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My aunt died in June 2008, her husband in May 2012. My aunt

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My aunt died in June 2008, her husband in May 2012. My aunt died intestate. her husband left a will to which I am not the executor. I am my aunt's next of kin, and the executor of her estate. Due to spouse transfer under intestacy, her estate is exempt from inheritance tax. My aunt owned two UK investment bonds that paid out when both she & her husband were dead. This caused a chargeable event on the date of my aunt's husband's death. I have certificates for two gains, £27217 & £97526. There is one policyholder. The title of the certificates is in my aunt's name. The policies are Zurich, but originally they were Hambro investment bonds taken out in 1976. There is no trust document loan or assignment against these bonds. They were never sold to anyone by my aunt. No partial surrenders occurred. Tax is treated as paid. There is a gain of £8k between the date of the second death and the date of notification of this death. I have no certificate for this gain. Zurich were not notified of my aunt's death in 2008. They were told about both of the deaths by my aunt's husbands accountant at the same time on August 10th 2012.
Would any income tax liability for these chargeable events lie with the personal representative or would it belong to my aunt's personal taxation?
Is there any possibility of there being any income tax or capital gains tax liability for the personal representative? My aunt was a state pensioner with a small investment income
when she died. She was not a higher rate tax payer.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

Just to be pedantic as your aunt dies intestate you are not her executor, but her administrator; it matters not a jot, you have exactly the same powers!

These gains are irrelevant as there is no Capital Gains Tax (CGT) on death, all the deceased's assets being aggregated and suffer Inheritance tax (IT) at a flat rate of 40%. IT does not kick in until 325K and that can be inflated by a number of ways. There could be unused 325K allowance from her husband's estate and also any charitable, inter spousal and certain other legacies don't count. If the estate is below 325K you can forget all the complications. The 8K gain falls to the beneficiaries of the second deceased's estate and is subject to CGT. As most individuals have an Annual Exempt Amount of 11K there will probably be no CGT due.

Once in the beneficiaries hands any interest earned thereon will, of course, be subject to Income Tax in the normal way, but most deposit takers deduct IT at the standard rate of 20%.

I do hope I have shed some light on the position for you.

Customer: replied 2 years ago.

The 8k gain does not fall to the second deceased estate seeing as the bonds were not my aunt's husband's property. They are solely our responsibility to administrate. from what I understand, there are no capital gains - since the bond was not sold. Incidentally, transfers of the bond from wife to husband would not incur a capital gain. Yes, and I am aware that I am an administrator & not an executor, I used the term loosely, as you pointed out, it is not important re this question.

I would appreciate it if you would answer my actual question

Expert:  bigduckontax replied 2 years ago.
But I have already covered that point viz:
'These gains are irrelevant as there is no Capital Gains Tax (CGT) on death, all the deceased's assets being aggregated and suffer Inheritance tax (IT) at a flat rate of 40%. IT does not kick in until 325K and that can be inflated by a number of ways. There could be unused 325K allowance from her husband's estate and also any charitable, inter spousal and certain other legacies don't count. If the estate is below 325K you can forget all the complications.'
You are perfectly correct that inter spousal transfers are outside the scope of UK taxation. Just for information, any gain made between death and estate distribution forms part of the relevant beneficiaries capital gains computation for the relevant year.
Customer: replied 2 years ago.

You don't seem to understand that I am not asking about inheritance tax

or capital gains tax.

I am asking about any income tax liability on these bonds and who is liable, my aunt's personal taxation or her personal representative.

Expert:  bigduckontax replied 2 years ago.
A personal representative is never responsible for any income tax due, the estate may be, but if the estate is inadequate to meet the liability then the tax man goes away empty handed. Your aunt is deceased so were it her personal taxation liability then that falls to the estate, never to any third party individual.
Customer: replied 2 years ago.
Relist: Answer quality.
The person did not seem to have a clue and did not answer my question. He was also inaccurate about what he did say
Expert:  TonyTax replied 2 years ago.

Hi.

I have a different answer which is based on my reading of the information supplied.

As the policies appear to have been written so that the payout was on the second death and your aunt's husband had no beneficial interest in either of them, then in the absence of a will, the policies become the property of the personal representatives for the administration period or until they are surrendered, assigned or pay out on the death of the insured.

There is no income tax liability on your aunt to the date of her death as her death did not trigger a chargeable event. Income tax is charged on estate income that isn't dividend income at 20% so as the chargeable event gains are treated as basic rate tax paid, the estate will have no further tax to pay. Top-slicing relief does not apply to personal representatives.

If the estate completes tax returns, the chargeable event gains and the tax treated as paid should be disclosed in boxes 9.31 and 9.30 respectively of the trust and estate tax return (page 5) which you can find here.

Take a look here, here, and here for more information.

I hope this helps but let me know if you have any further questions. Please be sure to rate my answer.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Expert:  bigduckontax replied 2 years ago.
I see that another expert has entered the fray and commented. If you read my responses carefully you will note that I came to the same conclusion and advised you accordingly.
Expert:  TonyTax replied 2 years ago.

I have to say that my answer, apart from being technically correct and supported by authoritatve links, is significantly different to the other one you were given by somebody else.

Please be sure to rate the answer that you prefer.

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