Obtaining a Grant of Probate or Letters of Administration (the latter usually applies when a will has not been made) can involve a lot of information-gathering to find out the probate (date of death) values for completing the required HMRC forms. These forms must be completed regardless of whether there is an inheritance tax liability.<\/p>\n\n\n\n
This information ideally ought to include whether there is any income tax liability due at the date of death. There may also be a refund due to the estate (depending on the date of death). Sometimes, this can take longer to find out because it requires HMRC PAYE correspondence to confirm. An accountant can often provide a calculation, which can then be verified with HMRC later.<\/p>\n\n\n\n
This is not, sadly, where liability necessarily ends. Many executors do not realise that tax does not end on death and the \u2018estate\u2019 as an entity in itself is possibly liable for income and capital gains tax.<\/a><\/p>\n\n\n\n During the estate\u2019s administration period, which runs from the date of death until the conclusion of the administration (i.e., when all assets have been collected in, liabilities paid and the estate is ready to distribute), there may be income arising. This can come from bank accounts or stocks and shares (whether held individually with share registrars or within portfolios).<\/p>\n\n\n\n Unlike individuals during their lifetime, the estate does not have \u2018personal allowances\u2019 and therefore theoretically all income is potentially taxable. I say \u2018potentially\u2019 because there are some exceptions to this, where HMRC makes concessions (reviewed each tax year), which means that smaller estates may not need to pay any income tax, provided that certain conditions are met.<\/p>\n\n\n\n Otherwise, the estate will need to pay income tax and this may be by:<\/p>\n\n\n\n Additionally, it may be necessary to provide beneficiaries with certificates to confirm the deduction of income tax (this can vary depending on beneficiaries\u2019 circumstances and the question of costs proportionality being taken into account).<\/p>\n\n\n\n This is an often-overlooked duty. Many executors assume that getting the grant is the \u2018main\u2019 job and thereafter the main focus is on getting funds to beneficiaries as soon as possible. However, care needs to be taken to ensure that the income tax (and capital gains tax) position is checked, returns filed, and HMRC\u2019s clearance sought, to properly safeguard the executor and beneficiaries.<\/p>\n\n\n\n Pippa Bavington TEP is a Partner at Fisher Jones Greenwood Solicitors<\/a><\/p>\n\n\n\n\n
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