Administration - Capital Gains and Income Tax Flashcards
(22 cards)
What tax responsibilities do PRs have regarding the deceased?
PRs must finalise the deceased’s income tax and CGT position from the start of the tax year to the date of death, and pay or claim any balance due.
What must PRs do during the administration period?
- Pay income tax on estate income
- Pay CGT on gains made from disposing of estate assets
Are PRs liable for tax due on income received before death?
Yes—PRs are responsible for settling any IT or CGT the deceased owed up to the date of death.
How are income and CGT liabilities treated for IHT purposes?
- Tax liabilities reduce the value of the estate
- Refunds increase the value of the estate
What income is taxed as the deceased’s?
- Income paid before death
- Income relating to a pre-death period but paid after death (e.g. rent, declared dividends)
What income is taxed as the estate’s?
Income arising after death, such as post-death rent or interest.
Are PRs entitled to a personal income tax allowance?
No—PRs do not receive a personal allowance for estate income.
What income is taxable in the hands of PRs?
- Rent
- Interest
- Dividends received during the administration period
When do PRs need to report estate income to HMRC?
Only if total estate income exceeds £500 per tax year. Below this, no tax or reporting is required.
What is Form R185?
A form given to beneficiaries showing their share of estate income and tax paid by PRs.
- Non-taxpayers can use it to claim a refund
- Higher rate taxpayers use it to calculate a top-up payment
Are PRs entitled to the CGT tax-free allowance?
Yes—PRs can use the same CGT allowance as individuals.
What gains are chargeable to CGT during administration?
Post-death gains on asset disposals made by PRs.
Are lifetime gains of the deceased taxed on death?
No—death is not a disposal for CGT, and accrued gains are wiped out at death.
What happens to the base cost of assets on death?
They are re-based to the probate value at the date of death (“tax-free uplift”).
Is transferring an asset to a beneficiary a CGT disposal?
No—it is not a disposal, and no gain is charged at that point.
What is the CGT base value for beneficiaries who inherit an asset?
The probate value of the asset at the date of death.
What is the CGT implication if PRs sell an asset?
Any post-death gain is taxed in the hands of the PRs and paid from estate funds.
What happens if PRs sell assets at a loss?
The loss can be offset against other taxable gains in the estate.
What is the chattel exemption for CGT?
If a tangible moveable item (e.g. a personal possession) is sold for £6,000 or less, no CGT is payable
When is it more tax-efficient for PRs to sell an asset?
If the PRs have unused CGT allowance and the beneficiary does not, it may be better for PRs to sell.
When is it more tax-efficient to transfer the asset to a beneficiary?
If the beneficiary has unused CGT allowance and the PRs have used theirs.
Can PRs claim main residence relief?
No—but beneficiaries may claim it if they inherit and then sell the property as their main residence.
