If you prepare a Memorandum of Appropriation can you state therein that the appropriation say of Shares is as at the date of death so that all income received would belong to the Charities with no tax reporting required or would you still report income and provide an R185 to the Charities to reclaim the tax paid. For CGT on the house sale noting the new rules and 60 day reporting do you consider it prudent to report same noting the appropriation to HMRC? Thanks if anyone can pick this up
If you are considering an appropriation at the date of death I presume that the income-producing asset was not left directly to the charity by Will. If that is possible at all in law (which I suppose it might be) it is not effective for income tax as regards income that has already become taxable. Even a deed can be retroactive as between the parties but not as against a third party who challenges that aspect of it. I doubt a deed poll can be and an assent or appropriation by PRs is likewise a unilateral instrument. So in practice, if challenged, an appropriation, though having some legal validity, which purports to be retroactive is theoretically open to challenge on that point by anyone with standing, like HMRC. If the appropriation is backdated you might be told not to pass Go or collect £200 or attract the baleful attention of the Monster of The Cube if you are one of its benighted hapless regulatees.
It sounds as if the charity has been given a share of residue. If income has arisen it sounds too as if this is estate income for tax, so taxable on the PRs in the first instance. Unless the will states to the contrary surely income from residue must belong to all the residuary legatees and you should give each of them a form R185E. HMRC might insist you stick to the law and if you pay it all to the charity they might see it as tax evasion since the charity will obtain an excessive exemption. The amount of income may be of no concern to the other legatees but the amount of tax lost will be material to HMRC as they have no known lower limit of materiality. Those who feel I am over-critical of our esteemed tax authority should read Erridge [2024] FTT 00276, a case on HICBC.
And of course even if all parties are willing there is no IOV facility for income tax. That has to have been an intentional choice by HMRC if not Parliament. An IOV can redirect income as a matter of law but not for tax purposes. If that is not what is wanted it rather proves my point that it would be safer to go down the strict plain vanilla route.
Jack Harper
CG-APP18-140 - Part 1 1.4 says a trust should be registered on TRS to use the in-year reporting system for CGs. Charitable trusts are of course excluded trusts. If yours has a registration number fine. If not it needs to apply for one. TRSM23060 is helpful about what they will accept. I have never tried either system for a charitable trust but I would not be surprised if they fail to dovetail and that you will need to contact by phone one if not both purveyors of the online procedures to avoid a Doom Loop.
Jack Harper
Hi Jack
Thanks so much. The whole residue is to charities.
As say maybe just pay the tax R185s the charities reclaim it.
Hmrc have the works in the estate and three charities reclaiming.
Was just I thought a practical consideration.
Thanks
Ruth
I agree. Do the forms and let them reclaim. They’re good at that and enjoy it! Sorry about the capitals. It did not look like that when it left me.
Jack Harper
Thanks Jack and no worries re capitals
Thanks for your input
Ruth