Income tax return: 06apr08 to date of death.

John_Pierpoint

I am the executor for a very elderly uncle who died in September.
http://forums.moneysavingexpert.com/showthread.html?t=1164505

I've been here before as my mother died a few years ago BUT she died in April, so the income her savings earned in the new tax year was minimal.

Uncle has conveniently died 5 - 6 months into the tax year. My understanding is that I can do an income tax return for his life in tax year 08/09 and get the benefit of a full 12 months of elderly person's tax allowances? (This trick used to work for couples having autumn weddings and the wife's tax claim as Miss Jones paid for Mr & Mrs Smith's honeymoon!)

So in preparation for probate, I have been sending off a standardised letter to the institutions where uncle kept his savings. This asks for the value of his account(s) as at the date of death and any income and tax paid in the 08/09 tax year.
I have had what looks like sensible replies from several institutions.
However the reply from Abbey is confusing.
Account A is an ISA and so there is no tax involved,
Account B shows a gross figure for income. (naughty uncle - some where along the line he must have filled in one of those gross interest forms, ).
Accounts C has the reply that confuses me. Balance at date of death 10,000 + accrued interest 254 GBP net.
"We cannot issue a Tax Deduction certificate for this account as no interest has been paid in the period 06 April to date of death".

So did my uncle own this 254 GBP at the date of death and so potentially have to pay Inheritance Tax on it BUT not be able to reclaim any income tax.
or has someone at Abbey given me the figure of accrued interest up to mid November that is not part of uncle's estate
or have I not understood the situation?

anniecave

ask for a statement to see whether the 254 appears and if it was gross or net

John_Pierpoint

Went into the local branch yesterday.
Stood my ground, when the receptionist suggested I had better telephone head office and discuss the situation with the person who had sent the letter (complete with self evident mistake).
Continued to hold my ground when the "consultant" (or whatever they are called) said she was leaving early today.
Eventually got an intelligent young man and we sat down in front of a terminal and sorted it out.
The tax free amount is coming from a TOISA (Taxexemptspecialspecialsavingsaccountonlyindividualsavingsaccount?)so that is why there is no tax paid.
There were a couple of obsolete bonds that had ended up on some sort of general extension rate (ie pretty pathetic rate of interest) but I guess there are millions of "loyal" elderly pensioners out there who are losing hundreds of pounds a year, because they have no concept of "tarting".
Perhaps they are subsidising the mortgages of everyone's grandchildren?

Mikeyorks

Not clear if IHT is involved? If not then you're only required to make best estimates of the interest related elements of Savings etc in order to obtain Probate. Having made 'reasonable enquiries' of the Banks etc if you don't have even the basic details.

Dealing with my Mother's estate recently I found interest certificates missing in every case for fixed term deposits which had completed in the 18 months prior to death. I managed (Halifax) to get 50% of them .... but eventually conceded defeat on the others. In the end (I had most of the basic figures .. having managed her accounts the prior 12 months) I managed to put together a reasonable summary of the capital / gross interest / tax paid for each account. And simply submitted a schedule for each of the two year's involved covering the R27 you will normally need.

In no case did I submit the interest certificates ... merely asked they contact me for any further info required. A subsequent refund cheque into the Exor account within 3 weeks .... suggests that they will not normally require the certificates?

dzug1

You are right about the full year's tax allowance.

You will also when you have wound up the estate be required to submit an estate tax return from date of death onwards.

Mikeyorks

dzug1 wrote: »

You will also when you have wound up the estate be required to submit an estate tax return from date of death onwards.

Only if you respond positively to this question on the R27 :-

Do you expect the estate to receive any untaxed income, or to sell any assets from the estate during the period of administration?

http://www.hmrc.gov.uk/forms/r27.pdf

To obviate this is why eg interest on ISAs is taxed from the date of death to the date of settlement. I've unfortunately had to deal with two estates in the past 12 months ..... and no estate return has been requested.

John_Pierpoint

Just for the record:
Yes a house is likely to be sold by the executor (me).
If I remember correctly, last time filling in the estate income tax return was a formality, I never heard anything about it afterwards.

InHeritanceTax should NOT be an issue BUT this depends on me proving that, when the wife died before her husband, she left everything to him and she was not a foreigner.

Also "from 17November2008 form IHT200 will be replaced by form IHT400 and form D18 by form IHT421".
Any body got experience of using the new versus the old forms and like to comment on the differences?

John_Pierpoint

I have had a chance to check out the forms I have been sent.

The most important is IHT402 - "Transfer unused nil rate band".

However my deceased uncle has not kept details of what happened when his wife died intestate in 2002.

My dilemma has been given its own thread here:

http://forums.moneysavingexpert.com/showthread.html?p=16417399#post16417399

Any one got any suggestions?