Recognising unreceipted debts to estate

marcusjames

My father passed away in August and I am preparing the various forms for probate.


For the past two years he was in a nursing home. I paid the first few months (until the home established direct debits from his account) and utilities on his house. However, I also paid cash to a 3rd party physiotherapist who visited him twice a week.


I had power of attorney for his accounts but did not draw the money from his account to cover the rising "debt" to me. Now he has passed away, the solicitor has advised that HMRC will reject any debt to me that can't be justified with a receipt.


The physiotherapist is being unresponsive and I suspect wasn't declaring the income.


I know I was silly to let it build up but hindsight is a great thing. At the time I was focused on getting him fit and back home. I hadn't realised how poorly he was.


Does anyone know if the solicitor is right. He has given some bad advice so far, hence asking on here. He is joint executor so difficult to change.


Thanks

SevenOfNine

I'm with the solicitor on this one, you've got no invoices or receipts, didn't pay directly from your father's bank, & chose to part with your own cash. I'd be surprised if HMRC were prepared to accept that, particularly if there may be IHT due.

Presumably you wish to reduce the declared assets for some reason? A big fat bill taking the estate below the IHT level maybe? Does the estate have debts which would have first priority over any beneficiaries inheritance (his care home bills perhaps).

Sorry if this sounds accusatory, it's not meant to be, just puzzled by what reason you have for wanting to omit this money from the probate documentation.

Has the solicitor previously given advice you didn't agree with, or given legally incorrect advice?

getmore4less

Will the estate be paying IHT.

nom_de_plume

Presumably the nursing home can confirm the twice weekly visits? How about writing a letter to the physio detailing your payments and the fact you have evidence of his visits and asking him to provide a receipt with a threat of contacting HMRC if he doesn't?

Yorkshireman99

nom_de_plume wrote: »

Presumably the nursing home can confirm the twice weekly visits? How about writing a letter to the physio detailing your payments and the fact you have evidence of his visits and asking him to provide a receipt with a threat of contacting HMRC if he doesn't?

The trouble with that is that the OP and the physio could be seen, AFAICS, to be conspiring to defraud HMR&C. It is also wise to remember that the solicitor is an officer of the Court and as such needs to be squeaky clean as far as this sort of thing is concerned. To the OP sorry to sound so blunt but the truth is sometimes unpleasant. Paying cash is an obvious way of supporting tax evasion.

marcusjames

Thanks for replies.


Yes, there is an IHT bill to consider, hence my attempt to reflect all debts owed by the estate.


I am being transparent and honest with probate. I have highlighted debts owed to the estate that could very easily be ignored (e.g. a family friend has some items outside of the house of value but I have included these).


I do understand the potential challenge from HMRC but estates are obviously subject to an element of trust with signing oaths and not removing chattels etc.

Keep_pedalling

marcusjames wrote: »

I am being transparent and honest with probate. I have highlighted debts owed to the estate that could very easily be ignored (e.g. a family friend has some items outside of the house of value but I have included these).

.

It these items belong to someone else why are you counting them as part of the estate?

Tom99

[FONT=Verdana, sans-serif]HMRC are prepared and Section 1 on form IHT419 is called “Money spent on the deceased's behalf – for example paying domestic bills”[/FONT]
[FONT=Verdana, sans-serif]Its designed for just this sort of situation, money spent shortly before the death of a parent when you have more important things to worry about, and no receipts are needed, at least not at first.[/FONT]
[FONT=Verdana, sans-serif]You have to say what the money was spent on, why the deceased's own money was not spent and why the debt was not repaid during the decease's lifetime.[/FONT]
[FONT=Verdana, sans-serif]I would suggest you fill in IHT419 with these debts and explain your reasons for not recovering the debt. Given they are nearly two years old its possible your claim may be rejected or receipts asked for but you can deal with that if and when that problem arises. [/FONT]

Yorkshireman99

Tom99 wrote: »

[FONT=Verdana, sans-serif]HMRC are prepared and Section 1 on form IHT419 is called “Money spent on the deceased's behalf – for example paying domestic bills”[/FONT]
[FONT=Verdana, sans-serif]Its designed for just this sort of situation, money spent shortly before the death of a parent when you have more important things to worry about, and no receipts are needed, at least not at first.[/FONT]
[FONT=Verdana, sans-serif]You have to say what the money was spent on, why the deceased's own money was not spent and why the debt was not repaid during the decease's lifetime.[/FONT]
[FONT=Verdana, sans-serif]I would suggest you fill in IHT419 with these debts and explain your reasons for not recovering the debt. Given they are nearly two years old its possible your claim may be rejected or receipts asked for but you can deal with that if and when that problem arises. [/FONT]

I would suggest that, based on what the OP has said, doing this could well backfire. It is not intended to deal with the sort of situation described. The OP would do better to keep quiet and accept that if he does he is likely to get away with what he has done. HMR&C do not take kindly to such behaviour as the OP has shown. Better they remain in ignorance.

Tom99

Yorkshireman99 wrote: »

I would suggest that, based on what the OP has said, doing this could well backfire. It is not intended to deal with the sort of situation described. The OP would do better to keep quiet and accept that if he does he is likely to get away with what he has done. HMR&C do not take kindly to such behaviour as the OP has shown. Better they remain in ignorance.

[FONT=Verdana, sans-serif]Paying someone in cash is not conspiring to defraud HMRC per se. I paid the chimney sweep in cash last week, am I conspiring to defraud HMRC?[/FONT]
[FONT=Verdana, sans-serif]Other than refuse to accept the physiotherapist payment as a debt there is no action that HMRC could take against the OP and the IHT419 form does not ask how each item was paid for nor for a receipt.[/FONT]
[FONT=Verdana, sans-serif]If a receipt was subsequently requested the the OP would say one is not available.[/FONT]
[FONT=Verdana, sans-serif]If fraud was committed HMRC's action would be directed at the physiotherapist.[/FONT]
[FONT=Verdana, sans-serif]However if the OP is that worried about the cash payment the just claim the nursing home bills which I would expect are far larger.[/FONT]
[FONT=Verdana, sans-serif]The solicitors comment that HMRC will reject any claim not back by a receipt is wrong, that is just their assumption.[/FONT]

SevenOfNine

Tom99, how will OP get round the FACT that co-executor is a solicitor who will be jointly responsible for what is declared.

It does not sound like he's going to take his chances & rather than an "assumption", I'd say it was more of a "professional concern".

HMRC are far from stupid, your suggestion on what can be done to avoid excessive IHT bills, if it worked, could be used left, right & centre by anyone trying to reduce what's owed, or even take the estate below the threshold in the first place.

OP hasn't yet mentioned how much this physio bill is! Perhaps a visit to a different solicitor might be in order to clarify the situation, I doubt the other executor is going to be swayed by responses on this forum.