Inheritance Question

kendalmintcake

So I know little on this subject and welcome your thoughts

I recently received and sum via the executor of the estate of my Father

Said estate was in the IOM and as such was managed under the legislation there.

Reading about inheritance tax is confusing

I live in Scotland

Do I need specialist advice regarding how this is declared on my tax return ? And if no inheritance tax was due in the IOM. What about the sum I received and how it is viewed in UK?

Flugelhorn

certainly in UK if you receive inheritance then you don't need to put it on a tax return - if there is tax to pay then it should be paid by the exec before you received the money

Keep_pedalling

You do not need to declare you inheritance and the only tax you will pay on it is income tax on any income you earn on it.

DRS1

Was it just cash you inherited? Or did it include any assets like stocks and shares or a house?

Enzo_L

There are no capital or inheritance taxes in the Isle of Man for residents who die if the Isle of Man was their tax domicile.

Legacies received by people in the UK from estates of Manx-domiciled estates are not subject to any UK tax and don't need to be declared to anyone by the recipient.

kendalmintcake

Just a cash sum

Thanks for your advice. Much valued

poseidon1

The responses so far are correct up to a point. The capital sum derived from an IOM estate is indeed tax free in the hands of the beneficiary recipient.

However, that does not apply to any estate income arising during the estate administration period (interest/dividends etc).

UK resident beneficiaries remain liable to income tax on gross untaxed overseas estate income, which is reportable on SA107 of the self assessment return.

The only issue here is whether the OP has been notified by the executor of any untaxed income included in his payment, or received estate accounts identifying such income -

https://www.gov.im/media/368473/gn_37_tax_arrangements_following_a_death_v_260913.pdf

Enzo_L

https://forums.moneysavingexpert.com/discussion/comment/82036130#Comment_82036130

There shouldn't be any gross untaxed income arising during the estate that ends up in the hands of beneficiaries because estate income is liable to Manx income tax under Isle of Man tax law and the personal representatives dealing with the estate have to account for the income and pay the tax on it it before making a distribution of that income to the beneficiaries.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82036196#Comment_82036196

Agree, in principle estate income should normally be assessed at estate level, however as will be seen from the extract below from Advocate John Rimmer's briefing note on IOM Wills Law and estate administration, IOM tax authorities generally waive tax at estate level to tax the IOM resident recipient beneficiaries personally.

'' 26.77 (d) In principle, income arising to personal representatives resident in the Isle of Man is
taxable (at up to 20%) in the Isle of Man. In practice, the Assessor of Tax will gener-
ally not seek to tax the personal representatives, but will tax the beneficiaries instead
in respect of income allocated to them. Where the beneficiaries are non-Manx resi-
dent, only Manx-source income (other than, most notably, bank and building society
interest, and company dividends) not protected by treaty relief will be taxable.'' - (

https://uniset.ca/microstates2/intl_succession_isle-of-man.pdf

However, in the case of non resident beneficiaries where certain categories of estate income perhaps should be taxed in IOM, even where this has occurred that taxed income is reportable by a UK beneficiary with the benefit of an IOM tax credit in ascertaining any liability to UK higher rate tax. Question is whether the executors would have recognised the distinction between resident and non resident beneficiaries, and apportioned any tax due accordingly

Be that as it may, if there was any IOM estate income (taxed or untaxed), strictly speaking it remains UK reportable and therefore potentially taxable.

If the OP has not been notified of any such income, presumably he is home and dry. He is probably not obliged to request a breakdown of his inheritance, if none were volunteed by the executors.

kendalmintcake

I understand a post death tax return was done in IOM

I received a distribution of assets post the above.

You see what I mean when I say, the waters are muddy

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82036426#Comment_82036426

Understood, but did the executors specifically notify you of any amount included in your distribution which related to estate income after death, as opposed to estate capital?

The principles related to estate income versus estate capital are pretty clear, and I would expect IOM executors to understand the distinction when advising IOM resident beneficiaries, it should be no different for non IOM resident beneficiaries like yourself.

If they did not provide you with a breakdown of your distribution, but provided you with a copy of the estate accounts indicating there was income received, then you are on notice that part of your distribution did include taxable estate income which requires reporting to HMRC ( you are taxable on all your worldwide income sources).