Incompetent handling of estate by previous executor means 45% tax now due on private pension!

endaf

Hello all, im after some advise from yourselves in regards to a distressing turn of events.
Long story short my partner's daughter is the sole beneficiary of her late father's estate. Originally his sister decided to take over & sort out the estate. I had misgivings as she seemed to take the matter very lightly, for example wanting the funeral paid for before any monies from his estate had been sorted & paid for by my partner, had one small pension paid out whilst there was still debts to pay for on the estate. I kept stating to my partner she needed to take responsibility as I knew things weren't being done as they should. 
Fast forward 3 years of constant communication back and forth between my partner and the ex-partner's sister about why its taking so long. Being told excuse after excuse about why the NHS work pension was still not being paid out. In the end I managed to persuade her to hire a solicitor only to find out that although the death was registered to the former employer the former executor had done nothing else after that. That now means as over 2 years has passed since the registration of death the pension will be taxed at 45%!! 
Iv asked her to instruct the solicitor to look into possible appeals/suing the previous executor etc but she is reluctant to as she devasted her daughter has lost nearly half of her estate through no fault of her own. 
So basically im after advise in regards to surely there being some form of appeal process with the HMRC? Advice on taking on a case against the former executor for not fulling her legal duties? 
Or should we just swallow this extremely bitter pill and try to invest the very little that her daughter has now been left with? 
Any help is greatly appreciated.... 

Hoenir

Legal responsibility falls entirely on the Executor. The HMRC aren't going to show any discretion. Not their problem to be become involved with nor to resolve. 

Keep_pedalling

Hoenir said:

Legal responsibility falls entirely on the Executor. The HMRC aren't going to show any discretion. Not their problem to be become involved with nor to resolve. 

As the pension is not part of the estate, I am not sure if that applies. I would have through the OPs partner could have actively intervened with getting the pension sorted at any time, although I stand to be corrected on that.

Keep_pedalling

The lump sum being payed will be subject to income tax, so (assuming this is a minor with no income) only the amount above £125,140 will be taxed at 45% 

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	over £125,140	45%

Jowwie

I inherited four small pensions a few years ago. Can't remember the specific details now but all of them were initially taxed at 45%. In the case of two of them I could declare that the pensions had been paid to myself from the estate and subsequently reclaim most of the tax (via an R40 claim form from HMRC). The other two I was not able to reclaim. The communications I had from the pension funds guided me as to whether or not a tax reclaim was possible.

endaf

Thank you for the quick replies already.
original payout should have been approx £40k but will now be subject to 45% tax as its been claimed over 2 years from the date death was declared to the employer.
thats a lot of money to be able to invest in a small child future but now nearly half is wiped out in tax through no fault of the child whatsoever! 

Just seems wrong there’s no appeals process that we can show hmrc that previous executor was incompetent.
Jowwie are you able to provide any further info on this as I’ve managed to find extremely limited info on the internet about reclaiming tax from the personal allowance. I would assume as her legal guardian the monies will be paid to my partner and she can claim it back? 

I’d really appreciate further guidance or where to obtain this.
My partners solicitor has basically shrugged his shoulders and said that nothing whatsoever under any circumstances can be done….he hasn’t even applied for letter of admin for her to take over yet and was instructed 3 months ago! 

Jowwie

The letters I got from the pension firms made it clear what I could/could not do in each case. You may need to try to get hold of that correspondence from the executor? The pension provider will doubtless just be following the rules imposed on them by HMRC. Maybe there will a pensions expert on here that can advise further.

You may have seen this? https://www.gov.uk/tax-on-pension-death-benefits  

Keep_pedalling

endaf said:

Thank you for the quick replies already.
original payout should have been approx £40k but will now be subject to 45% tax as its been claimed over 2 years from the date death was declared to the employer.
thats a lot of money to be able to invest in a small child future but now nearly half is wiped out in tax through no fault of the child whatsoever! 

Just seems wrong there’s no appeals process that we can show hmrc that previous executor was incompetent.
Jowwie are you able to provide any further info on this as I’ve managed to find extremely limited info on the internet about reclaiming tax from the personal allowance. I would assume as her legal guardian the monies will be paid to my partner and she can claim it back? 

I’d really appreciate further guidance or where to obtain this.
My partners solicitor has basically shrugged his shoulders and said that nothing whatsoever under any circumstances can be done….he hasn’t even applied for letter of admin for her to take over yet and was instructed 3 months ago! 

See my post above, although it may initially be taxed at 45%, you will be able to claim over half that back. Assuming she has no income the first £12,570 will not be taxed and the rest of it at 20% 

endaf

Keep_pedalling said:

endaf said:

Thank you for the quick replies already.
original payout should have been approx £40k but will now be subject to 45% tax as its been claimed over 2 years from the date death was declared to the employer.
thats a lot of money to be able to invest in a small child future but now nearly half is wiped out in tax through no fault of the child whatsoever! 

Just seems wrong there’s no appeals process that we can show hmrc that previous executor was incompetent.
Jowwie are you able to provide any further info on this as I’ve managed to find extremely limited info on the internet about reclaiming tax from the personal allowance. I would assume as her legal guardian the monies will be paid to my partner and she can claim it back? 

I’d really appreciate further guidance or where to obtain this.
My partners solicitor has basically shrugged his shoulders and said that nothing whatsoever under any circumstances can be done….he hasn’t even applied for letter of admin for her to take over yet and was instructed 3 months ago! 

See my post above, although it may initially be taxed at 45%, you will be able to claim over half that back. Assuming she has no income the first £12,570 will not be taxed and the rest of it at 20% 

Thank you keep_pedalling, would that be claimed for back immeadiately or at the end of the next tax year? As you can tell I am no tax expert at all! Is it best perhaps we hire an accountant to walk us through this process? 

endaf

Very disappointing information, Do HMRC not have any kind of appeal process? We are able to show incompetent handling of the estate by previous executor & will most likely be suing them due to incompetence. Surely this kind of scenario has occurred in the past with HMRC? 

Marcon

endaf said:

Very disappointing information, Do HMRC not have any kind of appeal process? We are able to show incompetent handling of the estate by previous executor & will most likely be suing them due to incompetence. Surely this kind of scenario has occurred in the past with HMRC? 

HMRC isn't at fault - the person who failed to progress the matter is, and that's exactly what they will point out to you. Your claim is against the executor for any tax charge (needlessly) suffered.

To whom is the payment going to be made and in what capacity - the child's mother as a 'bare trustee'?