WE 4 & 5 - Tax

Question 1

What are the PRs duties to HMRC?

Answer 1

• Deliver an account to HMRC regarding the deceased’s estate.
• Pay any IHT due

Question 2

What is included in the account delivered to HMRC?

Answer 2

• all property and the value of each item at the date of death.
• the exemptions and reliefs that apply.

Question 3

What’s the deadline for the submitting the account to HMRC?

Answer 3

12 months from the end of the month in which the death occurred

Question 4

What is the deadline for paying IHT due?

Answer 4

6 months from the end of the month in which the death occurred, after which interest becomes payable on the unpaid tax.

Question 5

What are the rules regarding instalment payments?

Answer 5

Tax can be paid in 10 instalments, the first due on the normal payment date and the remainder on each anniversary date. Interest is charged.

Question 6

What assets can the instalment option be used for?

Answer 6

• land and buildings,
• Company shares/securities giving the deceased control.
• Some unquoted shares without control but where payment would cause undue hardship.
• business or interest in a business
• Timber
• farms / interest in farming business.

Question 7

what happens if an asset which is the subject of an instalment plan is sold?

Answer 7

The tax becomes due immediately.

Question 8

Which form is used to account to HMRC about an estates assets / liabilities?

Answer 8

IHT 400

Question 9

When is form C4 used?

Answer 9

• additional assets liabilities are discovered.
• corrections to values.
  changes to exemptions / reliefs
• a variation of the original beneficiary entitlements which affect the IHT liability.

Question 10

Is there a legal duty for the PRs to follow the funeral wishes set out in a will? Who will pay?

Answer 10

No. Payment is made from the post-death administration expenses payable from estate funds.

Question 11

When should a formal valuation be sought?

Answer 11

For items valued over £500

Question 12

What is the consequence of being a low value or exempt estate?

Answer 12

No IHT 400 is due

Question 13

How does probate work?

Answer 13

• identify all assets, debts and beneficiaries
• pay tax to HMRC
• apply to Probate Registry for grant of probate
• get grant of representation
• pay any further tax due to HMRC
• prepare estate accounts
• distribute assets

Question 14

What is included on an IHT400?

Answer 14

• name
• address
• d.o.b
• d.o.d
• assets in estate
• need to submit an IHT 421 which is a probate summary with details of gifts made in last 7 years

Question 15

What is the process for applying for probate with will?

Answer 15

• Gather details of assets
• Gather details of gifts
• Gather details for IHT400
• Gather details for IHT 421
• Submit IHT400 & IHT421 to HMRC
• HMRC sends stamped IHT421 to probate
• complete for PA1P and send to probate with original will plus fee
• Once probate accept will and have a stamped IHT421, they will issue probate.
  .
• all executors sign probate form and IHT400

Question 16

What is the process for applying for probate with will when an executor won’t/can’t act and the estate is under the IHT threshold?

Answer 16

• need to work through rules (be a beneficiary of the residuary estate to apply)
• If non-taxable, no need for IHT400
• applying for grant of letters of administration with will
• Form PA1P used (as there is a will)
• provide details of deceased,
• provide details of surviving relatives
• explain which category of applicant they are
• explain clearing off
• attach copy of will
• send to probate registry
  .
• grant only covers succession estate
• obtain date of death valuations
• include gross and net value of estate
• include net qualifying value of estate (less spouse/charity).
  .
• 2 admins needed if minor beneficiary.
  .
  -PA1P submitted with original will and fee.
• once agreed probate will issue Grant of Letters with Will,