Estate Administration ' Reporting Requirements To HMRC

• Published date: 08 January 2024
• Subject Matter: Tax, Inheritance Tax, Capital Gains Tax
• Law Firm: Weightmans
• Author: Katy Morgan

A detailed guide on what personal representatives need to be aware of regarding a deceased person's estate.

A personal representative is responsible for managing a deceased person's estate, and this normally includes reporting the value of the estate to HMRC and obtaining a grant of representation. Personal representatives will be known as 'executors' if they are appointed through the deceased's will, or 'administrators' if the deceased died without a will and they are appointed through the intestacy rules.

Grant of representation

A grant of representation is nearly always required to deal with the administration of an estate. The grant is the court document which provides the legal authority of the personal representatives to deal with the deceased's assets, and it is required to transfer or sell property, deal with investments and close bank accounts.

Depending on the value of the estate, inheritance tax may need to be paid. The tax bill, or a portion of it, must be paid before an application for grant of representation can be made. This can often be problematic, as a property or investments cannot be sold until the grant is issued. This may lead the personal representatives to opt to pay the inheritance tax in instalments (if the estate includes property or certain private company shares) or to take out a short-term loan to pay the tax until the estate assets have been sold.

Valuations

The personal representatives are responsible for valuing the estate of the person who has died. This includes property, personal possessions, house contents, cars, investments, and cash assets. This will also include any business interests, and assets which are owned jointly.

If inheritance tax is payable, HMRC will require a professional valuation of any property or land, business interests, and any personal possessions worth more than '500.

Gifts

The personal representatives must also provide details of all gifts the deceased made in the seven years prior to their death. If the deceased did not keep records of these gifts, the personal representatives often must review the previous 7 years' worth of bank statements. There are some exemptions from the gifts becoming taxable, and these exemptions must be claimed on the HMRC account.

Tax

Inheritance tax is due at the end of the...