The 'administration' period

pjs493

So far I've been thinking of the administration period as that between the date of death of my husband and the day of probate being granted, but am I right to think this? Or is the administration period the period from date of death to the point where all estate matters are settled?

For example, does the rental income from a flat he owned and left to me continue to be considered income of the estate after Probate until the Land Registry is updated? Probate was granted on 30 January, so I have been assuming that rent paid on 1st February would be considered my income for income tax purposes. I paid off the mortgage as soon as I was able to after sending the mortgage company the Grant of Probate (first week in February). I'm now awaiting paperwork from the mortgage company so that I can update the Land Registry (they said it could take up to 15 working days for me to receive the paperwork).

Another example is that I will have to use my late husband's accountant to prepare his taxes from April 2023 to his date of death. Does the accountancy fee come under that tax period? Or does it come under the administration period (for which I will just need to write a letter to HMRC explaining the income and expenditure for that period relating to the rental property - conversely that will actually come in at a loss due to a large annual service charge due and paid on 1 January)? Or do I just have to pay the accountant's fee out of my pocket?

A lot of it is all academic as I inherited all of my husband's estate (barring a charitable donation and some sentimental items left to others), so any costs such as accountant's fees etc ultimately come out of my inheritance. But obviously I want to make sure I put the correct claims through the correct tax returns for the accountant's bill and rental income, etc. I also want to ensure that I fulfil my role as executor properly and correctly account for everything in the spreadsheet I've been using.

After everything is settled such as credit card debt, paying off the mortgage, etc, I have needed to use my own money to make sure everything has been paid to prevent the need to sell the flat. It was not an insolvent estate by any means, but without dipping into my own (and what was previously our joint) savings, I would have had to sell the flat to come out with a positive cash in hand balance.

Marcon

This should make very helpful reading: https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

pjs493

Marcon said:

This should make very helpful reading: https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

This link doesn’t actually answer my questions. 

It just provides a bunch of information already available on the HMRC website that I was already aware of, but hopefully it might be helpful to others. 

Marcon

pjs493 said:

Marcon said:

This should make very helpful reading: https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

This link doesn’t actually answer my questions. 

It just provides a bunch of information already available on the HMRC website that I was already aware of, but hopefully it might be helpful to others. 

Sorry to hear that. I rather thought it did, but perhaps a chat with your accountant is the best way forward.

pjs493

Marcon said:

pjs493 said:

Marcon said:

This should make very helpful reading: https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

This link doesn’t actually answer my questions. 

It just provides a bunch of information already available on the HMRC website that I was already aware of, but hopefully it might be helpful to others. 

Sorry to hear that. I rather thought it did, but perhaps a chat with your accountant is the best way forward.

I assumed that given the number of people on this forum who had administered estates before, someone would be able to give examples from their experience of when the administration period ended for them. I've already used the HMRC resources and conducted Google searches to find answers and haven't found a definitive answer or a real world example.

I don't have an accountant, my late husband did, but when they did his 2022-23 tax return, I had to answer several questions for them and call HMRC to clarify a number of issues despite his tax affairs being fairly basic. The accountant clearly wasn't an expert on dealing with the tax affairs of someone who died, but was in their speciality which was self assessment for those in the Armed Forces with other sources of income requiring a tax return.

BooJewels

It will surely depend on individual circumstances - when my husband died I didn't need to consult his accountant as he didn't have need of one, I didn't need to speak to HMRC, as they wrote to me very quickly stating that everything was in order and no tax to pay.  I didn't need Probate and everything had been in joint names, so just defaulted to me - so minimal effort on my part.  I had to make a few adjustments to mobile phone contracts, car V5 etc.  I considered the matter closed when I had the last of his pensions paid out and the cheques banked.  Nothing else did occur in an administrative sense after that.

On the other hand, my late Aunt's estate involved ISAs and a house to sell, so Probate needed so seemingly more complicated, but very luckily, it all got sorted in short order and I considered that closed and issued accounts last summer, within 6 months of her passing, yet got a letter from the DWP last week wanting some money back from Pension Credit overpaid a year ago.

Questions like where you declare the rental income should be answerable by said accountant.

So it's not really over, until it's really over.

kuratowski

You can read HMRC's thoughts on the administration period here
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30700p

The phrase that keeps coming up is that the administration period ends on the point at which the estate residue is ascertained.  This is, helpfully, further described within CG30810:

Residue is only ascertained when the personal representatives have both established the net worth of the estate and provided the liquid funds to pay liabilities and pecuniary legacies. Once that point is reached residue is ascertained and it is irrelevant that the assets have not been distributed.

Therefore, as a layperson I would say that waiting for the land registry to update property records is not needed for the residue of the estate to be ascertained, because that forms part of distributing the assets, not establishing its value.

As for when to account for accountants' fees etc, maybe this could be asked on the cutting tax board?  There are several accountants actively posting on there.

pjs493

kuratowski said:

You can read HMRC's thoughts on the administration period here
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30700p

The phrase that keeps coming up is that the administration period ends on the point at which the estate residue is ascertained.  This is, helpfully, further described within CG30810:

Residue is only ascertained when the personal representatives have both established the net worth of the estate and provided the liquid funds to pay liabilities and pecuniary legacies. Once that point is reached residue is ascertained and it is irrelevant that the assets have not been distributed.

Therefore, as a layperson I would say that waiting for the land registry to update property records is not needed for the residue of the estate to be ascertained, because that forms part of distributing the assets, not establishing its value.

As for when to account for accountants' fees etc, maybe this could be asked on the cutting tax board?  There are several accountants actively posting on there.

I suppose there is an element of some of it being somewhat academic as I am both executor and sole beneficiary of my husband's estate so other than changing things into my name, and the money from his ISA to be transferred, everything that was left to me is already in my possession. In other words, he didn't leave a car to his sibling that now needs to be passed to them for example. The only things he did leave to other people were a couple of sentimental items that I gave to said people when I saw them over Christmas (for example one was a whisky decanter he left to a cousin who also likes whisky), and a small donation to charity.

Much of the estate was paid (both incoming and outgoing transactions) before Probate. It was only the mortgage company and the ISA provider that wanted to wait from Probate. And to be honest, the mortgage company would have let me pay off the balance once they had the death certificate, I just needed to wait for Probate to avoid having to pay the exit and admin fees. I did a cost benefit analysis and realised that a few months of interest was less than the exit and admin charges, so it was best to wait. I made the maximum permitted overpayment in the interim.

I suppose as long as HMRC get what is due to them (if anything), it probably doesn't matter so long as I keep meticulous records in my role as executor. As money came in from closed accounts, I settled bills. I needed to use some money from the death in service benefit I received from my husband's workplace pension to pay off the mortgage to avoid selling the flat. But otherwise I just paid bills as I received incoming funds. I could have waited for Probate to pay everything, but it felt easier to me to pay a £600 credit card bill, for example, when one of his banks released the funds from a sole savings account he held.

poseidon1

Just seen this post so hope the following practical points assist:

1 ) Husbands rental property and his personal tax return to date of death.
Assuming you do get accountant to do this, the cost  is a pre-administration estate liability and reportable as such on the iht return ( if such a return p proves necessary). A proportion of the accountancy fee can be offset against the rental income for the purposes of your husband's final tax return in year of death ( refer to accountancy fees claimed on his 2022/23 tax return for this purpose).

2) Rental income post death.
You have intimated at some point you made substantial personal payments against the rental property mortgage, from your own pocket and before probate was granted. If so I would be strongly inclined to advise HMRC that you made a defacto appointment of the rental property  ( subject to the mortgage ) into your own absolute ownership with affect from the day after your husband died ( after all you are sole executor/ sole beneficiary ). 
This will mean all rental income and associated rental expenses should be reported on your own personal tax return, from the day after your husband's death to the end of this tax year. 
You indicate, that having regard to mortgage interest and a large service charge, you may well have a rental loss for tax purposes for the balance of 2023/24. If so, it makes far more sense you to benefit from this carried forward loss on your return, to use against future rental income for as long as you retain the property.

3) End of estate administration period.  Seems to me you are almost at the finishing line. However, your husband's predeath income tax  compliance  in 1) above appears to be outstanding, and I assume the rental property was not the only income source that should be reported.  Once that return is submitted and income tax payable ( if any) is settled  seems to me that should mark the end of the effective estate administration period.
Yes, you have still to legally transfer title to the rental property into your sole name, and his isa it seems may now be in the process of being transferred to you, but neither of these issues should concern HMRC's acceptance of the end of the estate administration, as long as they are happy with you dealing with the rent as set out in 2) above.

Hope this gives you a useful path to tie things up going forward

pjs493

poseidon1 said:

Just seen this post so hope the following practical points assist:

1 ) Husbands rental property and his personal tax return to date of death.
Assuming you do get accountant to do this, the cost  is a pre-administration estate liability and reportable as such on the iht return ( if such a return p proves necessary). A proportion of the accountancy fee can be offset against the rental income for the purposes of your husband's final tax return in year of death ( refer to accountancy fees claimed on his 2022/23 tax return for this purpose).

2) Rental income post death.
You have intimated at some point you made substantial personal payments against the rental property mortgage, from your own pocket and before probate was granted. If so I would be strongly inclined to advise HMRC that you made a defacto appointment of the rental property  ( subject to the mortgage ) into your own absolute ownership with affect from the day after your husband died ( after all you are sole executor/ sole beneficiary ). 
This will mean all rental income and associated rental expenses should be reported on your own personal tax return, from the day after your husband's death to the end of this tax year. 
You indicate, that having regard to mortgage interest and a large service charge, you may well have a rental loss for tax purposes for the balance of 2023/24. If so, it makes far more sense you to benefit from this carried forward loss on your return, to use against future rental income for as long as you retain the property.

3) End of estate administration period.  Seems to me you are almost at the finishing line. However, your husband's predeath income tax  compliance  in 1) above appears to be outstanding, and I assume the rental property was not the only income source that should be reported.  Once that return is submitted and income tax payable ( if any) is settled  seems to me that should mark the end of the effective estate administration period.
Yes, you have still to legally transfer title to the rental property into your sole name, and his isa it seems may now be in the process of being transferred to you, but neither of these issues should concern HMRC's acceptance of the end of the estate administration, as long as they are happy with you dealing with the rent as set out in 2) above.

Hope this gives you a useful path to tie things up going forward

This is really helpful. Thank you. My husband was employed full time so only did a self assessment due to the rental property. His accountant will submit his tax return for this current year until date of death once I complete the spreadsheet and send it to her. I’m comfortable doing my own tax return, my husband only ever did it to take the time burden away from himself and because he could offset the accountant fees against his tax return. 

You’re right in that I made the maximum overpayment on the mortgage from personal and joint savings while i waited for probate to be granted. I also replaced the fridge freezer for the tenants in January too because it broke. In order to avoid selling the flat I also used some of my own money to pay off the mortgage when Probate was granted. My husband was due a tax refund last year which HMRC are holding until his final tax return is submitted in April. Once that’s finalised I’ll write to them to explain the situation. Your suggestion regarding the flat and putting it on my tax bill makes the most sense to me, but I’ll explain it all to HMRC and see if they agree.  

poseidon1

pjs493 said:

poseidon1 said:

Just seen this post so hope the following practical points assist:

1 ) Husbands rental property and his personal tax return to date of death.
Assuming you do get accountant to do this, the cost  is a pre-administration estate liability and reportable as such on the iht return ( if such a return p proves necessary). A proportion of the accountancy fee can be offset against the rental income for the purposes of your husband's final tax return in year of death ( refer to accountancy fees claimed on his 2022/23 tax return for this purpose).

2) Rental income post death.
You have intimated at some point you made substantial personal payments against the rental property mortgage, from your own pocket and before probate was granted. If so I would be strongly inclined to advise HMRC that you made a defacto appointment of the rental property  ( subject to the mortgage ) into your own absolute ownership with affect from the day after your husband died ( after all you are sole executor/ sole beneficiary ). 
This will mean all rental income and associated rental expenses should be reported on your own personal tax return, from the day after your husband's death to the end of this tax year. 
You indicate, that having regard to mortgage interest and a large service charge, you may well have a rental loss for tax purposes for the balance of 2023/24. If so, it makes far more sense you to benefit from this carried forward loss on your return, to use against future rental income for as long as you retain the property.

3) End of estate administration period.  Seems to me you are almost at the finishing line. However, your husband's predeath income tax  compliance  in 1) above appears to be outstanding, and I assume the rental property was not the only income source that should be reported.  Once that return is submitted and income tax payable ( if any) is settled  seems to me that should mark the end of the effective estate administration period.
Yes, you have still to legally transfer title to the rental property into your sole name, and his isa it seems may now be in the process of being transferred to you, but neither of these issues should concern HMRC's acceptance of the end of the estate administration, as long as they are happy with you dealing with the rent as set out in 2) above.

Hope this gives you a useful path to tie things up going forward

This is really helpful. Thank you. My husband was employed full time so only did a self assessment due to the rental property. His accountant will submit his tax return for this current year until date of death once I complete the spreadsheet and send it to her. I’m comfortable doing my own tax return, my husband only ever did it to take the time burden away from himself and because he could offset the accountant fees against his tax return. 

You’re right in that I made the maximum overpayment on the mortgage from personal and joint savings while i waited for probate to be granted. I also replaced the fridge freezer for the tenants in January too because it broke. In order to avoid selling the flat I also used some of my own money to pay off the mortgage when Probate was granted. My husband was due a tax refund last year which HMRC are holding until his final tax return is submitted in April. Once that’s finalised I’ll write to them to explain the situation. Your suggestion regarding the flat and putting it on my tax bill makes the most sense to me, but I’ll explain it all to HMRC and see if they agree.  

Glad this helped.
Your position as sole executor/beneficiary greatly assists in winding up the estate quickly, but really have to applaud your very business like dealings with your husband's post death affairs and the commercial decisions you have made along the way with regard to the rental property. It must have been a very difficult time emotionally, and frankly many others in your position would have been quickly overwhelmed.