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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15914
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am the executor mother's estate. She died on 1

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I am the executor for my mother's estate. She died on 1 January 2015. All interest payments were made to the estate net of tax, apart from which was subsequently assessed for tax by HMRC via the form R40 for 2014/15 tax year. Further interest payments
were made net of tax in the 2015/16 tax year. There was no distribution from the estate in 2014/15 so I understand that no form R185 is needed for that year. Is a form needed for 2015/16 when all the interest has been paid net of tax at 20%. If a form is needed
should it include interest for 2014/15 and 2015/16? Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Unless there is a distribution of income from the estate in any one tax year you don't need to complete an R185 for each beneficiary. When you do pay out income and give the beneficiary an R185, they can use that to prove that tax has been paid on the income and to obtain a tax repayment if they are entitled to one. Tax is usually deducted from interest at source. Any interest not taxed at source will be assessed on the estate at 20%. If you roll up taxed income in the estate, when it is paid out you give each beneficiary an R185 which may include income for more than one tax year but they account for it as far as their taxes are concerned in the tax year in which it is paid to them. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thanks Tony. None of the beneficiaries will be able to claim a tax refund. Two of them pay basic rate tax and one pays at the 40% rate. In the final statement of account provided to each of the beneficiaries the total interest payments for each of the tax years 2014/15 and 2015/16 were set out, as was the tax deducted and the net payment included in the residual estate. The estate was distributed equally between the three beneficiaries. Do I still need to do the R185? If so is it their share i.e. one third each that I show on the R185 I give to each of them? Regards Ann
Expert:  TonyTax replied 1 year ago.
If the estate division is equal between three beneficiaries, then that will apply to the income as well. If you distribute income, you should give each of the beneficiaries an R185 showing their share of the gross income and the tax paid on it. It's a certificate of income which each one should keep to prove the origin of the income payment.
Customer: replied 1 year ago.
Sorry, one last question...I hope. The interest payments made in 2014/15 were as at the date of death. Am I correct in assuming this is still classed as income, even though HMRC assessed it as part of the tax calculation for the deceased in that tax year? Many thanks. Ann
Expert:  TonyTax replied 1 year ago.
The tax year of death is split into two periods, one from 6 April in the tax year of death to the date of death and one from the day after death to the following 5 April.
Any income paid out to the date of death is income of the deceased, NOT the estate. As you say, it has been disclosed as income of the deceased. When that money is paid out it is paid out as capital in the hands of the beneficiaries. Only income which has accrued since the date of death should be accounted for in the estate and included in the R185 figures.
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Customer: replied 1 year ago.
Thanks very much Tony. Kind regards, Ann
Expert:  TonyTax replied 1 year ago.
Thanks for accepting my answer.

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