EM7610 - Deceased partners

How the death of a partner affects the partnership tax return

The death of a partner does not affect HMRCs ability to

• Enquire into the partnership tax return under s.12AC
• Make a discovery amendment to the partnership return under s.30B.

The guidance for enquiring into a partnership return, or making a discovery amendment, applies as normal.

The death of a partner however may affect the ability to make consequential amendments to that partners return. This may further be affected by whether you are checking the return for the income the person earned before they died, or the return for the income generated after the person died. 

Returns for income the partner earned before they died

s.28B(4) consequential amendments following an enquiry into the partnership tax return

The enquiry into the partnership tax return should continue as normal following the death of a partner.

If the partnership return is amended as a result of that enquiry, consequential amendments must be made to the partners returns as normal under s.28B(4). The time limits outlined below do not affect HMRCs ability to amend the partnership return, or HMRCs ability to consequentially amend a partners return under s.28B(4).

When issuing the s.28B(4) consequential amendment, the notice should be addressed to the Personal Representative (an executor or administrator).

s.30B(2) consequential amendment following a discovery amendment made to the partnership return

Legislation – s.40 TMA1970

You should treat the death of a partner as triggering the s.40 time limits in respect of any consequential amendments required under s.30B(2) for that partner.

A consequential amendment under s.30B(2) must be made within four years after the end of the year of assessment in which the partner died. 

Where a loss of tax was due to the careless of deliberate behaviour of the deceased partner, a consequential amendment under s.30B(2) can be made for any year of assessment ending not earlier than six years before the partners death.

For example:

• If a partner dies on 21 February 2023, any consequential amendment under s.30B(2) must be made by 5 April 2027.
• As the partner died during the 2022/23 tax year, the earliest tax year which ends not more than 6 years before the date of death is 2016/17.
• Consequential amendments under s.30B(2) can be made for the periods 2016/17 to 2022/2023. These amendments must be made before 5 April 2027. 

Normally, you would wait until the partnership position has become final before making consequential amendments to the partners returns. However, in cases where you have made a discovery amendment to the partnership return under s.30B, you should make any s.30B(2) amendment to the deceased partner's self assessment within four years of the end of the year of assessment in which the partner died otherwise it will be time-barred.

This may mean that you need to the consequential amendment in advance of any amendments which you subsequently make to the remaining partners' self assessments. This is the only circumstance in which you should normally depart from the practice of making consequential amendments simultaneously on all the partners.

If the deceased partners return has not been filed at the time you make your s.30B discovery amendment, you should review the case again well before the time limit for assessing the deceased partners liability. You may want to consider making a determination in respect of the deceased partners individual return. Failure to take action will prevent you from being able to give effect to the s.30B(2) consequential amendments.

Returns for income generated after the partner died

The personal representative (an executor or administrator) may have to complete a tax return to report the income that the ‘estate’ generated for the period after the partners date of death. This will be a trust and estate tax return.

As the personal representative is not a partner, s.28B(4) or s.30B(2) consequential amendments cannot be made to the trust and estate tax return.

s.28B(4) or s.30B(2) consequential amendments cannot be made to returns submitted by a personal representative which reports the income the ‘estate’ generated after the person died.

If you wish to check the trust and estate tax return, notice of intention to enquire should be given under s.9A. As consequential amendments cannot be made to the trust and estate return under s.28B(4) or s.30B(2), any amendments required will be made when the s.9A enquiry is completed by issue of a Final Closure Notice under s.28A.

Early Finality

When a partner dies, early finality may be requested. An in-year partnership return may be requested if the partnership business has permanently ceased in such circumstances. If requested an in-year return would be issued to the executor or administrator of the deceased partner, whether or not the partnership business has permanently ceased.

The normal approach to in-year returns made on behalf of deceased taxpayers in non-partnership cases is to examine the return to see whether it poses any risk of error or evasion. If it does not you should confirm, on request, that you do not propose to make an enquiry EM1607.

In partnership cases it will not be possible to issue such confirmation unless both the partnership return and the partner's return are final and have been reviewed, since any enquiry into the partnership return will have a potential effect on each partner's own return.

If you give confirmation that you will not make any enquiries into a partner's return you are effectively giving finality to the partnership return as well. You should therefore weigh up very carefully whether you have all the information to enable you to give finality to the executor or administrator of a deceased partner.

Only if the partnership has ceased will early finality be possible. It may be that the surviving members of the former partnership will be keen to co-operate to bring early finality but this will not always be the case.

If early finality has been requested but you consider that enquiries should be opened into either the partnership return or the partner's return you should issue the appropriate notice under s.12AC(1) and/or s.9A(1) together with the notifications under s.12AC(6) as soon as possible, and proceed as normal.