site should be very useful to you https://www.dividenddata.co.uk . You can search each individual company and it tells you the XD date

ColinGala

"So if I have understood correctly - for each company i’ll work through and check if the person died between the ex dividend date and the payment date, and if that’s the case i’ll put the dividend amount on the form"

Almost correct....If the person died before the last XD date then a dividend is due. This may already have been paid to their account before the death date  (depends on the payment date) and, if so, doesn't need to be recorded. If the payment date is after the death date then the amount should be recorded on the form

You can check with the broker of the account (they provide you with details once they have been informed of the death) which dividends have already been paid. If it hasn't been paid yet, and a dividend is due, then you should record the amount on the form

probate_slave

OP, just to clarify, I believe you should declare the ex-dividends gross in box 2 of IHT411.

Any doubt is resolved at IHTM18110: "The dividends should be included at their full quotation value."

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm18110

There is guidance on page 72 of the current edition of IHT400 notes: "include the net value of the dividend on Schedule IHT411". But this whole paragraph has been copied verbatim from the 2010 notes, the period of notional tax credit on dividends. So by "net" they actually mean "gross".

I read the thread linked by poseidon above. It's inconclusive, of course, but the crucial point for me is that relief under section 669 Income Tax Act 2015 would not exist if it had already been claimed on IHT411.

poseidon1

probate_slave said:

OP, just to clarify, I believe you should declare the ex-dividends gross in box 2 of IHT411.

Any doubt is resolved at IHTM18110: "The dividends should be included at their full quotation value."

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm18110

There is guidance on page 72 of the current edition of IHT400 notes: "include the net value of the dividend on Schedule IHT411". But this whole paragraph has been copied verbatim from the 2010 notes, the period of notional tax credit on dividends. So by "net" they actually mean "gross".

I read the thread linked by poseidon above. It's inconclusive, of course, but the crucial point for me is that relief under section 669 Income Tax Act 2015 would not exist if it had already been claimed on IHT411.

Note what you say about section 669 ICTA 2005 ( not 2015). However that is specifically  limited to higher rate Residuary beneficiaries , so not a broad brush relief, and unlikely to be picked up by DIY executors.

As I  say  HMRC no longer refers to net accrued income in the IHT 400 supporting notes, so for the uninitiated they will inevitably report gross in the absence of reference to the contrary.

However that approach is belied by the HMRC guidance below which unambiguously refers to both x divs and accrued interest being reported net of basic rate tax -

https://www.gov.uk/guidance/valuing-stocks-and-shares-for-inheritance-tax#:~:text='IK' ('gilts',was last paid up to

This I believe is the guidance  Patrick Maroney referred to in the Trust Discussion.

 As a professional who always reported on a net basis ( stemming back to old CTT regime), I will continue to report net ( whilst advising HMRC accordingly) and refer them to their own guidance above in the event of any challenge.

Admittedly this does not really assist DIY estate administrators unless they have the good fortune of discovering the above guidance, but this is one of  many examples where professional knowledge of tax nuances is beneficial.

Sadly our little exchange  of views on this issue may appear overly academic to many readers of this forum, but hopefully for those it does make sense there is a bit of IHT to be saved in appropriate cases.

probate_slave

I think the question of how to report ex-dividends could hardly be less academic.

The guidance you quote above closely matches p.72 of the current IHT400 notes, from which I also quoted. It appears to have been lightly worked over by the "plain English" team. What HMRC mean by "net dividend" is, I believe, the payable as opposed to the grossed-up dividend from the notional 10% tax credit regime, itself abolished in 2016. They have miserably failed to update their own guidance.

Part of my reasoning stems from the fact that the notes remain unchanged from 2010. Secondly, the notes distinguish between "net dividend" without asterisk, and "net* interest" with asterisk, referring to "* net of Income Tax at basic rate" lower down the page. Finally, I feel the manual must be decisive.

So while I certainly agree with you about netting off, say, accrued gilt interest, I fear we will never agree about dividends.

poseidon1

probate_slave said:

I think the question of how to report ex-dividends could hardly be less academic.

The guidance you quote above closely matches p.72 of the current IHT400 notes, from which I also quoted. It appears to have been lightly worked over by the "plain English" team. What HMRC mean by "net dividend" is, I believe, the payable as opposed to the grossed-up dividend from the notional 10% tax credit regime, itself abolished in 2016. They have miserably failed to update their own guidance.

Part of my reasoning stems from the fact that the notes remain unchanged from 2010. Secondly, the notes distinguish between "net dividend" without asterisk, and "net* interest" with asterisk, referring to "* net of Income Tax at basic rate" lower down the page. Finally, I feel the manual must be decisive.

So while I certainly agree with you about netting off, say, accrued gilt interest, I fear we will never agree about dividends.

 As with some of the protagonist on the Trust Discussion forum, I am on the side of net divs and interest. I think in the end those in favour and those against, agreed to disagree.

That said, for all but  substantial estates with very sizeable cash deposits and investment portfolios ( not a common occurrence on this forum), this point is fairly academic in terms of the  quantum of IHT at stake.

DippySkippy

I'm just about to submit IHT forms - I decided to include the gross interest & dividends but then include in the other liabilities box 82 an entry for "Income Tax due on interest accrued at Death". Thought this should be clear