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Where Taxpayers and Advisers Meet

Is informal procedure required if no tax is due?

mlgibbons
Posts:6
Joined:Mon Feb 15, 2021 1:00 pm
Is informal procedure required if no tax is due?

Postby mlgibbons » Sat Mar 13, 2021 6:11 pm

Hi
I'm finalising the administration of the estate for my late father in law.

I'm trying to understand if I need to follow the informal procedure and notify HMRC in relation to gains made for the estate during the administration period as no tax is due as it has already been paid at source.

Over the administration period there has been: £24k in gains arising from a chargeable event on an investment bond, £5k in interest on savings and a loss of £3k for capital gains tax purposes.

Income tax at basic rate has been paid at source on the £24k and the £5k and I have issued a R185 to both of the beneficiaries.

I am assuming that as no income tax is due there is no need to inform HMRC via the informal procedure. Would I be correct in this?

Thanks
Mark

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Is informal procedure required if no tax is due?

Postby maths » Sun Mar 14, 2021 12:05 am

HMRC Trust and Estates Manual at para 7410 provides:

"Personal representatives may make an informal payment of the total liability for the whole period of administering the deceased’s estate if certain conditions are met. The main condition is that the total tax liability (income tax plus capital gains tax) for the entire administration period is less than £10,000. The other conditions are that

the probate/confirmation value of the estate is less than £2.5m, and
the proceeds of assets sold by the personal representative in any one tax year are less than £250,000 for deaths up to 6 April 2016, or
the proceeds of assets sold in any one tax year are less than £500,000 for deaths on or after 6 April 2016, or
the estate is not regarded as complex, so it can be dealt with without the personal representatives having to complete a Self Assessment return".

It would seem that you qualify.

mlgibbons
Posts:6
Joined:Mon Feb 15, 2021 1:00 pm

Re: Is informal procedure required if no tax is due?

Postby mlgibbons » Sun Mar 14, 2021 9:00 am

Hi
Thanks for that extract. Based on that, I would agree but an article on LexisNexis has made me wonder as it clearly states that the requirement only pertains to income which is untaxed at source:

https://www.lexisnexis.co.uk/legal/guidance/estate-tax-returns-informal-procedures

"Personal representatives (PRs) have a duty to report to HMRC any untaxed [my emphasis] income received during the period of administration and any capital gains which have arisen in that period on the sale of property forming part of the deceased’s estate. In accordance with the general rule under section 7(3) of the Taxes Management Act 1970 (TMA 1970), there is no requirement for the PRs to notify chargeability where the only income received has been taxed at source or has a tax credit attributed to it (eg bank interest, dividends prior to 6 April 2016)."

I think that I shall call HMRC and get clarification.

Cheers
Mark

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Is informal procedure required if no tax is due?

Postby maths » Sun Mar 14, 2021 1:31 pm

Strictly speaking, an SA 900 "Trust and Estate" tax return should be completed by the PRs for untaxed income/capital gains arising during he administration period Under TMA 1970 s 7(3) however there is no need to notify changeability to HMRC if the only income received has been taxed at source.

Despite the above, the informal procedure applies if the tax charge is small and the estate straight forward. I would suggest your circumstances so qualify.

The LexisNexis article is incomplete.

mlgibbons
Posts:6
Joined:Mon Feb 15, 2021 1:00 pm

Re: Is informal procedure required if no tax is due?

Postby mlgibbons » Mon Mar 15, 2021 9:50 pm

Hi
I spoke to HRMC today who confirmed that if no tax is due then no submission (informal or otherwise) is required.

Best regards
Mark


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