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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I, and my 3 brothers, UK residents, are executors and sole

Customer Question

I, and my 3 brothers, UK residents, are executors and sole beneficiaries of my late father's Isle of Man Estate, which have jointly managed for the past 4 years. The estate is exempt from UK inheritance tax. But is that true of the income currently generated by the Estate, including income from exclusively Isle of Man or other non-UK sources, which we jointly manage?
Thanks, Hugh
Submitted: 10 months ago.
Category: Tax
Expert:  TonyTax replied 10 months ago.
Hi. As UK residents and, I'm assuming UK domiciled, you are taxable on your worldwide incomes regardless of its origin. However, if as beneficiaries you haven't been paid any of the income by the estate, then you won't yet have a UK tax liability. The income is that of the deceased estate. When it is paid out, that is the tax point and you may have UK tax to pay depending on your individual circumstances. I hope this helps but let me know if youu have any further questions.
Expert:  TonyTax replied 10 months ago.
Hi, I'm just checking in to find out if you need further advice or clarification.
Customer: replied 10 months ago.
Thank you tony. Sorry it took me so long to get back to you. The urgent question is whether income generated within the estate is subject to UKIT given that we, the sole executors and beneficiaries of my fathers estate, are UK tax resident. We are still as executors managing IoM and other non-UK assets, still in the name of my father's estate, that are generating income. Are those incomes from non-UK assets, bequeated to us but yet disbursed to us individually, subject to UK income tax? Thanks
Expert:  TonyTax replied 10 months ago.
As of now, it seems that the estate has not distributed the capital or accrued income to you or the other executors as beneficiaries and if that is the case, you and the other executors as beneficiaries have no personal tax to pay. As Executors, you are treated as assuming the same tax residence of the deceased at the time of his death. Take a look here for confirmation. As there are no UK income producing assets, you have no reporting obligations as far as HMRC in the UK are concerned.
Customer: replied 10 months ago.
Yes Tony, that I can understand. As our father's personal representative, the executors of his will, we are treated for the purposes of the taxes the estate may have to pay (that is the issue here, and not our personal taxes) as having the same tax status as he did at the time of his death. BUT does the fact that we, as UK residents, are also the sole beneficiaries of estate we manage as his representatives, alter the situation? It is an estate run for the benefit of UK tax payers. The income, some of it compunding interest income, we generate within the estate is accummulating for our future benefit. Would it for that reason be subject to UK IT? Thanks
Expert:  TonyTax replied 10 months ago.
As beneficiaries, you don't need to report any income to HMRC in the UK until it is paid out of the estate to you. That is the tax point.
Customer: replied 10 months ago.
Does the estate itself have no tax reporting responsibilities? Is it in effect a kin od non-tax entity albe to build up capital, like a kind offsore ISA, and with the beneficiaries only having to pay tax on income withdrawn. I note there are Trust and Estate Tax Returns in which HMRC requires the reporting of income received from foriegn companies, offshore funds etc. But this would not apply to us because the estate for which we are executors is IoM, and despite our being the beneficiaries of the capital it accumulates?
Expert:  TonyTax replied 10 months ago.
Not in the UK unless it has UK source income. I cannot tell you about the reporting requirements in the Isle of Man as that is not where my knowledge lies. Whats i so know is that the IOM is a tax haven. You would need to contact the tax authorities there to determine your reporting obligations there. Many estates are complicated and take years to bring to a conclusion during which time income accumulates. Some make interim payments to keep the beneficiaries happy. The beneficiaries won't be liable for any personal tax until they have payments made to them. If the estate was a UK estate, it would complete an estate tax return and pay tax on any income at 20% on income not taxed at source.
Expert:  TonyTax replied 10 months ago.
Hi.
I'm just following up to find out if my answer helped or if you have any further questions.

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