Tax allowance and married persons tax allowance ? Problem

nad1611

Update. Sent a letter as advised from above replies, which included copies of as many missing years as possible and tax codes for as many years as poss too.on the 16th and this was received by HMRC on the 19th. On the 6/10/11, simply had a letter asking us to fill in a R27, no mention of any of the worries we had. So I will post the R27 off tomorrow and wait again.

jimmo

The issue of the R27 by HMRC is almost certainly nothing to do with your letter. Not so long ago people on this forum were saying that the post arrears at HMRC were 12 weeks, 16 weeks etc. I have no idea what the current state of play is at HMRC but you can be pretty confident that, whilst the letter may have been received on 19 Sept, nobody at HMRC has actually read it yet, never mind acted on it.
By all means complete the R27 and return it to HMRC if you wish but I wouldn't bother because you already know for certain that no repayment is due for the deceased.
In his role as executor, your husband has a legal obligation to pay the deceased's debts out of the estate before distributing the residue to the beneficiaries.
At present, your husband, as executor, already knows that the deceased has significantly underpaid tax and he needs to know whether HMRC want that money or are prepared to write it off.
General opinion on here is that HMRC should write it off but, until HMRC actually make a decision your husband, and the estate, is in limbo.
If I were in your husband's shoes, I would send the R27 back uncompleted with a covering letter referring to his letter of 16 September.
Ultimately what your husband requires is that someone at HMRC actually reads his letter of 16 Sept, understands the issues and makes a decision.
Now, I am not saying this would happen in practice, but a Form R27 is a repayment claim form (the clue is the letter R) and if your husband claims a repayment when he already knows that no repayment is due...
If you take stock of the current situation, your husband has written to HMRC and they have not yet responded. He needs their reply.
As a separate matter HMRC have issued a form R27, apparently not for the first time, but it is most definitely not the correct form for the circumstances.
I just feel that if your husband completes the R27 he will be wasting his time and not addressing the real issue which is do HMRC seek to collect the underpayment or write it off?

nad1611

Jimmo, unfortunately I didn't read your post until now. As you stated might happen has. Basically my husband did go ahead and complete an R27 as it stated in the letter that they couldn't deal with the estate until that was done. So I don't think there's been any harm done when he's simply followed their request, particularly when there's no repayment anyway. I think your... ending suggests that they could construe something dodgy which I don't agree with at all.
He received a letter on the 2/11/11, declaring no tax repayment due (as we knew). As you predicted, there is absolutely no mention whatsoever of the original letter.

Do we simply wait now and see what happens or should we be following this up? It seeems that if we send another letter about the one already sent, we could be chasing letters all the time.

If as you say things are behind by 12-16 weeks it seems we have at least another 5-9 weeks to wait. So I guess that's what we'll do. The rest of the estate business won't be wrapped up by then so we're not in any real rush and it can remain in"limbo" for the present.

ceeforcat

Interesting thread whcih I have only just come across - I had a similar problem with a deceased uncle of a neighbour - underpaid to the tune of £1350 over five years. Letter went to HMRC in April 2010 - heard absolutely nothing. I reckon that it's still in the 'too hard' box.

nad1611

Well that is interesting. How did you settle the Estate? I wonder if there's a time limit with the HMRC making a recovery of the money, or are we supposed to wait forever before settling and distributing to the Beneficiaries?

ceeforcat

I had nothing to do with the estate - completed three years earlier with no IHT. Uncle inherited whole estate and, accordingly, will be only one affected. I have no intention of reminding HMRC of my letter.

Mikeyorks

nad1611 wrote: »

....... are we supposed to wait forever before settling and distributing to the Beneficiaries?

There's nothing at all to stop you making significant interim distributions to the beneficiaries. And simply retaining sufficient funds to cover the final eventualities.

If you're stockpiling liquidated funds in an Executor account ..... it's just as well to distribute asap. As the interest (if any) is usually disadvantaging the beneficiaries.

nad1611

Fortunately we still have some time, we're about to put a property up for sale, but it would seem prudent to put some money aside and pay any sums due from that amount.Thanks.

jimmo

I don't think we have actually determined the amount of tax underpaid here and, in many ways, there is no need for us to know. As long as you, nad1611, know that is all that really matters but for the sake of illustration can we assume that it is £2,000?
As I understand it, the letter of the law says that the executor needs to make provision for that £2,000 but can distribute the rest of the estate to the beneficiaries.
If the executor fails to make the provision he may well find himself personally liable to pay the tax underpaid.
So, the legally correct procedure is that the executor should sit on that £2,000 until HMRC makes a definite decision. Then the executor will have to either pay HMRC or distribute the £2,000 to the beneficiaries.
On a personal basis, I am executor for my mum and when she leaves us there will be 4 beneficiaries, myself and 3 siblings.
If a problem such as this arises after my mum goes I like to think that I could distribute the whole estate between the 4 of us with a warning that HMRC might come chasing for the money. Then, if HMRC do come looking for the money, the 4 of us would pay £500 each. End of.
However, if any of my siblings let me down and didn't pay up I would still be legally liable for the full £2,000.
I would suggest that in this particular case the chances of HMRC chasing for the money seem pretty remote but they do exist. I would take the chance because of my confidence in my fellow beneficiaries.

Savvy_Sue

jimmo wrote: »

As I understand it, the letter of the law says that the executor needs to make provision for that £2,000 but can distribute the rest of the estate to the beneficiaries.
If the executor fails to make the provision he may well find himself personally liable to pay the tax underpaid.
So, the legally correct procedure is that the executor should sit on that £2,000 until HMRC makes a definite decision. Then the executor will have to either pay HMRC or distribute the £2,000 to the beneficiaries.

That seems like a reasonable summary to me too, and the way you intend to proceed also seems reasonable and would be my approach also.

I'm just wondering, however, if the executors have advertised in the London Gazette for creditors, does this cover possible debts to HMRC?