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Have you benefited from an inheritance recently?
Money Spider
Posted: 03 November 2017 17:49:35(UTC)
#1

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I have completed my Self Assessment(SA) tax return on-line each year since 2005-6.

Last year an elderly relative died and I was a beneficiary of the estate. The estate included some cash in building society accounts which earned interest between the date of death and when the estate was wound up (September 2017, due to HMRC taking 6 months to make a decision). This means that I received a share of that interest. This income has to be entered onto the tax return on sheet SA107 'Trusts etc".

I completed most of my SA on-line as in previous years, but could not find how to add SA107. HMRC did not reply to my secure message, so I telephoned them on 1 November.

The answer is: SA107 is only available in paper form and that means that your WHOLE SA must be submitted in paper form. When is the deadline for submitting paper tax returns, without penalty? Answer: 31 October!

Welcome to the 1960's world of HMRC!
Redundant (Old Timer?)
Posted: 03 November 2017 18:28:46(UTC)
#2

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Moneyspider

Nasty.

May I suggest you print off copies of all your partially completed online SA pages. Hopefully these will have today's date on (never used online SA myself as didn't trust it). Complete your paper SA quickly once you receive it and when you send it to HMRC attach a copy of the online SA, drawing attention (with full details) in the SA additional information box (last page?) to the partially complete SA attached including its number of pages and also give the details of your search for form SA107.

Now any Tax Inspector would, one hopes, see all this and not penalised you for a late paper SA return. If he does then you can appeal to the Tribunal and IMHO you would probably win.

As always just my thoughts and not advice.
Money Spider
Posted: 03 November 2017 19:08:34(UTC)
#3

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Thank you 'ROT'.
I shall indeed be claiming mitigating circumstances when I get the paper submission in (next few days). The on-line SA process will have plenty of journaled, time-stamped entries that I shall refer HMRC to review. Also when you ask a question via the SA process you get a reference number (I always keep a separate copy of this, because you never see it again). Thirdly, I always keep phone records (date, time, duration etc.) so that I can refer to them when making any complaint etc.

I'm not too worried, just astounded and the disconnect in the HMRC process and posting here so that others don't get similarly frustrated.
Mr J
Posted: 05 November 2017 09:43:26(UTC)
#4

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I believe Income received by the estate on assets prior to their distribution would be accounted for through the estate accounts and any tax due paid by the estate. The estate has its own income tax allowance.

I would have thought the share of interest was not your income, it was income of the estate, tax accounted and if necessary paid by the estate. When then vested to you your share of the interest earned by the estate was simply part of your inheritance and not part of your income.
Money Spider
Posted: 05 November 2017 10:19:46(UTC)
#5

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Mr J
I realise that you are trying to make a helpful comment. However, the estate has been administered by a qualified and experienced solicitor with whom I have met (although I am not an executor). I have been issued with HMRC form R185 (Estate Income) for 2016-17 and also for 2017-18 as income was received in both years (the deceased died in the tax year 2015-16).

I therefore have no reason to question further whether I am personally liable for the tax on this income (which is not a huge amount).

Hopefully, you (and others reading this) can now benefit from this information if ever you have the need.
Mr J
Posted: 05 November 2017 11:31:09(UTC)
#6

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Yes was just trying to be helpful. I stand corrected.

I guess there is no limit to the seemingly silly complexity of our tax system.

https://www.taxadviserma...come-estates-and-trusts

Money Spider
Posted: 05 November 2017 11:46:37(UTC)
#7

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No problem Mr. J. I appreciate you trying to help.

The executors (via the solicitor) did "appropriate" some investments in the estate (building society cash and some shares) in order to pay the IHT prior to grant of probate. I believe that when this happens those assets become the property of the beneficiaries, rather than the estate and hence a personal liability for income tax and possibly CGT arises for the beneficiaries. I think this is the root cause of the liability in the first place.

I am not a tax expert and my reason for starting this thread was to highlight that anyone in this position will be required to complete a paper tax return as HMRC form SA107 (Trusts, etc.) cannot be requested/added to an online assessment.......... but no one tells you that!
jeffian
Posted: 05 November 2017 18:56:00(UTC)
#8

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Money Spider,

I'm in an identical situation to you following the death of My Old Mum in 2016. The estate and its liabilities are 'frozen' as at the date of death, so any income arising after that belongs to the beneficiaries and is taxable in their hands. In my case, the solicitors provided a Form R185 setting out the income applicable to each beneficiary and I included this is the pack of information I give to my accountant each year to complete my Return. I can see that the figures were included in SA107, Page T2 under the heading "Income from the estates of deceased persons". Although I sign a paper tax return, I believe that the accountant actually files online and her covering letter says "The return must be submitted before 31 January 2018 to avoid a late filing penalty". The difference between us may be that private individuals may not be able to file online in the same way as accountants, but I do not see why not.

My understanding has always been that provided all tax due is paid in full before 31 January, no late filing penalty will be levied (although I note that is not what the guidance notes say!) but I have no experience of that.
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Tony Peterson on 11/11/2017(UTC)
David Grace
Posted: 20 November 2017 07:57:22(UTC)
#9

Joined: 20/11/2017(UTC)
Posts: 1

Does anyone know if an executor has to pay interest to an inheritor if the estate is not settled after say twelve months?
Mr J
Posted: 20 November 2017 21:48:44(UTC)
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The executor has a duty to the beneficiaries and should therefore manage the estate in a reasonable way on behalf of the beneficiaries. Normally the executor will employ the assistance of a solicitor to provide legal advice and assist with the administration of the estate. This will normally include the Solicitor providing an estate account (bank account for the estate) so that monies can be received from the deceased’s accounts and from the sale of estate assets. The same account can be used to pay debts, bills, or tax for the estate and ultimately to distribute monies to the beneficiaries. This is not normally a savings account so it may pay little or no interest especially with today’s low interest rates. If there is interest (or other income) earned from the estate or the estate account during the administration period it should be included in the assets of the estate and passed to the beneficiaries. However if no interest is earned there will be none to pay to the beneficiaries. If the executor receives very large amounts into the estate account and keeps them there for a very long time then I suppose beneficiaries could argue that the executor should have taken action to open further interest bearing estate accounts to benefit the beneficiaries. However I would guess this may be quite arguable and perhaps unlikely to stand up in any legal challenge against the executor but a solicitor would advise on any potential legal challenge/dispute. I guess it would have to be a very large sum to justify a beneficiary taking legal action against the executor.

Normally there may be interest due from money in accounts that the deceased held at the date of death. Interest either earned on these accounts prior to death, or in the period after death up to the closure of the account and transfer of the monies to the estate account. This interest must be accounted for in the estate as assets and paid out to beneficiaries.

(PS I am NOT a solicitor but have been an executor on two occasions. I offer the above only in an attempt to be helpful and would always recommend taking professional legal advice)
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Tim D on 20/11/2017(UTC)
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