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Dreaded R27 form - untaxed income during period of administration
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munkster
Posts: 27 Forumite
in Cutting tax
Hello all - my mum passed away last month and have been faffing around with form R27 "Potential Repayment to the estate" for most of the intervening time(!). I've obtained probate, all done, I am now just trying to make sure I'm not withholding anything on the R27 form.
Basically I've obtained a handful of (not very large, the largest is less than £2k and the others are much less) death benefit payments from life policies she'd taken out. My question is whether I need to put these anywhere on R27, specifically thinking of the question that asks...
"Do you expect the estate to receive any untaxed income, or to sell any assets from the estate during the period of administration?"
If anyone can re-assure me about this that would be appreciated.
Basically I've obtained a handful of (not very large, the largest is less than £2k and the others are much less) death benefit payments from life policies she'd taken out. My question is whether I need to put these anywhere on R27, specifically thinking of the question that asks...
"Do you expect the estate to receive any untaxed income, or to sell any assets from the estate during the period of administration?"
If anyone can re-assure me about this that would be appreciated.
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Comments
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Personally speaking, I find it very hard to understand how somebody who has lost their mum very recently has the fortitude to worry about tax matters rather than grieving for their loss.
However, each to their own and, generally speaking, a life insurance payout is not classified as income for Income Tax purposes unless the payer provides a Chargeable Event Certificate.
If you have no Chargeable Event Certificates from the payers then you can safely omit the payouts from the R27.0 -
Hello all - my mum passed away last month and have been faffing around with form R27 "Potential Repayment to the estate" for most of the intervening time(!). I've obtained probate, all done, I am now just trying to make sure I'm not withholding anything on the R27 form.
Basically I've obtained a handful of (not very large, the largest is less than £2k and the others are much less) death benefit payments from life policies she'd taken out. My question is whether I need to put these anywhere on R27, specifically thinking of the question that asks...
"Do you expect the estate to receive any untaxed income, or to sell any assets from the estate during the period of administration?"
If anyone can re-assure me about this that would be appreciated.
As you have managed to do everything so quickly, I take it that this is what HMRC calls an excepted estate ?[When I was executor for my late relative - Mr Dog - after all the tax forms had been accepted and the bulk of the InHeritance Tax paid, it took 6 weeks just to get an interview at the probate office in central London.]
http://www.hmrc.gov.uk/inheritancetax/iht-probate-forms/excepted-estates.htm
In other words your late mother's estate is one of the numerous "very small" or the 220,000 a year in the statistics below (not one of the 60,000 that probably are liable for IHT and have to complete form IHT400)
You have completed form IHT205 (because the deceased lived in England and Wales?). So you have claimed exemption from IHT and you will probably hear nothing more about this capital tax.
Then you turned to Income Tax; did the deceased pay income tax? most people do.
You have received a pay out from a few small insurance policies [I found an old Prudential policy dated 1918 in a box of photographs, with more to worry about in North Africa during WW2, this penny policy had been allowed to lapse - I collected a tenner on it:D and paid 4 quid in IHT on it:eek:] Presumably your mum's policies were similar insurance policies used for saving as much as for insurance as, until the 1980's, half the premiums paid in, used to qualify for tax relief and the payout, at death or maturity, was classed as capital not income.
(Presumably the proceeds did not tip the estate over the 325K IHT tax free limit?)
These were not "clever" new style policies "written in trust"?
Now you are dealing with Income Tax, by filling in form R27. If your mother was a regular tax payer, in death (unlike marriage) she is entitled to a full year's personal allowance so, by dying a few months into the new tax year, that started on 6th April, the estate should get a modest tax refund.
Are you happy that the income tax affairs of the deceased for years prior to 2011/12 are all in order?
Good luck, I envy the simplicity of your situation.
John.
PS For the benefit of anyone who is sorting out the estate of someone who is already in the Self Assessment system, insist on completing the full SA return. The "informal" R27 return does not get reconciled properly against the SA situation. So the SA system crashes on issuing threats and penalties to the deceased - Nice mail for a widow to open?
PPS Does the estate have any assets that would need to be reported or may be subject to Capital Gains Tax if sold?
PPPS On the emotional aspects of death. My late mother was struck down by a stroke. It turned her into someone still with old memories, but with the intellect and behaviour of a 3 year old toddler. That, not the funeral, was the hard time,
Mr Dog struggled to say his last words, which I deciphered to be "Can you help me with my tax return" - he knew in September the deadline was the 31st October.
7.1 Representatives administering the estate of a deceased person (the “personal representatives”) need, in all but the smallest cases, a grant of representation (i.e. probate/letters of administration from the Probate Registry in England and Wales, the Probate and Matrimonial Office in Northern Ireland or confirmation from the Sheriff Clerk in Scotland), which is only issued by the relevant court or office once it is satisfied either that any Inheritance Tax (“IHT”) due in respect of the particular estate has been paid or that none is due.
7.2 For some personal representatives this will involve delivering to HMRC an account of the property comprised in the estate and obtaining a tax certificate. This allows HMRC to examine, and collect any IHT due on, the estate before the assets are distributed to beneficiaries. About 60,000 accounts are submitted each year.
7.3 However, the vast majority of personal representatives are excused from the need to deliver an account to HMRC and obtain a certificate as they fall within circumstances prescribed in the Excepted Estates Regulations where no tax is expected to be due. Instead they submit to the relevant court or office, as evidence that no tax is due, a much shorter and simpler ‘excepted estate’ return of prescribed information. Once the grant of representation has been issued the returns are then passed to HMRC to allow HMRC to carry out its compliance work. About 220,000 excepted estate returns are submitted each year.
7.4 IHT is a tax on transfers of value. In general, IHT is payable on death; although it is also payable in respect of certain lifetime transfers. IHT is charged at 40 per cent of the value transferred by a deceased person above a nil-rate band, currently £325,000.
7.5 Since 2007, where a deceased person’s nil-rate band is not fully used, the unused proportion can be transferred to a surviving spouse or civil partner and used against the survivor’s estate when they die. This has reduced the number of estates that are due to pay IHT each year.
7.6 Amendments made by S.I. 2011/214 prescribed for the first time circumstances when the personal representatives of an estate benefiting from transferred unused nil-rate band may submit an excepted estate return to the relevant court or office, as opposed to having to complete a full IHT account. It is expected that the representatives of an additional 20,000 estates each year will as a result be excused from the need to deliver an account to HMRC.
The Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations, SI 2011/214, amend the excepted estates regulations.
7 Feb 20110 -
Thanks both, useful info... It's been "simple" so far (emotions notwithstanding, I can assure you...) as far as an estate can be, so long may that continue.0
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I found dealing with my dads estate helped give some focus, and also helped mum knowing it was in hand.
I was not too sure about the income issues, some ISA income that was not taxed as it should have been, joint acounts with 1/2 taxed, premium bond winnings etc.
We had a Jan death so had 3 periods, to deal with, pre death, estate Jan-April and estate April to close.
I just itemised everything in a supporting letter with my assumptions eg premium bonds remain tax free for a year.
After a short period I got a reply with refund/demands for the relevent amounts for each period.
The people at HMRC that deal with estates seem to be the most helpfull and reasonable to deal with, they understand you are dealing with someone elses tax issues so may not be familiar with everything.
You can call them if unsure.0 -
It is good to know that HMRC must be getting on top of their communication and overload problems of 2008/2009/2010.
My daughter, who is married to an accountant, has written to HMRC on a slightly complex issue, about a fortnight ago.
I will let you know when she gets a reply and how useful it is.
[My experience of sorting out my great aunt's estate back in 1995, was similar to yours, but I was dealing with a named individual, who seemed to have the experience to make the correct decisions and stand by them. The only problem we encountered was the Inland Revenue's envelope slicing-open machine chewing up a couple of my missives]0
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