I expect this commonly arises but I am trying to find the most pragmatic approach for my clients. The situation is as follows:
Mrs B died in 2014. Her beneficiaries were her two sons (one of whom lives in Canada). The executors appointed were her son and his wife. She held shares and these were registered to the executors only. This remains the case to date.
Her son (exec) has died in 2023. No chain of executorship therefore arises because his wife is still alive. His wife, along with a firm of solicitors are execs of his own estate.
Dividends since 2014 have been accumulated in an bank account held by the execs.
For income tax purposes: I have advised that strictly speaking Mrs B’s estate admin is not concluded and any income since 2014 must be reported to HMRC as part of Mrs B’s estate. Alternatively, it may be possible to adopt a pragmatic approach if we say that bare trust for the sons, and therefore respective tax returns forming part of their personal / estate return. *As an aside, dividends since 2014 only total around 1,800
For capital gains tax: If we complete stock transfer forms now to the son in Canada and the execs of the now deceased, this will be an assent so no CGT. If we sell as execs, there would likely be CGT. Even if we follow above reasoning of holding on bare trust for the two sons they would then need to consider their respective personal tax situations to check CGT.
If we go bare trust route (and even if we do not because Mrs B’s estate so long ago), I assume now caught by TRS if we treat the matter as her estate being incomplete.
The time spent on this is totally disproportionate on costs as the capital holdings are not expected to exceed £5,000.
Any thoughts / suggestions on the above would be most welcomed.
I don’t think that HMRC will agree with the advice that you have been given that the period of administration of Mrs B’s estate is ‘not concluded’. See my post in the thread linked below.
From the time that the residue was ascertained the son in Canada should have been declaring his share of the dividends to the Canadian tax authority and the UK son the same to HMRC. There may be little or no IT due by the UK son’s estate, especially as HMRC can only go back as far 2018/19 absent the making of a case that the UK son or someone acting on his behalf brought about the loss of any tax carelessly or deliberately. For the period of admin R185s should have been issued and the income thereon declared by the legatees. But absent bad conduct the UK son can’t be assessed.
If the shares are sold, the son resident in Canada is not liable to UK CGT, but may have a liability in Canada. The executors/legatees of the UK son will have a capital gain based on the shares’ probate value on his death.
Executors income tax liability during administration - #4 by jack
Thank you Duncan, so is you answer based on applying the logic that HMRC will view the assets as held on bare trust by the execs for the beneficiaries since Mrs B’s estate admin period ended (residue ascertained), in line with CG30720 and an “inferred assent” as per CG30900 ?
And income tax treatment treated accordingly i.e. execs holding as bare trustees for beneficiaries.
Of course this triggers TRS then due to ongoing bare trust beyond 2yrs since DOD (and Mrs B’s Will refers to residue “held upon trust”).
Yes. See also CG30940.
Your final paragraph is controversial but prudent. See here: TRS (again) and Will Trust - delay - #10 by DuncanCameron.
Duncan, further HMRC manual section is brilliant, thank you.
And yes good old TRS is always controversial!