Permanent cessation: permanent cessation: period of administration
When someone dies, the processing office has to finalise the liability and make any repayment due for all periods up to the date of death. In the straightforward cases it will also be responsible for finalising the liability for the period of administration (AP4419 onwards / TSEM7350 onwards). Wherever possible, the personal representative should be encouraged to settle any liability under the voluntary payment arrangement outlined at AP4425.
However, where any of the following situations arise, or are likely to arise, the period of administration will be the responsibility of a Specialist PT office, or other designated office, and not of the processing office
- The deceased was a Lloyds Underwriter and West Yorks Personal Tax Unit will deal with the period of administration
- The GCD of the deceased was PD1 and they will also deal with the period of administration
- A trust is created under the terms of the deceased’s will or the rules of intestacy. One of the Specialist PT Trust offices will be responsible (see TSEM7366 and TSEM7378)
Specialist PT Trusts Edinburgh will take responsibility for dealing with the period of administration in any of the following circumstances
- A corporate trustee is acting (see AP4424)
- The tax liability for the whole period of administration is in excess of £10,000
- The estate has a value at the date of death in excess of £2.5million
- The proceeds of assets sold in any one tax year by the personal representatives exceeds £250,000
If the estate does not fall into any of the above categories but is not straightforward so cannot easily be dealt with under the informal payments procedures (see TSEM7366 and TSEM7376), it should be referred to Specialist PT Trusts, Edinburgh to be dealt with.
Where there is a prolonged administration period tax consequences can become quite involved. But if the local office considers that the estate’s affairs are relatively straightforward and the administration has been completed within two calendar years from the date of death, any liability can be dealt with informally under the procedures outlined at TSEM7410.
Detailed guidance about periods of administration is given in the Assessment Procedures (AP) guidance at AP4414 onwards, and in the Trusts Settlements and Estates Manual (TSEM) from TSEM7350 onwards. Detailed guidance about how to decide which office will handle an estate’s tax affairs is in AP4419 - 4425 and TSEM7406 - 7410.
Where an SA record has been set up for an estate / period of administration, clear cross references should always be made between the deceased’s record and the record for the period of administration.
Advice in section ‘Set Up Taxpayer Record’ should be followed in every case to set up the record, subject to the following
- When using function SET UP TRUST, you should set the Trust Type field to ‘Non-discretionary’
When using function SET UP CAPACITY DETAILS, you should
- Select the role of ‘Other’ from the drop down menu
- Type in the appropriate capacity role
Note: If a personal representative wishes to appoint an agent to act on their behalf, a new form 64-8 must be completed to replace the existing form completed by the taxpayer.
Issue of tax return
Note: Processing offices should not set up SA records for periods of administration or issue SA returns to personal representatives without prior consultation with Specialist PT Trusts, Edinburgh.
There will be some exceptional cases, for example, an open enquiry into the affairs of the deceased, or the personal representative is not prepared to finalise a small liability informally. The office handling the enquiry will need to agree with Specialist PT Trusts Edinburgh that they should take responsibility for the period of administration and set up an SA record for the estate. Small estate liability cases that will not agree to informal procedures should be referred to Specialist PT Trusts Edinburgh to issue SA returns. For further details see AP4423 / TSEM7406.
Other than the exceptions referred to above, SA returns should only be issued to estates by a Specialist PT Trusts office.
Single notice / single declaration
Where a single personal representative is appointed to act for a number of estates, it can become quite onerous for them to sign large numbers of individual returns. Issuing large numbers of individual notices and returns to the same personal representative at the same address is also expensive for HMRC.
This situation is most likely to occur in the case of a corporate trustee, such as a bank or a large solicitors firm, who may be trustee for many hundreds or thousands of individual trusts. Equally, individuals in large legal or accountancy firms may be appointed personal representatives for substantial numbers of estates.
If you receive a request for the single notice / single declaration provisions to be applied, there must be at least fifty estates involved and all must be dealt with by the same office.
For further advice on the conditions which have to be satisfied and maintained by the personal representative, contact Specialist PT Trusts Edinburgh.
In pre-SA years informal local arrangements have been operated where tax for several small estates has been accounted for by way of a single composite assessment and corresponding payment. These arrangements are not acceptable under SA and a separate SA record may have to be created if the estate’s affairs are complex, interest or penalties are to be sought, or the tax due exceeds £10,000. These relatively few larger and more complex estates will come within the SA regime and be handled by Specialist PT Trusts Edinburgh.
For the small estates to be dealt with locally, you should always encourage the personal representative to agree to the informal calculation option which requires making a voluntary payment using the P211(Z) / P254 procedures. It has the benefit of not requiring SA returns to be completed. This informal arrangement should always be sought where the following conditions are met, unless the case is to be dealt with elsewhere in accordance with AP4344, TSEM 7406 and 7410.
The liability does not include
- Tax on payments within ITSA.S946
- Recovery of tax overpaid (S30 TMA 1970)
- Recovery of excessive tax credits (S252 ICTA 1988)
- Any enquiries into the computation provided by the personal representative are to be dealt with informally
- If any offence has been committed, such as failure to notify, it is not considered that interest and penalties should be pursued
If it is found that the net value of the estate in such a case is substantial you should also consider whether an enquiry should be opened for the periods prior to death (see EM3271).
Further guidance on the use of informal arrangements and the voluntary payments procedure is at AP4425 / TSEM7410.
Early settlement: In-year return for the final period of administration
In the vast majority of cases where the taxpayer died on or after 6 April 2003, any liability arising during the period of administration will be dealt with by way of the P254 Voluntary Payment Procedure (AP4425). The question of providing early settlement will not arise in these informal payment cases. The following instructions will therefore only be relevant to
- Specialist PT Trusts offices
- Processing offices where the death occurred before 6 April 2003 and SA returns have already been issued, or exceptional cases where the informal arrangement is refused or abused
In SA, the liability for the final period or year of administration will usually be established upon submission of the SA return issued at the end of the tax year. However, a request may be received during the year to settle the liability up to the date on which the period of administration is wound up, including any earlier year’s liability.
The issue of an in-year return should be restricted only to those cases where early settlement is requested by the personal representative. A Short Tax Return (SA200) should not be issued in such cases. All other cases should be issued with the return at the end of the year in the normal way.
Following the submission of an in-year return the liability may be calculated and you can
- Repay any excess tax deducted (or paid)
- Determine any liability due
Note: Determination of the liability may still result in the agent or personal representative wishing to settle the outstanding liability at the normal due dates.
An Officer should be nominated to supervise cases of early settlement. He / she will be required to
- Authorise the issue of an in-year return
- Ensure the necessary manuscript amendments are made to the return
- Examine the completed return
- Consider the position regarding any enquiries arising under Section 9A TMA 1970 (as inserted by FA 1994)