This is a query with the preparation of R185s for four charity residuary beneficiaries.
Three beneficiaries received an interim distribution in one tax year and the last beneficiary received their interim distribution a few months later in the following tax year.
For the purposes of the R185s this will mean that one charity will end up receiving an R185 for a different tax year and therefore will be deemed to have received a different amount of interest and be able to claim a higher rate of income tax back than the other charities.
Is this an issue or is it correct way for the R185s to be prepared?
A quirk of Estates is that R185s are cumulative and reflect all income received up to the point a distribution was made - thus they allow reflection of income taxed at different rates in different years, unlike trust R185s that are prepared only on a tax year basis and according to entitlement, rather than actual receipt. It is also worth noting that if an Estate residuary beneficiary receives an asset in-specie before receiving any actual cash, that is deemed by HMRC to be an interim notional income distribution and an Estate R185 should be provided to reflect the share of income earned up to that point. Similar to matching pools of relevant income in offshore trusts against capital distributions, before matching against stockpiled gains - and also probably as honoured in the breach!
So to answer your query specifically, the Estate R185s should show separately the income received in different years and taxed at different rates for each beneficiary, so the main difference will be in respect of any extra income earned in the few months between those interim distributions. which solely relates to the last beneficiary, unless you are allocating them all equal shares as interim distributions, when that extra income will fall to be allocated between them equally as part of a later interim or final distribution…
Maxine
TC Citroen Wells