Hi all, I am posting on behalf of a colleague who has become a little frustrated and is looking for some advice or hopes to be pointed in the direction of resources in dealing with a tax query.
Her client has requested HMRC confirm how inherited musician royalties will be treated for tax purposes. The answer they have provided suggests they will be treated as the beneficiary’s income and taxed accordingly.
However, there is concern that it could be an income to the estate but the estate is not generating the income and therefore HMRC will treat the royalties as capital, a capital accretion subject to ongoing IHT, which then leads to the question of how the monies are appointed out of the estate if we don’t know what they are due to get each year.
The Musicians Union (MU) advises that if a musician is deceased, the MU will continue to collect their share of any income due and will distribute it to their estate upon provision of appropriate probate documentation.
This appears to support the understanding of the treatment of the royalties for tax purposes. The MU has confirmed to the potential beneficiaries that their musician relative can prepare a letter setting out his wishes to be followed on his death in regard to the payment of his continued royalties.
She cannot find clarification on how the royalties will taxed on the death of the musician and if for example it might be better to set up a trust for the royalties.
Can any one help?
Wason Male & Wagland