SAM90010 - Permanent cessation: permanent cessation: deceased cases
Introduction
PAYE / SA linked cases
Personal representatives
Period of administration
Issue of tax return
Extending the filing period
Late filing penalties
Concessional dates for interest
Nominated Officer
Early settlement: Issue of in-year return and informal calculations (R27)
Estimated taxable benefits
Student Loan cases
Introduction
Clerical procedures following the death of a taxpayer are largely unaffected by the introduction of SA. Detailed guidance is given in the Assessment Procedures (AP) Manual at AP4344 onwards and the Trust Settlements and Estates Manual (TSEM) at TSEM7350 onwards.
The procedures and SA aspects are summarised in this subject.
When informed of the death of a taxpayer it will be necessary to update the SA record to indicate
- That the taxpayer has died (using the Taxpayer Business Service (TBS))
- The date of death (using TBS)
- Which special outputs are no longer required (using TBS). Note: With the exception of the Welsh signal in Welsh language cases. This signal will be reviewed by the Welsh Unit
- The details of the Personal Representative
- To inhibit the SA Exit letter so it is not issued to the surviving spouse, civil partner or next of kin
- Set the ‘Final Return Year’ signal in ‘Signals’ on SA
PAYE / SA linked cases
When the Final Return Year signal (also known as the Last SA Return Required signal) is set in this type of case, the PAYE / SA link is broken and the SA record will automatically be transferred to the office dealing with the personal address. Unless the record is held in a specialist office, the record should be transferred following the Action Guide for Deceased cases at SAM90011.
Personal representatives
The computer will automatically set up a capacity role of ‘Personal Representatives . . . . . . ’ when
- The Deceased signal is set to ‘Y’ in TBS function AMEND TAXPAYER DESIGNATORY DETAILS
And
- There is no existing live capacity role
This ensures that no output is addressed to the deceased taxpayer. Any output will be addressed to ‘Personal Representatives of . . . . . . . Decd’ in these circumstances.
When the details of the person or body acting in capacity are known the information held on the computer record should be updated.
Notes:
| a. | The SA record should also be noted to indicate that the agent on the SA record no longer acts for the deceased. If a personal representative wishes to appoint an agent (including the same one previously acting for the deceased) to act on their behalf, a new form 64-8 must be completed to replace the existing form completed by the taxpayer. |
| b. | A personal representative / executor can file a deceased person’s tax return online but when the date of death and the deceased signal is set on SA, any online enrolment for the deceased person is removed from the system. Therefore the personal representative will need to register and enrol for SA Online again, using the deceased person’s UTR, when they have been set up as capacitor in order to file the deceased persons return online. If there are no capacitor details shown in SA then the activation code will not be sent out. For further information, see subject ‘Set up taxpayer record: set up capacities’ (SAM100210). |
Period of administration
Note: PT Operations offices should not set up SA records for periods of administration or issue SA returns to personal representatives without prior consultation with Specialist PT Trusts Edinburgh.
There will be some exceptional cases, for example, an open enquiry into the affairs of the deceased, or the personal representative is not prepared to finalise a small liability informally. The office handling the enquiry or the small estate liability will need to agree with Specialist PT Trusts Edinburgh that they should also take responsibility for the period of administration and set up an SA record for the estate. For further details see TSEM7406.
For those small estates which are to be finalised locally, that is where the total tax due for the period of administration is, or is likely to be, less than £10,000, and none of the other exceptions listed at AP4344 apply, you should invite the personal representative to pay any tax due under the voluntary payment arrangements. For full details see TSEM7410.
For further details see subject ‘Permanent Cessation: Period Of Administration’ (SAM90030).
Issue of tax return
After notification of the death of a taxpayer, the Deceased signal should be shown on the taxpayer’s SA record. See SAM90011 on how to set this signal. You must use TBS to set the signal on SA.
In February of each year the computer will check whether an SA return should be issued automatically in the following April. If the Deceased signal is set the computer will not automatically issue a return but will include the case on the ‘Manual Issue of Returns: Deceased Signal’ work list. See subject ‘Manual Issue of Return: Deceased Signal’ (SAM125080).
You may be notified that a taxpayer has died between the automatic selection process taking place in February and the date of the bulk issue in April. In these circumstances you should write to the surviving spouse, civil partner or next of kin extending your sympathies and to explain that unfortunately it is too late to stop the issue of a return in the name of their deceased spouse / civil partner / relative in April but this return can be destroyed when received. You should advise that a further return may be issued to the personal representative of the deceased in order to finalise the deceased tax affairs.
After checking that neither an in-year return has already been made nor that an informal calculation has been accepted (AP4380 / AP4381), you should also prepare a return manually, addressed to the personal representative (or the executor(s) / administrator(s) if known) to be issued at the bulk issue date. Note: The return must be addressed to a named person to be considered correctly served. For example ‘Mr A N Other as Personal Representative/Executor/Administrator of …………. Deceased’.
Extending the filing period
The filing period can be extended by amending the filing date where the personal representatives satisfy HMRC that there is a reasonable excuse for not being able to file the SA return on time. The decision as to whether or not the filing period should be extended (and if so by how much) is left to the discretion and judgement of the particular office.
If a filing period is to be extended the personal representatives are expected to file the return by the end of the extended period. If the return is filed within this extended period no fixed penalties for late filing will be applied.
However, if the return is not filed within the extended period, fixed penalties will be applied and based on the original filing date.
An extended filing period does not change the due date for payment.
Late filing penalties
Where a taxpayer who has been served with a notice to deliver a return fails to comply with that notice and dies before the filing date, then any penalties subsequently imposed, either on the taxpayer or on his / her personal representatives under Sections 93 or 93A TMA 1970, will need to be discharged.
This is because we cannot show that the person on whom the notice was served has incurred any penalty because he / she died before it became due.
When notified of the death you should
- Update the SA record with the appropriate details using TBS
- Where a late filing penalty has been imposed, to cancel the penalty use function AMEND FIXED PENALTIES. From April 2012, use function VIEW/CANCEL PENALTIES for penalties for 2010-2011 onwards
- Issue a new return to the personal representatives as a ‘Late Issue/Reissue’ return. This will give the personal representative 3 months and 7 days to file the return
- Record the date of issue of that new return on the SA record using function RECORD DATE OF CLERICAL ISSUE
If the taxpayer dies in the period very close to the filing date and you are notified of the date of death before the penalty run has taken place, you should reissue the return without delay and note the date of issue on the SA record. This will prevent the penalty being charged.
The new return will have a filing date based on the date it was actually served on the personal representatives, and any late filing penalties will be based on that new date of service. This may be
- 31 October following the end of the return year for a paper return, or 31 January following the end of the return year for an online return
Or
- 3 months 7 days after the date of issue
Note: Any late filing penalties based on the new date of service will need to be calculated manually and entered on the taxpayer’s SA record using function CREATE SUNDRY CHARGE.
Where the taxpayer dies shortly after the filing date, then any late filing penalties imposed will have been validly charged. However, an appeal from the personal representatives should normally be accepted and the penalty cancelled. You should
- Issue a new return to the personal representatives
- Record the date of issue of that new return on the SA record
Again, any late filing penalties
- Are then based on the date of service of that new return
And
- Will need to be calculated manually and entered on the taxpayer’s SA record using function CREATE SUNDRY CHARGE
For more detailed information about penalties see section ‘Penalties’ (SAM61000 onwards).
Concessional dates for interest
If a taxpayer dies before a charge becomes due and the executors or administrators cannot pay the duty before they obtain probate or letters of administration, then Schedule 53, part 2, section 12 of the Finance Act 2009 applies and the relevant due date is the later of either
- The normal due date
Or
- 30 days from grant of probate or letters of administration inclusive
In such cases the reduction of interest is treated as a statutory amendment and any interest given up is regarded as a discharge.
For more detailed information about interest charges see section ‘Interest’ (SAM60000 onwards).
Nominated Officer
An Officershould be nominated to supervise cases of early settlement. He / she will be required to
- Authorise the issue of an in-year return in response to a request from the personal representative
- Ensure the necessary manuscript amendments are made to the return
- Consider the position regarding any enquiries arising under Section 9A TMA 1970 (as inserted by FA 1994)
Early settlement: Issue of in-year return and informal calculations (R27)
In SA, the liability for the year of death will usually be established upon submission of the SA return issued at the end of the year. However, a request may be received during the year to settle the taxpayer’s liability to the date of death, including any earlier year’s liability.
Because the completion of an in-year return is often requested by personal representatives so that they can finalise tax liabilities and distribute the estate to the beneficiaries, the request for the issue of the return is now included on page 2 of form R27. A Short Tax Return (SA200) should not be issued in such cases.
Also in straightforward SA cases, such as where the taxpayer dies early in the tax year and / or there is very little liability or details of income, etc to return, the personal representative may choose to provide in-year details on the R27 as an alternative to completing an SA return. In these situations the nominated Officer can decide to accept the informal information without insisting on the completion of an SA return for that final period (see AP4381 for full details).
Unless a request is made for an in-year return, it should be issued at the end of the year in the normal way.
Following the submission of an in-year return, or an informal computation such as on form R27, you can calculate the final liability using function CREATE RETURN CHARGE to enter details on the SA record and
- If a repayment is due and there is an overpayment shown on the SA record
-
- Issue the repayment to the personal representative using function ISSUE REPAYMENT FROM OVERPAID BALANCE
- If there is additional liability
-
- Issue a print of ‘today’s statement’ (using TSS) and form PS1 to the personal representative for them to send payment to Banking Operations. The underpayment will not normally be due until a later date but the personal representative may want to make early settlement
Note: Determination of the taxpayer’s liability on an in-year return may still result in the agent or personal representative wishing to settle the outstanding liability at the normal due dates. But for informal computations on an R27, the personal representative must agree to make payment of the tax due without the need for application, that is, voluntarily at the time the R27 is submitted or as soon after and before the statutory due date for the return year. You should deal with these liabilities in the same way as liabilities for the period of administration. See TSEM7406.
Estimated taxable benefits
The employer is not required to provide P11D information to the personal representatives until 6 July after the end of the relevant tax year. In most cases matters would be resolved by agreement between the employer and the personal representatives. However, where the personal representatives are unable to obtain P11D information from the employer they can include estimates of the taxable value of any benefits or expenses payment.
Where estimates are used it should be made clear to the personal representatives that calculation of the liability can only be regarded as provisional until the actual figures are known.
Student Loan cases
If you receive a claim for early settlement and the taxpayer is a Student Loan Case, refer to the Collection of Student Loans (CSL) Manual on the Intranet for details of how to deal with the Student Loan.
