A debt at death

We act for a company where the owner-manager had an overdrawn loan account of £250 000. The owner-manager has recently died and we are now planning on waiving the loan.

From the legislation (ITTOIA 2005 s 419) it is clear that when an owner-manager dies owing money to the company if the debt is written off after death the write off is not taxed as a dividend on him.

Section 419(2) indicates that the write off is treated as income of the deceased’s estate. As the estate only suffers tax at the basic rate on any income arising during the administration period and the waiving of a loan is treated as a dividend does that mean that there are no tax implications on the write off?

Or does the beneficiary of the estate get taxed at the dividend rate on the...