TSEM7413 - Deceased persons: administration period: reporting using informal payment procedures

General

If an estate has no chargeable income and no chargeable gains then there is no need to notify HMRC, either formally via the Trust Registration Service and Self-Assessment see TSEM7376, or under informal procedures, see TSEM7410. as long as there are no claims to reliefs or elections.

Reporting using informal payment procedures 

To report the estate’s income, personal representatives or their authorised agent should send a letter to HMRC at the end of the administration period, including:

  • their name, address and phone number
  • the name, address, National Insurance number, and Unique Taxpayer Reference (UTR) of the person who died
  • a year-by-year breakdown of any income and capital gains tax due for the whole of the administration period
  • any income Tax and capital gains tax they have reported and paid during the administration period, for example if they sold residential property

This should be sent to -

HMRC Bereavement Services
HM Revenue and Customs
BX9 2BS
United Kingdom

HMRC will review and if they agree the tax due, will send the personal representative details on how to pay any tax the estate owes with a unique payment reference number for the estate.

SA return issued

Informal payment arrangements may not be accepted where a Notice to file a Trust and Estate Self Assessment tax return has been issued to the personal representatives.

Income tax

Income is charged to tax at the rate appropriate to the nature of the income received, for example.

  • dividends are chargeable at 8.75% 
  • investment income (bank, building society interest etc.) is chargeable at 20%
  • other income such as rents, or business profits are chargeable at 20%.

The starting and higher rates do not apply to personal representatives in the same way as they do for individuals. Personal representatives do not get personal allowances.

The rules relating to Individual Savings Accounts, (ISAs) held by the deceased can be found here Inheriting ISA from spouse or civil partner.

This allows ISAs to be regarded as a continuing account of a deceased investor. No money can be paid into it from this point, but it will continue to benefit from the tax advantages of an ISA, any growth will remain tax free. Its status as a continuing ISA lasts until either the administration of the estate is complete, the ISA is closed, or three years have passed since death-whichever is sooner. There are different rules in place for years prior to 5th April 2018.

Capital gains tax

CGT liability can be accounted for informally where the proceeds of sale of assets from the estate, are less than £500,000 in any one tax year and the total tax due, income tax and capital gains tax, is less than £10,000.

Any sale of residential property which results in a capital gains tax charge, must be reported and the tax paid to HMRC within 60 days of completion of sale. Report and pay capital gains tax.

One of the main aspects for HMRC to consider is the date of death value of the asset(s) sold. If the estate paid Inheritance Tax (IHT), HMRC may have agreed the date of death value, and this can be accepted for CGT purposes.

If the estate has not paid IHT, or the particular asset was not chargeable to IHT, it will be necessary HMRC to consider the accuracy of the date of death value returned in the computation.

Further instructions on the date of death valuation can be found in the Capital Gains Manual at CG32210 onwards.