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Tax information
As a registered charity PDSA benefits from valuable tax concessions that have the effect of increasing the generous gifts left to us by our benefactors. We are able to reclaim the Income Tax paid on our share of residuary income, and it is possible to avoid payment of Capital Gains Tax in certain circumstances.
This is not, however, an automatic process. Therefore, this note is intended to remind you of your legal duties, and also to assist you in carrying them out.
Income Tax
Under Section 700 Income and Corporation Taxes Act 1988 legal personal representatives are required to furnish beneficiaries with statements showing the income earned by the residue of the estate.
Please provide form R185 (estate income) for each tax year during the administration of the estate in which we have received a ‘sum’, showing our share of all net interest and dividends credited (including interest and dividends accrued as at the date of death) to the deceased’s estate after the date of death and to the executor’s investments.
Income Tax forms are available from the Inland Revenue website http://www.hmrc.gov.uk or call HMRC Trusts, Edinburgh 0131 777 4030.
Capital Gains Tax
Exemption is available to charities under Section 256 Taxation of Chargeable Gains Act 1992. If an executor sells assets forming part of a charitable bequest and a capital gain is expected, exemption will not be available unless the executor has, with the consent of the charity, appropriated the asset to the charity prior to the date of sale. The executor is then deemed to dispose of the assets as bare trustee for the charity, and the exemption can be applied.
Inheritance Tax
When Inheritance Tax is payable complex rules apply to the allocation of the tax payment. Details of the Inheritance Tax calculations should be included in the estate accounts.
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