The case of Harris v HMRC 2018 is a valuable reminder that personal representatives can be held liable for their actions.

In this case, Mr Harris was the lay personal representative of the late Helena McDonald. The estate was substantial and was worth around £1.3 million. The inheritance tax liability was in the region of £340,000.

Although Mr Harris was able to make payments that were immediately due to HMRC, the majority of the estate was tied up in land and so not all of the tax had to be paid straight away.   Mr Harris agreed to transfer the estate to the deceased’s brother, who was the sole beneficiary, on the understanding that the brother would pay the estate’s bills, including the remaining inheritance tax bill.

Unfortunately, the deceased’s brother left for Barbados, without having paid the inheritance tax bill and he has not been heard of since.

Mr Harris tried to appeal his liability on the basis that he no longer possessed the estate funds to pay the tax liability but his appeal was struck out at a first tier tribunal. It was held that Mr Harris’s agreement with the beneficiary was irrelevant and that Mr Harris continued to be personally liable for any outstanding inheritance tax.

When should inheritance tax be paid?

Inheritance tax must be paid by the end of the sixth month after the person’s death. If the tax is not paid within this timeframe then interest will begin to accrue.

In some situations, tax can be paid in instalments. For example, if the estate is made up of property then the personal representatives can choose to pay the tax in instalments over a ten-year period. However, interest will still accrue on the outstanding amount.

What other duties does a personal representative have?

The main duties of a personal representative include:

  • Paying all debts and expenses
  • Paying all taxes due – including income tax, inheritance tax and sometimes capital gains tax
  • Declaring any gifts made by the deceased during their lifetime
  • Keeping the assets safe and insured
  • Informing all utility suppliers
  • Contacting pension providers
  • Organising the clearance of any property
  • Signing all forms and transfers
  • Declaring information to be true and correct
  • Producing a set of accounts for the beneficiaries
  • Providing the beneficiaries with the appropriate Statements of Income
  • Pay interest on legacies if not paid after one year
  • Dealing with the estate in a timely manner
  • Setting up any trusts that are included in the Will
  • Agreeing legal costs
  • Dealing with any claims made against the estate

Conclusion

Had Mr Harris obtained legal advice he would undoubtedly have been advised against transferring the assets before the inheritance tax liability had been fully discharged.

We at Timms are often instructed by personal representatives to provide advice in respect of the administration of estates. Our friendly team have almost over 70 years of collective experience and can provide with you with as much, or as little, advice as you require on either a fixed fee or hourly rate basis.

For advice regarding Wills, Probate, Powers of Attorney or Trusts, please telephone me on 01332 364436 or e-mail me at j.robinson@timms-law.com.