Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Trusts, Settlements and Estates Manual

From
HM Revenue & Customs
Updated
, see all updates

Deceased persons: administration periods: returns: clearance procedure

Background

When the administration period comes or is coming to an end and HMRC needs to send a tax return to the personal representatives covering the final period to cessation, we will usually do this after the end of the tax year in which the cessation occurred. Under Self Assessment, however, HMRC can enquire into a tax return within a specified time.

For returns for years up to 2006-07, the time allowed for enquiries is up to 12 months after the fixed filing date - for returns delivered within the filing window that is up to 12 months after 31 January following the end of a year of assessment. This could mean that if the administration period ended on, say, 10 April 2006 the personal representatives could not be sure, until after 31 January 2009, whether HMRC were going to enquire into the return for the period to cessation.

For returns for the tax year 2007-08 onwards, the time allowed for enquiries is up to 12 months after the day on which the return was delivered as long as the return is received on or before the statutory filing date. This could mean that if the administration period ended on say, 10 April 2007 the personal representatives could not be sure, until 12 months after they filed a return, whether HMRC were going to enquire into the return for the period to cessation. In this example the return could be filed at any time from 11 April 2007 to 31 January 2009, so the personal representatives would not be sure of their position until a date between 11 April 2008 and 31 January 2010.

Procedure - return

To help personal representatives settle the tax affairs of the administration period quickly HMRC will, on request, issue a tax return before the end of the tax year in which cessation occurred.

This practice is not statutory, but was included in the Budget announcement for Finance Act 2007.

Procedure - clearance

Whether the tax return is issued before or after the end of that tax year, HMRC will, on request, give early written confirmation if we do not intend to enquire into that return.

This confirmation does not preclude, in exceptional circumstances, HMRC enquiring into the tax return at a later date if we discover that the return was incomplete or incorrect. But in the vast majority of cases, receipt of this written confirmation will signify the end of HMRC’s interest in the income and capital gains tax affairs of the administration period and, where that is the only open matter, will enable the personal representatives to finalise tax liabilities and distribute the estate.

This practice is not statutory, but was included in the Budget announcement for Finance Act 2007.

Action

If an administration period has come or is coming to an end and the personal representatives request a tax return before the end of the tax year, issue a tax return in-year.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If the personal representatives request a clearance we should acknowledge their request. If we do not intend to open an enquiry we should issue a letter confirming this. If we need time to carry out research we should keep the personal representatives informed.

This does not prevent us using the discovery provisions if it later turns out that the return is incorrect or incomplete.