Business beneficiaries re residuary beneficiaries

Morning everyone

I’d appreciate some feedback though I suspect I know the answer. Would be great to have some confirmation that it’s the right answer though :slight_smile:

My client is wife and residuary beneficiary of husband’s estate.

Husband left business to sons - standard Will wording - gift of share in the business.

There is a substantial self assessment bill - £150,000. The beneficiaries are arguing about who should pay it.

Presumably as it’s husband income it will be paid from residue BUT the deceased always settled his income tax liability from his business accounts. This is why wife is querying it.

That brings me to my second point- there is no mention of the building accounts in the Will but presumably they pass to sons as part of the business? There is then a sole trader account registered in husband’s sole name- presumably this passes to wife as part of residue?

Going back to my first point about the self-assessment. Wife does not believe it would have been the intention of her husband to require payment out of residue. He has left pecuniary legacies but if the income tax liability is settled out of residue there won’t be enough money to cover those. Do you think it’s worth a Larke v Nugus statement letter to solicitors who drafted Will?

Hi Deborah

In which account is/was the income on which the tax liability has arisen? I would have thought logically it would be payable out of there. How has the accountant valued the business? What have they included as business assets/cash? What are you claiming BPR on? Have they shown any liabilities (eg income tax) against the business accounts? Is there a balance of income due at the date of death (ie profit) at the date of death? As a sole trader all income was his anyway (unlike with a company where you have to make a decision to pay salary or dividends). Personally I would have thought any cash not needed to cover business liabilities, client deposits etc, at death was his as it presumably arose from his earnings over the years and these earnings belonged to him and would have been assessed on him at the time. I would stress that I am not an accountant, but these are the things I would be thinking /asking about.

If I were you I would ask the accountants.

Good luck


Sara Spencer | Trust Manager

Sara Spencer Ltd, 8 Kingsway, Harrogate, HG1 5NQ

07952 651881 | 01423 524114

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In the case of a sole trader on death, the business dies with them, its not a legal enity - as is the case with a partnership or Ltd.

All the monies (from all his named bank accounts - inc any T/A) fall into residue and the executors must settle any debts and the tax bill.

You can leave the traders moveable assets via the will, tools, vehicles etc.

Richard C. Bishop