I am dealing with a small Estate with essentially only a couple of bank accounts, all of which is goes in charitable legacies. What little is left will be swallowed by tax and fees leaving nothing for the residuary beneficiary (this was the Testator’s intention - if there’s anything left, give it to X).
There has been interest of around £3,000 on the two accounts so tax of £600 is due and this can be dealt with under the informal procedures but what about the R185? It seems unfair that the ResBen is given a tax certificate showing he received £2,400 net when actually he got nothing!
As a residuary beneficiary you are only providing details of the amount left to them. If after taxes and fees it is nothing then you don’t need to prepare an R185.
The front of the R185 confirms The residue is what’s left in the estate after you’ve paid all debts, legacies and taxes.
1 Like
Thank you for confirming.
I believe that you should issue R185s to the charity beneficiaries in the proportions to which they share in the estate.
Patrick MORONEY
If the whole estate is payable to the charities in (partial) satisfaction of cash legacies, my understanding is that the distributions will be capital in hands of the charities and therefore no forms R185 will not be appropriate.
If, however, the legacies have been satisfied in full more than one year after the death, it may be that interest will be due on the legacies which extinguishes what remains of the estate. In which case I recall the interest will be paid gross (notwithstanding it is paid out of taxed income). (If the law has changed in recent years in relation to the last point that would be good, as it will avoid another area of potential double taxation.)
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
You can deduct a proportion of fees from the net income to arrive at the distributable income. If this is nil, no R185 form is required.
Have all other legacies been satisfied in full? If so . . .
When looking at the position for the residuary beneficiaries, it is important to determine what is capital and what is income. It seems to me that the Estate does technically have income remaining (it is unlikely that the expenses will be entirely income in nature) and on that basis a statement should be provided to the residuary beneficiaries detailing this. It is just unfortunate that capital has effectively had to borrow from income to pay expenses and this debt cannot be repaid.