Form R27

poppy3

I have been sent form R27 after the death of my father last year. There are no guidance notes with this and I am having trouble completing it. It asks for interest he earned and tax deducted from his bank/building society accounts during the tax year up to his death. In this case April '09 to Nov '09. Now during that period there wasn't any interest actually credited, but after his death and when the accounts were closed (around 3 months later) then I have statements of interest earned and tax paid from a number of banks/building societies. I have phoned HMRC and the person I spoke to seemed to think that when accounts are frozen after a person dies then the interest is stopped, and therefore I should enter the amounts on these statements. I am of the opinion that these statements include interest earned up until the date the accounts were closed. To complicate things further I have googled form r27 to see what I could find out, and I find an answer from an ex tax inspector that says if no interest is credited to an account during the tax year up to the persons death then the amount declared should be nil. Can anyone shed any light on this for me please.

Gertie_Walker

Yes, the answer you have found is correct.
The form R27 asks for income to the date of death and if these were accounts where interest was not credited during the period Apr - Nov, (maybe interest was only credited in March) then you simply write down the names of each account and then 'nil' beside the income.
HMRC is trying to understand what your father's income was up to the date of his death in order to calculate any repayment of tax due.
As you rightly state, interest credited at the date of closure belongs to the estate and hence to the beneficiaries.

Mikeyorks

poppy3 wrote: »

Can anyone shed any light on this for me please.

Interest is chargeable to tax when it is paid - not when it accrues. So if there was no interest added to the account(s) from Apr 09 to the date of death then no interest goes on the R27. As that form relates to the income of your father.

When the interest is paid - it should all have been subject to tax at source (20%) - even if the account(s) had R85s filed for them in order to achieve gross interest. And even though some of that interest would apply to the period Apr 09 - Nov 09. As the R85 lapses at the date of death - and the interest was payable / therefore tax due, after Nov 09. In that way most estates will not have supplementary tax to pay on the 'estate income'.

Bottom line - post #2 is wholly correct.

poppy3

Thanks to you both for your replies. It seems that not for the first time people at HMRC don't actually know the right answers. Some guidance notes to accompany this form would make it so much easier for everyone concerned. But I suppose that's far too sensible. Thanks once again:T

jimmo

Sorry to say this but if you are handling your dad’s estate you may be in danger of running into an awful lot more red tape than completing an R27 for HMRC and what you have to be careful of is answering the questions asked.
I have just looked at an on-line version of the form R27 and on that the question is “Bank, Building Society or other interest received”
To somebody who is used to dealing with red tape nothing could be simpler than that. In the relevant period your dad received nothing and there is nothing to declare. No amount of advisory notes could make that clearer.
You, on the other hand, are almost certainly not used to dealing with red tape and in your opening post have said that the R27 asks for interest he earned. That can certainly be interpreted differently to interest he received but is most definitely not the question asked on the form R27.
You really have to be careful with the details and answer the questions asked. Don’t try to second guess the meaning of a question because in this instance you could probably work out the amount of interest “earned” by your dad during the relevant period and falsely declare that as interest received.

poppy3

Don’t try to second guess the meaning of a question because in this instance you could probably work out the amount of interest “earned” by your dad during the relevant period and falsely declare that as interest received.

Thanks for your comments. If I had acted on the advice of the woman I spoke to at HMRC then I would have made a false declaration, but I had my doubts, which is why I asked here.

John_Pierpoint

Presumably:
1. Dad was not doing an annual self assessment?
2. Dad's estate (value of everything he owned) was below the threshold for IHT (currently £325K)?

Gertie_Walker

John, form R27 is an income tax repayment claim form - it has nothing to do with IHT. HMRC would be requesting an SA had the deceased been in the SA system. The R27 is just a simple form to enable the next of kin to claim repayment of income tax up to the date of death.

John_Pierpoint

Not my experience unfortunately with the late Mr Dog's estate.

[My reference to IHT was because when an estate is over the limit (currently £325K) you DO have to include accrued, and not yet paid, interest and pay 20% + 40% tax on it and then cope with the complexity of having beneficiaries who are liable to 40% higher rate tax being expected to pay another up to 20% on this interest - so no wonder there is a ban stopping beneficiaries of a residual estate using the on-line system for their tax return].

On the income tax front, I completed the outstanding full year Self Assessment return BUT Mr Dog's tax office then sent me an R27 with the message that his final half year could be done "informally"; which seemed to mean on the back of an envelope.

In the event the executor's account received a small repayment (which did not agree with my back of the envelope calculation and had no intelligible reference amongst a sea of other payments from the various investments I was liquidating; so I thought it must be some sort of forgotten dividend). No notice of payment or tax calculation was ever sent.

Meanwhile the SA system went apoplectic demanding payments on account, penalties and interest.

The moral of this story is:
If you are already part of a computer system insist on sticking with it, however ridiculous it might seem to fill in a form, the size of a TV listings magazine, to get back a hundred quid.

skeato

So r27 is not lieu of probate then ??

JillyCornwall

No probate is entirely different.
I am currently struggling with R27 myself. I was sent one in January regarding my Mums Estate..she passed away Dec 2011. After misreading the form & wrongly entering figures I downloaded one from the HMRC website & find it has now changed..has much more helpful notes and 'seems' simpler, however I'm still struggling, mainly because 2 of the building Societies she had savings with simply ignore my requests for a Tax voucher..one says no tax will be paid until the end of the year even though she had it deducted before her account was credited (Principality) ..they have sent me a final account stating no tax paid...I'm writing to them yet again as one small account (Yorkshire Bank) with no prompting sent a full closure account with Tax vouchers for year up to death & months after & to closure.
The other one I'm struggling with is Santander share dividends..she only had 83 shares & dividends were only a few pounds but I can't get them to send me a summary.
Probate was a doddle compared to this one flipping form. Any tips dealing with these Banks gratefully received!!