CheckLists.Tax (beta)
T1: Death
INCOME TAX ON ESTATE
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Income arising to executors/personal representatives
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- Rate of tax
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- Trust rates do not apply.
- But if a sum representing income of the personal representatives is paid to trustees during the administration period, it is treated as income of the trustees (ITA s.483).
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Legislation:
Cases:
HMRC manuals:
Commentary:
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Settlements legislation
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- Attribution of income where settlor retained an interest ceases on death
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Attribution ceases
- Attribution only applies during life of settlor (s.624).
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Settlor credit for tax paid by trustees
- See i4. Trust income.
- Apportion the tax - see TSEM4513.
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Legislation: ITTOIA s.624;
Cases:
HMRC manuals:
Commentary:
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Transactions in securities
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- Counteraction can be taken against personal representative
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- Counteraction can be taken against the personal representatives of the person who obtained the income tax advantage (s.712).
Legislation: ITA 2007, s.712.
Cases:
HMRC manuals: CTM36825.
Commentary:
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Close company issues
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- Identify what happens to any outstanding loans to close companies
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- HMRC raise this point at CTM61665.
- Where debt released or written off when personal representative liable, separate charge applies (ITTOIA s.664(2)(d); SAIM5200).
Legislation: ITTOIA s.419; ITTOIA s.664; CTA 2009, s.947
Cases:
HMRC manuals: CTM61665; SAIM5200
Commentary:
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EMPLOYMENT INCOME TAX
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Employment related securities
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- Notional loan under Chapter 3C treated as discharged but no employment income
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- Where employment-related securities are acquired for less than market value and there is a notional loan under s.446Q, that loan is treated as discharged (if not already discharged) when the employee dies, but does not give rise to employment income (s.446U(4)(b)).
Legislation: ITEPA 2003, s.446U;
Cases:
HMRC manuals: ERSM70140;
Commentary:
See also:
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CAPITAL GAINS TAX
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Attribution of gains of non-resident trust to settlor (s.86)
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- No attribution of gains arising in year of settlor's death (even pre-death gains)
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See Sch 5, para 3.
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Legislation: TCGA, Sch 5, para 3;
Cases:
HMRC manuals:
Commentary:
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Matching gains to benefits from trusts etc (s.87, s.89(2), Sch 4C)
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- No matching in year after death
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- Where the recipient of a capital payment dies:
- Match to trust gains in the tax year of death, even if disposal is after death.
- Do not match to trust gains in subsequent years (CG38605).
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Legislation: CG38605;
Cases:
HMRC manuals:
Commentary:
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INHERITANCE TAX
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Gifts with reservation of benefit
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- General
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- See C2: Gifts by individuals.
- Where the tests are satisfied immediately before death, the gifted property is treated as part of the donor's estate on death (s.102(3)).
- If the tests were satisfied, but cease to be satisfied prior to death, deemed PET at that time (s.102(4)).
- Apart from the above, the property is not treated as being in the donor's estate.
- Consider impact of property being in estate on value of other assets in estate.
- Even though property is not really in donor's estate, exemptions might still be available if property belongs to exempt recipient (IHTM14303).
- No exemptions can apply if the reservation ceases during the donor's lifetime, as that is a PET.
- Tests are applied in the period of 7 years prior to death (or from gift to death, if shorter).
- Potential worst of both worlds if lifetime gift is made (triggering CGT), but benefit reserved such that IHT is payable on death (with no CGT uplift on death).
Legislation: IHTA 1984, s.102;
Cases:
HMRC manuals: IHTM14303;
Commentary: McCutcheon 7-12 to 7-14;
See also:
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- Agricultural and business property relief for GWR property
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- If property was BPR or APR property at the time of gift and that property is subject to a reservation so as to be included in a PET or death estate:
- Shares are to be treated as having continued to be owned by the donor since the gift (Sch 20, para 8(1A)(a)).
- XX
Legislation: FA 1986, Sch 20, para 8;
Cases:
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