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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
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Pre-enforcement: consider the defaulter: deceased customers: insolvent estates

Insolvent estates

If the estate is insolvent and there are assets, they should be realised and a dividend paid to estate creditors. Generally an estate is only administered if there are funds. See DMBM585280 for un-administered estates.

Formal administrations

When an order has been made under the Administration of Insolvent Estates of Deceased Persons Order 1986 the case will be dealt with by either:

  • the Insolvency Claims Handling Unit (ICHU) for direct taxes
  • the National Insolvency Unit (NIU) for indirect taxes.

ICHU will:

  • lodge a claim in the normal way
  • advise Estates & Trusts Office/Bradford Enforcement Unit as appropriate of their action, as in INS1704.

NIU will:

  • lodge a claim for any VAT or other indirect tax debt
  • advise Estates & Trusts Office/Bradford Enforcement Unit as appropriate of their action, as in INS1704.

Informal administrations

The personal representative should administer the estate according to insolvency legislation and acknowledge HMRC’s claim.

If the personal representative tells you there are insufficient funds in an estate and either:

  • makes an offer of part payment
  • advises you the estate is insolvent but there will be no formal administration

 

  • ask them:

    • for details of the estate’s assets and liabilities
    • for details of any property jointly owned by the deceased before they died
    • if a payment will be made pro-rata with payments to the other creditors.

If it is clear that the estate is insolvent and there is no formerly jointly owned property:

  • allocate any payment as in DMBM210110 
  • write off the balance Type 2.

If you have evidence of formerly jointly owned property, see DMBM585285.