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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Personal representatives: residue: late date

For the years 2008-09 there will be few cases in which it will be to the taxpayers’ advantage to argue that there has been an extended period of administration. This is because the rate of Capital Gains Tax payable by personal representatives is either the same as that paid by the legatees or higher. It cannot be lower. There may be a small advantage if the personal representatives have any unused annual exempt amount and the legatee doesn’t or the personal representatives may have unused losses that will be lost.

Unless it is an exceptional case where there are good reasons for accepting that the period of administration must be extended beyond the date residue is ascertained, see CG30710, you should seek the full facts to enable you to determine when residue became ascertainable. You should then argue that the beneficial ownership of the assets vested in the legatees at that date. As stated in CG30700 the attitude of the Courts is to look for an interpretation that allows administration to be completed at an early date.

Unquantified debts

One claim that is sometimes met is that there is an unquantified debt preventing residue being ascertained. This may not be sufficient to prevent the administration period being treated as at an end. Such a situation was considered in CIR v Sir Aubrey Smith 15TC661. Lord Hanworth commented at page 674

`For my own part I think the question of a mortgage debt or any other debt must take its proper place in perspective. It may be in some cases that that is a factor from which a strong inference may be drawn. It may be on the other hand that the device of leaving a debt unpaid is resorted to in order to pretend that the residue of the estate has not been ascertained and is not ascertainable. If such a device were resorted to in any case it ought to be held ineffective’.

When a Solicitor or other professional person is employed by the personal representatives to deal with the administration of the estate, his or her fees will be one of the estate’s debts. Sometimes when personal representatives wish to extend the period of administration they arrange that the Solicitor, etc, does not submit a bill in respect of at least some part of his or her fees. They then argue that this has prevented ascertainment of residue and has caused the period of administration to be extended. Any such claim should be resisted on the basis of the above quotation. It should be contended that the information to quantify the bill must be in the Solicitor’s records and that administration should therefore be considered to have ended.