I am getting myself more confused the more I look at this.
Estate leaves cash legacies of £17,000 to exempt beneficiaries, £35,750 to non exempt beneficiaries. Residue is split between 2 exempt and 1 non-exempt beneficiary.
Full NRB is available, but estate taxable due to amount of residue passing to the non-exempt beneficiary . Do I need to gross up just the cash legacies to the non-exempt beneficiaries, or is this not require as they are within the NRB? If grossing up is required I understand the tax is an administration expense to be borne by all residue beneficiaries.
Also, any tips on how to deal with this in the estate accounts?
I suggest you start with the HMRC calculator https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/616100/Grossing_up_calculator_2017.pdf
although the initial notes do make clear this does not apply if you are following Re Benham - as I suspect might be the case since I would normally expect the tax attributable to residue to be borne by the non-exempt RL alone.
The estate accounts will obviously need to follow your treatment of the tax liabilities, but if appropriate you may wish to show the net estate for distribution, add back the IHT payable, deduct the legacies and the IHT attributable to them [thereby showing the net legacies payable to each], to leave residue before division, and then deduct IHT attributable to residue from the share of the non-exempt RL.
If you are doing a re-Benham calculation you may find the calculator on http://actuaries.eu.com/ReBenham2.html of use. If a reduced Inheritance Tax rate applies it can accommodate that too. I note that I need to make a few minor edits to the page, but it does do the calculations.
The gross taxable legacy is the “Taxable Element” plus the “Tax”.
You should note that the problem with Re-Benham is ascertaining what the gross amount of the various legacies needs to be in order to that the net amount of those legacies come out in the desired proportion. Once those gross amounts are known the IHT calculations are the same as usual.