Limitations to on-line submission = "Estate Income"

Mary_Hartnell

Last year (2009/2010) I received my share of a deceased relative's estate. The will left basic bits and pieces to various people including to me then I got a nice cheque representing 25% of what was left plus the income it had earned over a period of 18 months.

A form came with the payment called an R185 showing the breakdown of the income into interest and dividends.

Today I got round to trying to do my annual tax return.

The welcome screen greeted me with the text copied below.

*I think this says "You cannot do this on-line as per usual (using our software) because of the estate income.
(so get your finger out and complete a manual tax return by the end of October!!!!)"
[the text in red has been highlighted by me and I can confirm that I am UK resident and I am not a minister of religion nor am I lloyds underwriter ].

Have I understood the situation? or could I simply put the 20% taxed stuff in the bank interest bit and the 10% taxed bit in the share dividends bit on the rest of the system?
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You can use this service if in the tax year ending 5 April 2010 you received
· employment income
· self-employment income
· partnership income
· UK property income

· pensions
· UK interest, dividends etc

· foreign income

· capital gains (If you are entitled to to the annual exempt amount)

Find out which financial records you will need to complete your return online.
It is very important that you enter the correct amount in the appropriate box on the return. Errors or mistakes can lead to you being asked to pay the wrong amount of tax, and can take time to correct.

Help icons are provided throughout if you need specific help or information whilst completing your return.

Find out more about using the File a return service

You cannot use this service if in the tax year ending 5 April 2010 you received:

• Multiple chargeable event gains

• multiple chargeable events

· trust, settlement or estate income

and / or you were:
· non-resident or non-domiciled in the UK

· a Minister of Religion

· a Lloyds Underwriter

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The help button provides this additional detail.


Trust, settlement or estate income

If you were a beneficiary of a trust (excluding a 'bare' trust) or settlement, or the settlor of a trust or settlement whose income is deemed to be yours, you will need to complete the 'Trust etc' pages.
If you received income from the estate of a deceased person do not complete the 'Trust etc' pages if:

• what you were entitled to was a legacy of a fixed sum of money or a specific asset
• your legacy was paid with interest
• that income came from a specific estate asset and can be entered elsewhere on your Tax Return, for example, rents from an estate property

If you want to file online, you will need to use commercial software.

dori2o

First of all, why do you need to complete a return?

Do you normally complete one anyway?

In which case unfortunately you cannot do the return online with HMRC's software and will need to purchase commercial software in order to complete the return online. Otherwise you will need to either request the form from HMRC or print it out from the HMRC website here http://search2.hmrc.gov.uk/kbroker/hmrc/forms/selfassessmentforms.jsp#category2050obviously remembering that the deadline for paper returns is 31/10/10.

Does this income take you above the higher rate threshold?

Unless the income is in excess of £10k, then call HMRC to advise them and they will adjust your tax code to collect the extra tax due. If the income is in excess of £10k, you will need to complete a tax return, so call and arrange for one to be completed.

are you looking to reclaim tax overpaid?

If you are simply looking to reclaim tax and do not normally need to complete a tax return (not already been requested and income from estate is less than £10k) then complete an R40 claim form. These can be requested from HMRC or printed from the HMRC website.

will the level of this income affect your personal allowance (assuming you are over 65/75).

If so, again contact HMRC and advise them and they will ajdust your tax code accordingly.

If none of the above apply then you need do nothing.

Mary_Hartnell

Yes I do an annual Self Assessment tax return anyway because I have a "hobby" business that makes a profit of a few thousand.

Even though I'm not a vicar - I thought I had read the instructions correctly!

It is a shame that HMRC do not seem to have understood the simplest principles of Boolean logic (I'll give 'em and/or).

I'm sure I could rewrite the instructions or create a decision tree, to filter out those who are barred from using the on-line system; whether by the type of tax payers they are or by the type of income they have.

The logical conjunction and in logic is related to, but not the same as, the grammatical conjunction and in natural languages.

http://en.wikipedia.org/wiki/George_Boole

I'm very tempted to take the two figures off the R185 and put them into the "normal" part of the return for savings income and company dividends; but ah well her we go we go with the old manual system: Fill it all in, make silly mistakes, photocopy it all, get a certificate of posting and send it off into the HMRC black hole and start wondering what has become of it.

Then I have to understand why the HMRC way of working out the tax differs from mine, only to discover that something nasty has been done to my PAYE code that may well result in my direct debits bouncing :mad:

What is so special about estate income anyway?

dzug1

Trust, settlement or estate income

If you were a beneficiary of a trust (excluding a 'bare' trust) or settlement, or the settlor of a trust or settlement whose income is deemed to be yours, you will need to complete the 'Trust etc' pages.
If you received income from the estate of a deceased person do not complete the 'Trust etc' pages if:

• what you were entitled to was a legacy of a fixed sum of money or a specific asset
• your legacy was paid with interest
• that income came from a specific estate asset and can be entered elsewhere on your Tax Return, for example, rents from an estate property

I'd suggest that is your let out to put the income in the normal boxes and ignore the estates pages

I think if you get the estates pages themselves they say the same thing - put the income under the appropriate heading in the main return. And don't admit to receiving estate income - if you do they will want a blank estates page completed with a comment that the income is elsewhere.

Mary_Hartnell

I cannot answer yes to any of those three bullet points - all the income comes from my share of the residuary.

There are several other beneficiaries who seem to think I am the family expert. My situation is simple: standard rate and not additional personal allowance (yet); though I bet we have a pensioner, an additional rate payer and a family working tax credit situation amongst the other beneficiaries.

So I think we will have to do it manually by the book.

The form seems simple.
http://www.hmrc.gov.uk/forms/sa107.pdf

The instructions go round the houses a bit, but that is because they are trying to cater for half a dozen types of trust. Our situation is simple.
http://www.hmrc.gov.uk/worksheets/sa107-notes.pdf

I just don't understand why the SA107 has not been incorporated into the on-line Self Assessment system?

dzug1

What does that income consist of - ie where does the estate/residuary get it from?

If it's dividends and bank interest then it can go in the main form - indeed should go in the main form.

Mary_Hartnell

Thanks for your thoughts dzug1

I believe that all the income money is "bank" interest and equity based dividends; however I understand the executor has had a bit of a run around with HMRC getting the estates income taxed correctly.

I don't want to get involved in any hassle with this organisation so if they want a return on paper then that is what they will get.

John_Pierpoint

As an executor, I was told by the tax office to do the deceased's tax return using the on-line system, only to discover I was not allowed to when I applied for the code numbers.
I then found accountantws grumbling about this situation on another forum.

If I believed in conspiracy, then I would think that this is because the tax man realises that this is the last chance to discover that the deceased has been under reporting for years.

I actually believe in c0ck-up, so I think the authorities failed to realise that 2,000 citizens a day die, and now that benefits are paid via the tax system lots of them will need to submit at least one last tax return.