Estate only asset Property Investment Co

by **dmplondon** on Thu Apr 21, 2011 4:05 pm

Estate's only asset (after settling liabilities and part of IHT due) is valuable shares in a private company which owns investment properties. The shares in this company are left to on trust to specific individuals in the Will with remainder to others (i.e. there is no residue).

More IHT is due and question is how to get cash. Could company purchase own shares from the Executors?

The normal 'CGT' route would not seem to be available (not a trading company and wouldn't meet the 'to settle IHT' exemptions either due to nature of company).

So company purchasing own shares is a distribution. If this is to the Executors they pay basic rate tax only (i.e. 'nothing') and so can use funds to settle IHT without further charge... or am I missing something? Might HMRC argue administration has ceased (as residue has been established) even though Executors don't have cash to settle IHT and therefore trust or other tax rates apply?

Will beneficiaries ultimately have to pay tax on the distribution when the remaining shares are distributed by the Executors (i.e. even though the Executors have used the income to pay IHT will they be treated as distributing it to the beneficiaries, who will then pay tax at their marginal rate on the 'dividend'?)

Any other ideas to avoid more tax on settling the IHT (i.e. over an above the IHT which is accepted)?

by **maths** on Fri Apr 22, 2011 11:27 pm

If the IHT arising on the estate has not been discharged by the executors presumably probate has not been obtained and thus the administration of the state can't have been concluded?

Am i missing something?

by **dmplondon** on Tue Apr 26, 2011 1:28 pm

@maths

The IHT is due in instalments. Not sure whether that means that probate not granted until final instalment paid?

by **maths** on Tue Apr 26, 2011 11:43 pm

I still confess to be struggling.

Either the administration of the estate is concluded or it is not; often stated as occurring when residue has been ascertained. If it has then the executors arguably now hold the shares as trustees (not executors) and the shares are thus no longer available to the executors to discharge any IHT due on the estate.

If it hasn't then the shares are arguably still held by the executors and could be part of a share buy back (although I am not certain of all conditions re share buy backs).

Probate can be granted if the instalment option is utilised.