R27 Tax Form and ISAs

Cossack

I've just tried to get through to the HMRC for 30 minutes with no luck, all for a very simply question I hope someone could help me with. On the form R27, which I am filling in for my late mothers estate, it asks for "Bank, Building Society or other interest received without tax taken off". Do I include ISA interest in this box or not? I'm assuming not, but the form isnt very clear on this and neither is the HMRC website.

chrismac1

No. ISAs are excluded completely. Note that the R27 is in essence a "normal tax return" except the person concerned is now dead, as opposed to living. You must have spoken to a numptie.

xylophone

http://boards.fool.co.uk/help-with-r27-11996865.aspx?sort=whole might be worth a read- I'd put the ISA interest in together with any other interest received gross and add a covering letter as suggested.

Cossack

Thanks all, I think I'll go along with chrismac1 and not include any ISA information. Mind, HMRC are brilliant aren't they - I never got to speak to anyone I just wasted 30 minutes of my life hanging on the phone listening to some bint telling me how important my phone call is. Obviously not important enough to actually employ enough people to man the phones.........

System

chrismac1 wrote: »

You must have spoken to a numptie.

Your advice re the ISA was correct, however if you'd bothered to read the Op's post you would have noted that they didn't get to speak to anyone at all.
In a rush to insult all HMRC employees again chrismac

chrismac1

Fair comment. Better to wait 30 minutes on an 0845 number than get some duff gen from a numptie - another winner from the HMRC stables!

Mikeyorks

chrismac1 wrote: »

Better to wait 30 minutes on an 0845 number than get some duff gen from a numptie

Indeed. Why pay for a call when you can come on here and get a numptie for free.

Mikeyorks

Cossack wrote: »

I think I'll go along with chrismac1 and not include any ISA information.

On death - it's not always that clear cut. Interest - in general - is taxable when paid ....... not when it's accrued.

But - a dispensation exists for ISAs. In that the ISA manager is, uniquely, allowed to apportion the interest. And pay that to the date of death without tax deducted. But that for the period from the date of death - to ISA closure is taxed.

On the few I've seen - ISA managers always follow the dispensation route. But it's worth checking that yours has done that - before you commit on the R27.

In the event the ISA manager has taxed all the interest. Then apportion it yourself - and include the portion to the date of death (+ interest) in the taxed interest section of the R27. That approach is endorsed in the ISA guidance notes :

Interest, dividends or gains in respect of investments in a ISA that arise after the date of death of the investor are not
exempt from tax.

However, there is no loss of exemption on interest or dividends payable or gains which arise on disposals made before the date of death.

John_Pierpoint

Mikeyorks wrote: »

On death - it's not always that clear cut. Interest - in general - is taxable when paid ....... not when it's accrued.

This is the situation that particularly gets my goat.

The accrued interest on an ordinary savings account is taxed at 40% to Inheritance Tax and then when it is crystalised into the account after the death another 20% is taken off.

That makes 60% marginal tax rate or am I missing something here?

Now pay out that interest to a beneficiary who pays higher rate tax and get into a right can of worms.

Or am I misunderstanding something?

Why cannot all savings institutions have a system where they close the account on death and promptly reopen it designated "The personal representatives of XYZ deceased" thus creating a clear BC and AD accounting entry?
The former having a clear taxed at 20% income figure for the deceased's final tax return. The latter having a clear taxed interest, in due course, payable to the residual beneficiaries.

ISA providers are only too happy to write a letter that says
".....we have transferred these holdings into an investment account [paying peanuts?]. Any tax credits paid since the date of death will be reclaimed and paid to HMRC".

John

PS presumably the deceased was not already within the grip of annual self assessment - in my experience there was no joined-up system between the R27 and the the SA treadmill of payments on account.

John_Pierpoint

I thought that call centre people who read things off computer screens and repeat them with no "cognition" were called "muppets".

I had a right "muppet" on the phone the other day trying to flog me PV Panels - regardless of my Telephone Preference status.

The most insulting bit was that he assumed that I was the "numptie" who knew nothing about solar PV, and almost blew a gasket when I kept on correcting the "facts" he was feeding me.

Cossack

I asked all the building societies concerned to send me accounts of tax gained on the ISAs up until the date of my mothers death (they may be a couple of days out, but in general the amounts they gave me were up until that date) - so whatever I put on the R27 is my mothers tax. I understand that the accounts now go into a "dormant" stage until I get probate so any further tax accrued will be minimal, but easily identifiable as being "my" tax.