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Finalising estate: IHT and income tax issues

edited 30 November -1 at 1:00AM in Deaths, Funerals & Probate
2 replies 753 views
wizzywilcwizzywilc Forumite
60 posts
Seventh Anniversary 10 Posts Combo Breaker
edited 30 November -1 at 1:00AM in Deaths, Funerals & Probate
I have found this forum immensely helpful while I have been dealing with a family estate, and learnt a great deal. So thank you all. It has also made me very thankful that there are no disputes or tensions between myself, and my two co-executors who are the sole beneficiaries. For practical reasons they have reserved their powers.
We will shortly receive the proceeds from the house sale which means that nearly all assets from the estate will have been realised. We have agreed that I will then make an interim distribution, retaining a small amount so I can deal with outstanding matters.
These are:
1) paying a few outstanding expenses and selling two small parcels of shares and a vehicle.
2) Advising HMRC of changes in the value of the estate since the date of death. This will include the above assets, and some ISAs. I will return form C4 to correct the account. Anything I need to watch out for?
4) Recovering a small (c£100) overpayment of IHT. This arose because I had to take money from 3 different bank accounts to pay the IHT, and asked banks to close the accounts and send all proceeds to HMRC. Despite my careful calculations this went awry because two of the banks had refused to tell me exactly how much interest had been added since DoD. How do I recover this from HMRC?
5) Dealing with tax on interest on executors accounts. Because of the sums involved these are held in 3 specially opened accounts. C £250 interest. What happens about this and how does HMRC know that this is estate not personal money?
6) Dealing with income tax. He was self-employed and his accountants have made returns for 2017/8 and 2018/9. They estimate that a refund of income tax is due. He died early in 2018/9 tax year. How should this refund reach executors, and on what sort of timescale?
I would welcome any general guidance and responses to specific points.

Replies

  • Boleyn19Boleyn19 Forumite
    98 posts
    10 Posts First Anniversary
    Advising HMRC of changes in the value of the estate since the date of death. This will include the above assets, and some ISAs. I will return form C4 to correct the account.

    My understanding is that valuation of the estate and consequently any IHT is based on the day of death. Cash and share may go up (or down) after death but HMRC do not need to know. The sale price of the house they would need to know if you valued it top high, or too low, or of you did not achieve the value on the Picasso you put up for sale.
  • wizzywilcwizzywilc Forumite
    60 posts
    Seventh Anniversary 10 Posts Combo Breaker
    My understanding is that as the value of some assets, notably property but also stocks and shares, can change between the date of death and when the asset is realised, the estate may have paid too much, or too little IHT. So HMRC form C4 allows you to submit a corrective account to get this adjusted (either way).
    https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4
    Grateful if anyone can tell me more, especially if there is a "de minimis" amount below which changes need not be reported.
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