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HMRC internal manual

Technical Teams Operational Guidance

Investigation work: Disclosure Report examination: examining the disclosure report: deceased taxpayers

See TTOG5350 where IHT liabilities may be in point.

The death of a taxpayer needs to be handled with sensitivity. However, it is also necessary to recognise that it may be appropriate to consider early action to protect the interests of HMRC. See CH54200 for advice on assessing time limits.

You should speak to the Risk and Intelligence Team in IHT (part of Charity, Assets and Residence (CAR)) when:

  • the taxpayer or their agent have indicated or disclosed that there may be IHT liabilities
  • the taxpayer or someone closely associated with the taxpayer dies before or during the investigation
  • the taxpayer has been involved with the setting up of a trust or structure (particularly those situated offshore) or has transactions with or within a close company that results in a reduction in the value of their estate

SI cannot claim the yield for IHT liabilities uncovered in its statistical yield but can claim credit for ‘value added’. Depending upon the apparent IHT exposure for HMRC it may be appropriate for the case to be team worked with CAR IHT or for CAR IHT to work that aspect of the case separately.

Section 74 Taxes Management Act 1970 provides that when a person chargeable to income tax dies the executor or administrator of the estate becomes liable for tax chargeable on the deceased person. The provisions of Section 74 are extended to capital gains tax by Section 77.

Where a taxpayer dies before enquiries can be concluded it is important that the executor/administrator is made aware of the need to retain sufficient funds to meet any liabilities that may be determined when the enquiry is concluded.

When a case owner learns that a taxpayer whose return is under enquiry has died they should write to the executor/administrator advising them of the enquiry and making it clear that they should retain sufficient assets in the estate to meet any liabilities that may be established. Their attention should be drawn to the provisions of S74 and their potential personal liability if the assets of the estate are distributed prematurely. It may be appropriate at this point to invite a payment on account from the estate or to suggest the purchase of a certificate of tax deposit. In some instances it may also be appropriate to invite the executor/administrator to settle the enquiry on HMRC’s terms.

When contacting executors/administrators case owners should point out the possibility of additional liability even if the avoidance succeeds, as a result of any consequential amendment to IHT liability.

If the estate may have insufficient funds to meet any potential liability the case owner should consider making a jeopardy amendment(s) following the guidance at EM1950 onwards.

Where the original enquiry is jointly worked the investigator (or Technical Lead or Enquiry Project Manager) should also be mindful of yield share agreements with other Directorates.