EIM42380 - Employment income: basis of assessment for general earnings: earnings received after the death of an employee or office holder
Section 13(4) and (5) ITEPA 2003
When an employee or office holder dies, earnings received (or,
if the employee was subject to the special rule for certain foreign
earnings, received in the United Kingdom) after the date of death
are treated as income of the personal representatives and not the
income of the deceased. They are assessable on the personal
representatives in the same way as if they had been received by the
employee or office holder (see generally
EIM42201). The earnings will, of course,
all have been earned in periods before the date of death even
though they are assessable only on receipt.
If it is contended that earnings cannot be attributed to any
particular period during the lifetime of the deceased employee or
office holder, see
EIM40005.
So it is the place where duties were performed and the
residence and ordinary residence status of the employee when the
remuneration was earned that counts. The residence position of the
personal representatives at the time the earnings are received (or,
where the special rules for certain foreign earnings apply,
received in the United Kingdom) is irrelevant.
In cases where an employee or office holder has died the
employer will follow the instructions at page 16 of the
Employer’s Further Guide to PAYE. By following those
instructions the employer will account for tax in the following
way:
- where payments are made in the tax year in which the employee died, and before a P45 is issued, the employer will calculate the tax due using the tax code in use before the employee died
- where payments are made in the tax year in which the employee died, but after the P45 has been issued, the employer will use code BR
- when payments are made in a tax year following that in which the employee died the employer will prepare a new deductions working sheet and will use code BR.
The statutory assessing position for earnings received by
personal representatives after the death of an employee or office
holder is set out in
EIM42390. In many cases, adopting the
statutory position would place an additional burden upon the
personal representatives and family of the deceased but would not
result in materially different overall tax liability. Sensible
administrative procedures should be used in this type of case.
Normally, you can take the pay and tax shown on the
deceased's P45 as received in the period before the date of death,
and follow
EIM42410. However you should use the
strict basis of assessment, and follow
EIM42390, in cases:
- where it is requested, or
- where you know that a substantial amount has been paid after the date of death. For these purposes a substantial amount means a sum in excess of £1,500.
The tax chargeable on the personal representatives is a debt due
from and payable out of the deceased's estate.
As regards:
- the strict basis of assessment for the personal representatives of a deceased employee or office holder, see EIM42390
- the time limit for assessments on the personal representatives, see EIM42400
- the treatment of earnings received up to the date of death, see EIM42410.
