Historic Tax Returns

Historic Tax Returns

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Hi,

I'm new here, have searched for an answer and could not find one, (even though there may be one).

I am executor for a friend who passed away in September. In 2012, he sold a big victorian property that was converted into flats but, as far as I was aware, he didnt let any of the flats from about the year 2000, and lived in the whole of the property as his main residence, (If you saw the house you would see how it could be let out as flats, or lived in as a whole, or part, or parts). Since his purchase in 1983 he lived in the property/part of it. As far as I am aware, he didnt declare a capital gain so I have appointed an accountant, (Decent sized firm of chartered accountants), to help with finding out what might be due, and what the penalties might be.

In his papers I discovered tax returns going back to 2006/7, and in 2006/7 he declared a property income of £3k and in 2007/8 he declared a property income of £1500. I have now established that he let the top floor of the house to some friends when they were between houses, and the figures would equate to about £500 a month for 9 months. No rental income was declared since 2007/8, but I don't have copy tax returns for prior years, and these would be useful in establishing whether, and to what extent, the property was let.

I have asked the accountant to ask HMRC for copy tax returns back to say, 1998, or as far back as is possible, but he has replied that HMRC do not have the authority to release this information to him. He adds that, as I have the Grant of Probate, they might release it to me, if it is available. I have no idea how to go about making this request, and his answer was quite blunt, so I'm wary of asking - hence, here I am.

I completed HMRC form P1000 in December, which I thought gave HMRC authority to deal with my accountant, and I have now received their form P1001, asking again if I want them to deal directly with a proffessional.. I thought this had been asked and answered.

Anyway.. if it's possible for me to obtain the info, I'm happy to do it - it's a learning curve, and it saves the estate some accountancy fees.

Hope the above makes sense, and that somebody can point me in the right direction.

Richard 

Replies (15)

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By Tim Vane
25th Jan 2016 11:00

Sorry, but why does it matter? If it was his residence then there is no capital gain to pay, so let sleeping dogs lie.

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By Paul D Utherone
25th Jan 2016 11:33

Well it might

if as noted it had been converted to individual flats and only lived in one with letting of others.

So far as rental is concerned HMRC can only go back 6 years from the year of death if they assess within 4 years of death

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By Tim Vane
25th Jan 2016 11:40

Yes but the OP says he lived in the whole of the residence.

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Replying to SteveHa:
By Paul D Utherone
25th Jan 2016 12:31

To be fair he actually said

Quote:
he sold a big victorian property that was converted into flats
and
Quote:
Since his purchase in 1983 he lived in the property/part of it.
so it is a possibility that CGT would be relevant.
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Replying to Justin Bryant:
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By richard10002
29th Jan 2016 13:00

Correct. In fact, it's not a possibility, it's a certainty. I am trying to find out how it works, before my accountant approaches HMRC. I posted here and on UK business because I wasnt particularly happy with my accountants one line answers which actually suggest that I do the things that I thought/think he should be able to do.

Thanks for the reply.

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By cheekychappy
25th Jan 2016 11:46

Saving the estate accountancy fees may well turn out to be a false economy.

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By Cloudcounter
25th Jan 2016 12:07

Already asked this question

on UK Business Forums.  Obviously didn't like the answers

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Replying to lionofludesch:
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By Anne Robinson
25th Jan 2016 13:10

Done to death on that forum

Cloudcounter wrote:

on UK Business Forums.  Obviously didn't like the answers


as above
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By cheekychappy
25th Jan 2016 12:15

Maybe the contributors on that forum were not very good?

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By Andp
25th Jan 2016 12:39

From what I understand of your post , as executor you are concerned about the deceased's accurate disclosure of rental profits and capital gains tax on his historic tax returns . And if it is concluded there are "gaps" - you would like to inform HMRC before they knock on your door ?

Please confirm my understanding is correct.

I am pleased to hear you have appointed a firm of accountants. DO NOT DIY ANYTHING. All you have to do is dig out paperwork and forward it to your accountants

Did your friend DIY his tax returns or did he use an accountant ? His agent's details should be disclosed with in the tax returns you have. Trace his old agent and ask them for missing tax returns.

For your agent to gain authority - obtain form 64-8. insert your name and  sign off as executor, insert deceased name and their unique tax reference and NIC number. Your agent fills in the rest and submits it to HMRC.

I think you need to meet your agent and spell out what your concerns are. They will assess the magnitude of your concerns and quote you accordingly.

Avoiding sleepless nights will come at a cost. Take heed of your agents advice. 

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Replying to Justin Bryant:
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By richard10002
29th Jan 2016 13:29

Your understanding is correct and my reason for posting here and in UK Business is because my accountant has suggested I do something direct with HMRC, whereas I appointed him to keep things at arms length, and to avoid doing or saying something which could compromise either myself as executor, or the estate.

The historic rent situation is resolved. I know for a fact that there has been no rental income since 2007/2008, and the rent in 2007/8 was declared, so whatever went before is not an issue from an income tax point of view but, as I believe, it would help establish the occupancy of the house, thus the residence/letting split, over the years..

I'm pretty sure my friend DIY his returns as there is no mention of an accountant/agent. I am aware of someone who did his accounts in the 1990's, but I only have a first name, and I understand that he has passed away.

I'll find 64-8 and see how it works - surprised/concerned that my agent didnt mention/suggest it.

Once I am reasonably well educated on how things work, I'll be arranging a meeting to discuss things, and the way forward.

I received some helpful replies on UK business, and one in particular, like yours, which helped a lot.

 

Thanks for the comprehensive response - it is truly appreciated, and has actually added something to the info I received on UK business.

 

Cheers,

 

Richard

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By richard10002
27th Feb 2016 13:05

Hi again,

(I've had some good info on UK Business Forums, so am posting here with my latest query, as there may be some differing opinions and suggestions).

I've collected as much info as I think I need now, so will be setting up a meeting with the accountant for late next week.

One thing that I could do with knowing, (or having an idea of), is:

My deceased friend definitely didn't declare his Capital Gain in his 2012/2013 tax return. This could have been careless, on the basis that he thought that, as it was his main residence at the time of sale, he was relieved of CGT... or it could have been deliberate, but not concealed, or it could have been deliberate and concealed.

As executor, I am definitely going to declare the Capital Gain unprompted, and am on the verge of doing so.

My question is, are HMRC likely to base the penalty on their interpretation of the actions of the deceased, or on my actions as executor? Or is there no way of knowing until they impose it?

I've had a read of this case, which provides quite a bit of info of some of the principles involved:

Usher and Another, (Perkins) - and - HMRC 22nd January 2016

www.bailii.org/uk/cases/UKFTT/TC/2016/TC04849.html 

I will also be discussing the possibility of buying in some tax advisor expertise such as Mike Downs of RSM, or his department - I'm hoping this approach will be welcomed by my current accountant, rather than resisted.

Many thanks for any input.

 

Richard

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By Paul D Utherone
27th Feb 2016 13:52

It remains a moot point whether there is any CGT liability

If the property was converted into individual flats with no connections & separate entrances then there might be CGT to pay. Even then it could well be that most of any gain was covered by PPR - see HERE

If instead it was a single property that he used as his main residence with the brief lets that were potentially Rent A Room then there's no CGT as it's all exempt as PPR

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By richard10002
27th Feb 2016 18:41

Thanks Paul,

There is always the chance that flitting around the government tax manuals could reveal a tax reducing solution, so your reference is welcomed, however:

He bought the property with kitchens and bathrooms already cobbled out of it to provide 5 separate lettable units, all with their own entrance off communal hall stairs and landings... so he expended nothing in "creating the gain". I think his letting of these units was on a kind of "ad hoc" basis, generally to friends in need, or friends of friends, but I dont think it could have been called brief. It was certainly regular between 1983 and 2,000 and, thereafter, there was about a 9 month period from late early 2007, where he let one of the parts to some friends who were between homes.

Having said that, apart from the fact that almost anything can be sold, provided there is a willing buyer, I could argue that these lettable units couldnt be sold separately, but nor could they be considered as merely renting a room/s. I am an estate agent, so have some experience in how such a property could be described - but am no expert on tax.

Based on my experience, along with that of a solicitors free half hour of advice, and my accountants advice to date, I have pretty much concluded that some CGT is/was due. I am thinking that, as long as HMRC accept what I/we put forward, with relation to the part PPR periods, and wholly PPR periods, the amount before interest and penalties will be just short of £50,000. Interest would be at 3% for about 3.5 years, and I am hoping the penalty will be 30% rather than 100%..... hence the latest question.

 

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By richard10002
03rd Mar 2016 21:26

For completeness, my accountant produced this today:

 

"

EM1395 - Human Rights Act: Deceased Taxpayers

Where a taxpayer has died, you must not impose a penalty on the personal representatives of the deceased taxpayer for offences committed by the deceased before the date of death.

TMA70/S100A(1) allowed us to do this until it was repealed in Finance Act 2007 because it was not compatible with the Human Rights Act (HRA)."

 

So no penalties!!

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