Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to 87investor,longview,Sussexlad,niord,staffordian, for Donating to support the site

Probate and undiscovered tax liabilities

including wills and probate
Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Probate and undiscovered tax liabilities

#195302

Postby Sunnypad » January 21st, 2019, 3:28 pm

hello all

hoping someone can help me not panic about this...

my dad died last year and I have discovered an account with about £3000 in it that was not declared on tax returns.

before I get advice from the solicitor I wondered what was likely to happen about this? I am panicking about HMRC wanting to do an investigation into his affairs. If this happens, what is the process - do inspectors come to the house and go through paperwork?

I am mostly flapping about my elderly frail mother, who is not coping well with the death or the legalities.

hope someone can advise, many thanks.

Lootman
Lemon Half
Posts: 7762
Joined: November 4th, 2016, 3:58 pm
Has thanked: 64 times
Been thanked: 1368 times

Re: Probate and undiscovered tax liabilities

#195305

Postby Lootman » January 21st, 2019, 3:33 pm

Accounts do not have to be declared for tax purposes. Only income from accounts. So a key question here is whether or not this was the type of account that generated any income. If not then it is a non issue. And there is an annual tax-free allowance for interest income as well.

Even if it did generate some taxable income, with the low interest rates that have been present for the last decade or so, the interest income on 3K might be sufficiently low that it is not worth worrying about or bringing up at this point. If it was hard for the executor to find this account then it will be even harder for anyone else to stumble across it either.

Sometimes it is better to let sleeping dogs lie.

Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Re: Probate and undiscovered tax liabilities

#195308

Postby Sunnypad » January 21st, 2019, 3:39 pm

it was a bond

in terms of not panicking, I'm a bit unclear why certain things are on the accountant's list and others aren't. I don't know if it's dad's lack of competence with paperwork or simply because the interest generated is considered too low?

in terms of letting sleeping dogs lie, I can't just let dad's post go unopened, surely - wouldn't that be illegal?

thanks. As I say, the main thing is my elderly mum is so incredibly anxious - she is officially the executor. It's okay to pay any outstanding bills but if HMRC actually come to the house, I fear she'd literally have a heart attack.

Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Re: Probate and undiscovered tax liabilities

#195312

Postby Sunnypad » January 21st, 2019, 3:57 pm

oh I've just realised

prior to 2016/17, the tax would have been deducted automatically wouldn't it?

so the previous years for that, it wouldn't have needed to go on a tax return anyway, is that right?

PinkDalek
Lemon Half
Posts: 5523
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1409 times
Been thanked: 1572 times

Re: Probate and undiscovered tax liabilities

#195318

Postby PinkDalek » January 21st, 2019, 4:31 pm

Sunnypad wrote:oh I've just realised

prior to 2016/17, the tax would have been deducted automatically wouldn't it?

so the previous years for that, it wouldn't have needed to go on a tax return anyway, is that right?



Can you be a bit more precise on the type of "bond", as that would indicate whether or not Income Tax was deducted at source? Was the interest payable annually, monthly or what?

Yes, from 6 April 2016 banks and building societies did not deduct Income Tax before they paid interest but, if your Father submitted Income Tax returns, the interest should still have been included. Can you be sure it wasn't?

The amounts would appear to be small, as has been said, and I doubt a major investigation would ensue should the accountants advise HMRC of the missed interest (if it was). We don't know enough about your Father's affairs to know if additional Income Tax would be payable nor if that is the only item missed.

Was the accountant an agent for your Father's past Income Tax affairs and can you explain what letter has been received and from whom?

Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Re: Probate and undiscovered tax liabilities

#195325

Postby Sunnypad » January 21st, 2019, 4:51 pm

what happened was a letter was sent by a building society to dad about changes to voting processes

I called them up to notify them of the death and they said, much to my surprise, that he did still have an account there.

I have asked for paperwork to be sent but was in a flap at work at the time so didn't make a proper note of what account it was.

I am probably just anxious because of the state of his paperwork but it just got me thinking, what if there are other forgotten accounts and HMRC make a thing of it?

because the paperwork is such chaos, I cannot say whether the account was included on previous tax returns, but I know it's not on the 2017/18 tax return.

dad also switched accountants a couple of years ago and I am not sure how much paperwork he kept.

I am not due back at my mother's for a few days so can't check it myself till then.

really I was thinking - hopefully panicking - that HMRC would do a major investigation. I am reasonably sure that any other accounts that might appear would be similar amounts but of course I can't know this for sure. We can pay the tax bill, it's just the prospect of a tax inspector visiting mum that's freaking me out.

are you supposed to put everything you have on a tax return? A previous poster mentioned income bearing accounts only? I thought you had to put everything on the tax return, even if it's just 50p interest earned on a bank account?

thanks again.

Lootman
Lemon Half
Posts: 7762
Joined: November 4th, 2016, 3:58 pm
Has thanked: 64 times
Been thanked: 1368 times

Re: Probate and undiscovered tax liabilities

#195331

Postby Lootman » January 21st, 2019, 5:08 pm

Sunnypad wrote:are you supposed to put everything you have on a tax return? A previous poster mentioned income bearing accounts only? I thought you had to put everything on the tax return, even if it's just 50p interest earned on a bank account?

What I was trying to say earlier was that there is no need to declare accounts to HMRC at all. Only income from accounts e.g. interest, dividends, gains etc. So things like current accounts that typically do not pay interest can be ignored for income tax purposes.

Another thought is that the value of the assets of the estate would have been declared. In that case the amount in the account would be relevant and should have been included in the estate valuation for the purpose of determining inheritance tax. If IHT was due then that might be a more serious omission than a small amount of missing interest.

Gersemi
2 Lemon pips
Posts: 127
Joined: November 4th, 2016, 3:57 pm
Has thanked: 262 times
Been thanked: 43 times

Re: Probate and undiscovered tax liabilities

#195332

Postby Gersemi » January 21st, 2019, 5:09 pm

Relax, it's very unlikely that a tax inspector would visit your mum. At most they might write and ask some questions, but in view of the amount involved they are unlikely to do anything except ask for any tax due. If your Dad's total interest from all accounts is less than £1000 in a year then there won't even be any tax due.

Even if they did want a face to face meeting (which I consider very unlikely) they would write and request a meeting which she could refuse to attend. They won't knock at the door without warning.

Gersemi

scrumpyjack
Lemon Quarter
Posts: 1177
Joined: November 4th, 2016, 10:15 am
Has thanked: 70 times
Been thanked: 448 times

Re: Probate and undiscovered tax liabilities

#195334

Postby scrumpyjack » January 21st, 2019, 5:16 pm

It is quite common for assets to be discovered after the IHT return. I have had this issue myself. It was no problem to notify them of this by letter and pay 40% tax on the additional asset. They were perfectly happy with this.

chas49
Lemon Quarter
Posts: 1102
Joined: November 4th, 2016, 10:25 am
Has thanked: 90 times
Been thanked: 169 times

Re: Probate and undiscovered tax liabilities

#195336

Postby chas49 » January 21st, 2019, 5:22 pm

Lootman wrote:Another thought is that the value of the assets of the estate would have been declared. In that case the amount in the account would be relevant and should have been included in the estate valuation for the purpose of determining inheritance tax. If IHT was due then that might be a more serious omission than a small amount of missing interest.


And (for the OP's peace of mind - since the topic subject includes the word Probate), additional IHT will only be an issue if the newly discovered account balance takes the value of the estate over the threshold for IHT or nil-rate band. Currently that's £325000. And assuming his share of the house (if they own rather than rent) passed to your mother, that value isn't counted.

Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Re: Probate and undiscovered tax liabilities

#195355

Postby Sunnypad » January 21st, 2019, 6:16 pm

thank you all

the entire estate goes to mum, so no IHT to pay at all.

It is mainly my mum's anxiety that is sending my anxiety through the roof. She has never even read a bank statement before, so it's quite a mission, even with me doing it, with an accountant and solicitor, every piece of paper that arrives makes her panic, but I should probably post again on Comfort Cafe about that!

she is also trying to understand everything that the accountant and solicitor are doing, so for example the fact that it's not hugely clear (to us) which accounts need to be listed on a tax return is making her panic. The way dad had it set up, he did include things like 50p from a current account, and I must admit, I am not clear about that either - but that's probably a query for the tax board.

thanks again.

Lootman
Lemon Half
Posts: 7762
Joined: November 4th, 2016, 3:58 pm
Has thanked: 64 times
Been thanked: 1368 times

Re: Probate and undiscovered tax liabilities

#195357

Postby Lootman » January 21st, 2019, 6:21 pm

Sunnypad wrote:It is mainly my mum's anxiety that is sending my anxiety through the roof. She has never even read a bank statement before, so it's quite a mission, even with me doing it, with an accountant and solicitor, every piece of paper that arrives makes her panic

My mother was the same way when my dad died.

What I did was set up a power of attorney so that I could conduct all her financial activities for her. She could still write cheques and withdraw cash, of course. But all bills were set up to pay via direct debit, for example. Whilst for her investments we simply transferred them into my name, which greatly simplified managing them and also later made her probate a lot easier, since I was also the executor and sole beneficiary.

You may not be willing or able to do all that, of course. But if you are then you might be able to reduce her anxiety level, if not your own.

PinkDalek
Lemon Half
Posts: 5523
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1409 times
Been thanked: 1572 times

Re: Probate and undiscovered tax liabilities

#195358

Postby PinkDalek » January 21st, 2019, 6:25 pm

Gersemi wrote:If your Dad's total interest from all accounts is less than £1000 in a year then there won't even be any tax due.


If a Basic rate taxpayer, the Personal Savings "Allowance" from 6 April 2016 has been £1,000 per annum.

If the Father was a Higher rate taxpayer the PSA is £500 and if Additional rate £0.

Even if they did want a face to face meeting (which I consider [u]very[u/] unlikely) they would write and request a meeting which she could refuse to attend. They won't knock at the door without warning.


Agreed unless, as before, there are more major items that come out of the woodwork but they still will not knock on the door.

Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Re: Probate and undiscovered tax liabilities

#195363

Postby Sunnypad » January 21st, 2019, 6:43 pm

even if they request a meeting, she will struggle to cope. I wish I could say to her that it's 100% guaranteed they wouldn't.

I have tried to get her to agree to PoA but she says she won't do that until probate is over. She feels that it's her responsibility, which I appreciate and really respect. I'm frankly worried about the effect on her health though.

I just really hope all this is sorted out sooner rather than later. Talking to the accountant and solicitor reassures her temporarily - then more paper arrives e.g. new tax code, and off she goes again with a panic.

I suspect there are a lot of widows in this situation but of course telling her that doesn't help.

Clitheroekid
Lemon Quarter
Posts: 1959
Joined: November 6th, 2016, 9:58 pm
Has thanked: 828 times
Been thanked: 1972 times

Re: Probate and undiscovered tax liabilities

#195444

Postby Clitheroekid » January 22nd, 2019, 12:48 am

The first thing to say is that both she and you are worrying about nothing. I've spent well over 30 years dealing with estates and HMRC and they are not remotely interested in itrivial stuff like this.

As has been said, it's highly unlikely that there was anty tax due on the piddling amount of interest that £3k would have generated. The rate of interest was probably only around 1%, meaning it was generating interest around the princely sum of £30 a year!

Even if IHT had been payable, so that you would have had to declare it and pay another £1,200 tax it's an extremely minor matter.

HMRC fully understands that executors can't be expected to know every detail of someone's affairs, and this sort of thing happens all the time. Contrary to popular opinion HMRC really aren't out to catch people who are doing their best but make a mistake - they are after people who are deliberately fraudulent, evading tens or hundreds of thousands of pounds.

And I can guarantee 100% that no tax inspector will come to visit your mother or open an enquiry over such a minor matter. So tell her to stop worrying.

From a common sense point of view have you considered having her mail redirected to you for a while? It might ease the pressure on her, particularly if you're dealing with most of it anyway.

Alternatively, rather than go through all the rigmarole that an LPA involves have you considered asking her to give you a very simple `section 10'' Power of Attorney? This is a one page document that involves no formalities and doesn't need registering, but it would enable you to act on her behalf just as effectively as an LPA would. In fact the only practical difference between a section 10 POA and an LPA is that it would cease to be effective if your mother were to lose mental capacity.

Howard
Lemon Quarter
Posts: 1180
Joined: November 4th, 2016, 8:26 pm
Has thanked: 424 times
Been thanked: 530 times

Re: Probate and undiscovered tax liabilities

#195509

Postby Howard » January 22nd, 2019, 10:45 am

Sunnypad wrote:even if they request a meeting, she will struggle to cope. I wish I could say to her that it's 100% guaranteed they wouldn't.

I have tried to get her to agree to PoA but she says she won't do that until probate is over. She feels that it's her responsibility, which I appreciate and really respect. I'm frankly worried about the effect on her health though.

I just really hope all this is sorted out sooner rather than later. Talking to the accountant and solicitor reassures her temporarily - then more paper arrives e.g. new tax code, and off she goes again with a panic.

I suspect there are a lot of widows in this situation but of course telling her that doesn't help.


From the information you have given in previous posts in December, your Mum now has two investment properties (flats) and her own house as well as some share investments and other income. I know it's hard, but surely it is important to get her affairs on an organised basis? If you don't do this, every new letter about her financial affairs, even the most minor, will be a challenge. With substantial assets there are responsibilities and you owe it to yourself to get these addressed, otherwise you may inherit an even worse situation.

It's easy to comment without knowing all the facts, but from what you have written, sooner or later, you will have to take some control. It will be more relaxing if you can decide what you are happy to do and then delegate the rest to professionals you trust.

In the end, hopefully your family have significant assets and the challenge is to enjoy them.

Good luck

Howard

Sunnypad
2 Lemon pips
Posts: 156
Joined: November 4th, 2016, 1:17 pm
Has thanked: 15 times
Been thanked: 25 times

Re: Probate and undiscovered tax liabilities

#195617

Postby Sunnypad » January 22nd, 2019, 4:18 pm

Clitheroe, thank you so much. that's reassuring.

re post - she also refuses to have her post redirected.

Howard - you helped out on the other board - what I think is happening is she feels so guilty about chugging along with dad's mess, she has decided she is going to deal with all this- with "help" from me - while not accepting she is making herself worse and me worse.

unbelievably - for those of you who know me - my sister has now offered to step up and do an intervention, so to speak - and deal with the property side! :shock: So we will go at the weekend, explain our proposal of splitting duties and taking the load off her - and frankly if she says no, we will have to be harsh and say "if you want to do it, you have to do it alone".

I can't have terrified phone calls every day about post and it will do nothing to protect the estate.

one piece of good news from last night - she's said so far she's not prepared to consider PoA but she did ring me and say she's been looking at the information I gave her, so we might be getting there...!

fingers crossed and thanks again for all the help. I have a conference for the rest of this week so if there are any new replies, I'm not ignoring you - just trapped with work. You are all fab!

Howard
Lemon Quarter
Posts: 1180
Joined: November 4th, 2016, 8:26 pm
Has thanked: 424 times
Been thanked: 530 times

Re: Probate and undiscovered tax liabilities

#195628

Postby Howard » January 22nd, 2019, 4:46 pm

Sunnypad

Great news! It is tough dealing with elderly parents. I sympathise about the heart-rending phone calls (and remember a few myself). But in the end you have to grit your teeth and do what is best. And if you can solve it as a family, you will all come out the other side with a good feeling.

very best wishes

Howard


Return to “Legal Issues (Practical)”

Who is online

Users browsing this forum: No registered users and 4 guests