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Readers’ forum: At your discretion

19 November 2019
Issue: 4721 / Categories: Forum & Feedback
Encashed offshore bond as funds to pay inheritance tax.

My client died in September 2018. She was UK resident and was the settlor and beneficiary of a discretionary trust. A vulnerable person’s election was in place.

In March 2019 the trustees cashed in an offshore bond because funds were required to pay an inheritance tax liability. A six figure chargeable event gain arose on encashment.

My questions to readers are as follows:

  • Who is liable to pay the tax?
  • Should the gain be reported in the trust tax return the personal return to date of death or the administration return from date of death to 5 April 2019?

I am aware that the position is rather more complicated when an encashment applies after death but before the end of the tax year. Unfortunately I have no practical experience...

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