SAM90030 - Permanent cessation: permanent cessation: period of administration

Introduction
Issue of tax return
Small estates
Early settlement: In-year return for the final period of administration
Nominated Officer

Introduction

When someone dies, PT Operations Bereavement Team will be responsible for finalising the liability and making any repayment due for all periods up to the date of death. They are also responsible for finalising the liability for the period of administration for non-complex cases  (TSEM7350 onwards). Most administration periods are considered non-complex, the personal representative should be able to settle any liability under the voluntary payment arrangement outlined by providing a calculation of the tax due.

The Bereavement Team mailbox is Bereavement - R & F, PT Ops (PT Operations).

On receipt of the unique payment reference from the Bereavement Team, the Personal Representative can then make a one off payment to settle all the administration period tax due. 

The exceptions to this would be

  • The deceased was a Lloyds Underwriter - High Net Worth Unit, Bradford will deal with the period of administration
  • The deceased tax affairs were dealt with by Public Department 1( PD1). They will also deal with the period of administration

HMRC Administration of Estates (part of the PT Operations Bereavement Team) will take responsibility for dealing with the period of administration on a formal basis by issuing Self Assessment Trust and Estate Returns in any of the following circumstances

  • The tax liability for the whole period of administration is in excess of £10,000
  • The estate has a value at the date of death in excess of £2.5million
  • The proceeds of assets sold in any one tax year by the personal representatives exceeds £250,000 for deaths up to and including 5 April 2016
  • The proceeds of assets sold in any one tax year by the personal representatives exceeds £500,000 for deaths after 5 April 2016

If the estate does not fall into any of the above categories but is not straightforward so cannot easily be dealt with under the voluntary payments procedures (see TSEM7376), it should be dealt with formally through Self Assessment.

Detailed guidance about periods of administration is given in the Trusts Settlements and Estates Manual (TSEM) from TSEM7350 onwards.

Where an SA record has been set up for an estate / period of administration, clear cross references should always be made between the deceased’s record and the record for the period of administration.

Advice in section ‘Set Up Taxpayer Record’ should be followed in every case to set up the record, subject to the following

  • When using function SET UP TRUST, you should set the Trust Type field to ‘Non-discretionary’
  • When using function SET UP CAPACITY DETAILS, you should
  • Select the role of ‘Other’ from the drop down menu
And
  • Type in the appropriate capacity role

Note: If a personal representative wishes to appoint an agent to act on their behalf, a new form 64-8 must be completed to replace the existing form completed by the taxpayer.

Issue of tax return

Note:  Offices should not set up SA records for periods of administration or issue Trust & Estate SA returns to personal representatives without prior consultation with HMRC Administration of Estates.

There will be some exceptional cases, for example, an open enquiry into the affairs of the deceased. The office handling the enquiry will need to agree with HMRC Administration of Estates that they should take responsibility for the period of administration and set up an SA record for the estate. HMRC Administration of Esates will issue Trust & Estate tax returns for non-complex cases where the personal representative will not agree to the voluntary payment arrangements.

Small estates

For the non-complex estates, you should always encourage the personal representative to agree to the informal calculation option which requires making a voluntary payment using the ETMP procedures. It has the benefit of not requiring Self Assessment Trust & Estate returns to be completed.

This informal arrangement should always be sought where the following conditions are met, providing the case is not to be dealt with elsewhere in accordance with TSEM 7406 and 7410.

  • The liability does not include
  • Tax on payments within ITSA.S946
  • Recovery of tax overpaid (S30 TMA 1970)
  • Recovery of excessive tax credits (S252 ICTA 1988)
  • Any enquiries into the computation provided by the personal representative are to be dealt with informally
  • If any offence has been committed, such as failure to notify, it is not considered that interest and penalties should be pursued

If it is found that the net value of the estate in such a case is substantial you should also consider whether an enquiry should be opened for the periods prior to death (see EM3200).

Further guidance on the use of informal arrangements is at TSEM7410.

Early settlement: In-year return for the final period of administration

In the vast majority of cases any liability arising during the period of administration will be dealt with by way of the Voluntary Payment Arrangements procedure. The question of providing early settlement will not arise in these informal payment cases. The following instructions will therefore only be relevant to

  • HMRC Administration of Estates
Or
  • Offices where the death occurred before 6 April 2003 and SA returns have already been issued, or exceptional cases where the informal arrangement is refused or abused

In SA, the liability for the final period or year of administration will usually be established upon submission of the SA return issued at the end of the tax year. However, a request may be received during the year to settle the liability up to the date on which the period of administration is wound up, including any earlier year’s liability.

The issue of an in-year Trust & Estate return for the administration period should be restricted only to those cases where early settlement is requested by the personal representative. All other cases should be issued with the return/notice to file at the end of the year in the normal way.

Following the submission of an in-year return the liability may be calculated and you can

  • Repay any excess tax deducted (or paid)
Or
  • Determine any liability due

Note: Determination of the liability may still result in the agent or personal representative wishing to settle the outstanding liability at the normal due dates.

Nominated Officer

An Officer should be nominated to supervise cases of early settlement. He / she will be required to

  • Authorise the issue of an in-year return
  • Ensure the necessary manuscript amendments are made to the return
  • Examine the completed return
  • Consider the position regarding any enquiries arising under Section 9A TMA 1970 (as inserted by FA 1994)