I have an Estate - Assets comprised:-
House 495k
ISA Investments 400k
NSI Bonds 50k
Chattels 15k
Banks & B Socs 400k
Inland Revenue say:-
“you must report tax owed in the administration period simply by writing to HMRC (known as ‘informal arrangements’) if all of the following apply:
• the estate was valued at less than £2.5 million when the person died
• the total Income Tax and Capital Gains Tax due is less than £10,000
• you did not sell more than £500,000 worth of assets in any single tax year during the administration period”
Which assets are “sold” - surely the Bank & Build Socs are not? NSI Bonds? ISA accounts in Tax Free wrapper?
I suggest that the word “sold” is seeking to identify CGT disposals and is “Oi, geezer!” code for the technical term, so directed at the mythical passenger on the Clapham Omnibus (with or without Oyster Card). I would follow the law: ask what does the TMA 1970 ordain should be reported and only report that. HMRC directions which conflict with that are believed to be the law only by themselves and by the gullible or easily intimidated, though I have every sympathy for the last two.
I have always assumed that “sold” is intended to refer to disposals for CGT purposes.
One point I would mention, though, is that I have been advised by HMRC that when considering the £500,000 limit, you must include assets held in an ISA, even though in most cases any gains on those assets will not now be subject to CGT. In my case the only substantial asset was an ISA, but there was a modest shareholding outside the ISA which produced dividends during the administration period. The £100 de minimis tax figure does not currently apply to dividend income so this meant we had to submit a formal tax return for a £65 tax bill.
I had cause to consider this not too long ago and found the answer in the manuals at TSEM7410 which says “the proceeds of assets, whether those assets are chargeable or not ,sold in any one tax year are less than £500,000”
For the avoidance of doubt, I assume you mean that you wrote to HMRC to tell them that the estate owed £65 in tax (ie the letter being the exors’ notice under s 7 TMA 1970) and HMRC responded by issuing a notice to file under s 8. That is to say you didn’t crate a record on the TRS.
I’m surprised that HMRC would issue an NTF for the sake of £65, they must have bigger fish to fry.
I am about to issue a reminder to HMRC about my letter of 3 August asking for their legal authority to use TRS to register any estate. I imagine it is either in the " Too Hard" tray or the “Don’t Care” tray or perhaps just languishing in my Personal Dossier.
In answer to Duncan’s query, no I did not write to HMRC first asking if they wanted a tax return for such a small amount. I asked the question about the ISA and the £500k limit, and on receiving their reply, followed the process of registering the estate as a complex estate on the TRS. In my experience these days HMRC tend to stick to the strict rules on whether an account or return is required, even if there is no tax at stake.