VATREG43200 - The effects of death, insolvency and incapacity on registration: death of sole proprietors
Generally speaking, regulation 9 can be applied to the trade of a deceased sole proprietor where it is clear that the business will be transferred to the beneficiary, or sold on as a going concern, in the near future. In other words, where you have reason to believe that the person carrying on the business is only doing so on a temporary basis.
Generally speaking, on the death of a sole proprietor, the executor or the administrator carries on the business of the deceased and will be registered as the taxable person carrying on the business rather than in his professional capacity. This may mean deregistration followed by re-registration, or it may mean that the executor signs a VAT 68 on behalf of the deceased’s estate in favour of the person now carrying on the business.
Regulation 9 only applies to the person carrying on the business. So, if the executor or the administrator is not carrying on the business, he can not be made subject to regulation 9.
If the person carrying on the business is neither the administrator nor the executor of the estate, he is an executor de son tort. If he is not carrying on the business in a temporary capacity, you should register him without recourse to Regulation 9.
If an executor de son tort carries on the business unknown to us, and an administrator is subsequently appointed with effect from the date of death, you should treat the executor de son tort, rather than the administrator, as the taxable person because the administrator did not make any taxable supplies.
If you decide to invoke Regulation 9, you should:
- amend the name on the register to read ‘A, carrying on the business of B’
- send a copy of the letter in VATREG47250 to the personal representative, informing him that he is being treated as the taxable person under the VAT Regulations 1995, regulation 9 and advising him of his obligations
- delete the trader’s bank details so that any repayments due will automatically be issued as payable orders to the personal representative, and make any necessary amendments to the address of the principal place of business
- set the Local Office review to inhibit the automatic issue of Demand Notices for Immediate Payment (forms 891 and 899)
- make a note in the trader’s folder that the sole proprietor has died, giving the date of death, and monitor the situation reviewing the file periodically.
Once the estate is settled and the business is in the hands of the new owner, you should:
- register the new taxable person calling for a completed VAT 1 and VAT 68 where appropriate
- set the EDR at the date on which the estate was transferred to the new owner (this applies whether registration is under a new number or by reallocation)
- remove the inhibit placed on the automatic issue of Demand Notices for Immediate Payment.
If, after 12 months, the estate still has not been settled, you should make enquiries to find out what is happening and, depending on the result of your enquiries:
- you should allow the Regulation 9 treatment to continue where it seems likely that the estate will be settled in the near future
- if there seems to be no likelihood of a settlement in the near future, you should call for a completed VAT 1, or VAT 68, from the person carrying on the business.