Estate Administration Expenses

Can someone please explain what rules apply to the allocation of administration expenses between the capital account and income account in the estate accounts of a deceased person which are ultimately borne by the residuary beneficiary. Specifically:-

  1. Can legal and accountants fees incurred for dealing with the administration of the estate on behalf of the executors be apportioned between capital and income?
  2. Should expenses incurred in relation to collecting in missing dividends and other income be allocated against the estate income account?
  3. Which expenses allocated against the estate income account can be treated as allowable in the estate tax return?
  4. For those income account expenses not treated as allowable in the estate tax return, what are the rules for offsetting these against the different types of income after tax that the estate pays to the residuary beneficiary for inclusion in the R185 statements issued to them?
  5. HMRC used to allow up to 10% of administration expenses to be charged against the estate income. Has this been dropped as I can no longer find any guidance to this in HMRC’s manuals?


Andy Cook

  1. Yes they can and yes they should be apportioned appropriately. What is appropriate, however, is open to debate. Each expense category should be considered individually to see how much, if any, is attributable to income and how much to capital. HMRC would prefer that nothing was charged against income. Most of the expenses properly chargeable against income and not tax deductible for the Executors.
  2. Yes.
  3. None, except those that would be properly deductible against that source, e.g. net rental income expenses.
  4. My understanding is that the order of offset follows that for RAT, i.e. lowest tax rate to highest, or, against dividends, then interest, then property or other income. Net income for each tax year would be calculated and then aggregated accordingly for the R185.
  5. I don’t think the 10% allowance has been dropped, but the circumstances in which it could be claimed were fairly narrow.

Maxine Higgins
Citroen Wells