I've for a few years completed a couple of my family members' self employment tax return for them, self taught. Rather simple with no savings & interest income as such, with just some business capex here and there. However for this tax year they have been left property, cash and maybe shares in a will and it means I've had to look into what to do with it. (Something I've not looked at before)
As I understand, cash left in a will is only potentially taxed by IHT. My question is on shares and how these affect the tax situation of each party dependending on how the shares were dealt with.
Does a lot depend on how the will is written? As of yet I don't know the details, but if the will left fixed monetary amounts or stipulated a cash percentage split of remaining assets in the estate at death, then that would mean shares/other investments would have to be sold by the executor to satisfy the will. At this point does this mean any gains would be a liability of the estate through CGT? (I've read something somewhere that said the executor becomes liable for CGT. It was a wording/circumstance I didn't quite understand.)
And so on the other hand, if the shares/investments themselves were left to a particular person, they don't have to be sold first in probate (just change the name of the shareholder with the company), with CGT being paid later whenever the asset is sold.
Is this generally correct? Basically I have to either sort my family members' affairs out for them again by Jan 31 or advise them to see a solicitor or accountant now. I'm yet to speak to them but if they weren't left particular shares and it was just cash from the proceeds of the will then I have no worries for completing this 11/12 tax year. The house they received wasn't sold until the 12/13 period!...which gives me time to work out what to do otherwise!
I would think about getting in touch with an accountant as IHT is a minefield, but generally the gains should be a liability of the estate. Are these just a small shareholding as if these are shares in a family businesses you may get exemptions from IHT, but that is for the executors to worry about.
it sounds like the distribution isnt settled as yet, if so does this affect the 11/12 tax year? The shares also dont sound like they have been disposed of so there is no gains payable by anyone inheriting them.
However, without seeing everything it is difficult to say, but unless they inhetirited some asset, and then disposed of it i cant see there being anything that complicates the tax return for 11/12, BUT dont take this as gospel.
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
In general,any IHT due would have been paid by the executors before any money was distributed to the beneficiaries.
The executors of the person who has died should have given your relatives a form R185 (Estate Income) giving details of income paid out - details from this need to be included in their SA return.
There is no CGT liability on transfer to the beneficiaries, but they should get a valuation as the base cost for any CGT calculation when they sell.
