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Death and taxes

What to do when a tax payer dies ?

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes — Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789

10th August 2020

Step 1: Use Government’s Tell Us Once (TUO) Service:
Via this service you inform a number of government organisations including HMRC about the death. Please note you will need a lot of information before you use this service. So check there website before calling – click here.


Step 2: Ascertain whether there was a Will?
Tax affairs of the deceased are handled by the Personal Representatives (PR).In case a Will is present, PRs are called Executors. In its absence they are called Administrators.

Step 3: Use HMRC Bereavement guide.

Step 4: Do PRs need to apply for Probate?
See basic guide here. Probate is not required all cases

Step 5: HMRC will send a tax return within 3 months with instructions. Submission back by post. No action needs to be taken unless the tax return arrives with instructions.

Sources:
1 – ICAEW Website
2 – Citizen Advice
3 – Gov.uk – After a death

18th September 2020

Two Tax returns received from HMRC:

Tax year 2019-20File in 90 days
Period 6th April 2020 till the date of death.File by 31st Oct 2021

Please note these tax returns do not have tax computation sections, HMRC will compute the tax payable and send the bill.

Bonus:

Agent authorisation for deceased taxpayers made easier : see ICAEW article.

Please note allowances like Married Couple’s allowance, Marriage Allowance and Blind Person’s Allowance can be transferred from the person who died to the surviving partner in the year of death. Source : Tax Adviser Magazine

HMRC Contacts:

  1. Self assessment forms ordering (paper returns) – 0300 200 3610. Incase there is delay in getting the forms, please call this line. Agents can call without Agent authorisation in place but this team can only re-issue the forms if death is noted in HMRC systems.
  2. Bereavement and deceased estate Helpline on 0300 322 9620. Agents should also use this helpline for deceased estates in preference to the Agent Dedicated Line (ADL) to speak to the right advisers first time. [Agent update 122]

Taxation of Indian Partnership profits in UK

If a UK tax resident is a partner in an overseas firm, they will be liable to UK income tax on their share of profits.1

Difference between UK and Indian partnership

UKIndia
In UK, partnership pays no tax, partners pay tax on their share of profit.2  In India, partnership pays tax and partners share is exempt income u/s 10(2A) of Indian Income Tax Act.4
Partners salary and/or interest not allowed as deduction for partnership profits.3Any salary and/or interest paid to partners is allowed as a deduction but then taxable in the hands of the partners. 4

Similarities between UK and Indian partnership

UKIndia
Qualifying interest. Monies borrowed to buy interest in a partnership is allowable deduction in partners tax return.5Same in India.  

Computation of taxable profits

  • Taxable profits of the partnership are computed in a manner as if the partnership itself was UK resident3. This means taxable profit and loss of the Indian partnership will need to be re-computed9 as per UK rules.
  • See Book – Alan Melville Taxation for computation examples.
  • FTCR available to UK resident partner on tax paid by the foreign partnership overseas6 . Be aware you will need to add it manually, software does not pick this up automatically.

  • NIC Both Class 2 and Class 4 not payable as trade carried wholly outside the UK.8 Be aware you will need to manually remove it, software does not pick this up automatically.
  • Basis period should not be an issue as most of the firms in India keep their accounting period aligned to the fiscal year.
  • Tax return: for both UK and foreign partnership we need to use form SA104. Plus, use SA106 box 2 to fill in FTCR manually computed.

Notes:
1. RDR1 point 6.8 and 6.63
2. Tolley Income tax 51.1
3. Tolley Income tax 51.4
4. Direct taxes by VK Singhania para 314
5. Tolley Income tax 41.10
6. INTM335500 , DTAA Article 4 1 b and 24 1 a and Tolley Ray – Partnership Chapter 16 & 17.
7. Loss relief for partners – ICAEW Textbook Pg 206
8. Re Class 4 see SSCBA 1992, Section 15 (1) c ; re Class 2 see SSCBA 1992 , Section 11 (3)
9. Besides adding back salary and interest, adjustments as per ICAEW Textbook Pg 124 and 125. See also Tolley Tax Computations.
10. BIM82000

To know more about taxation of foreign income in the UK read our Worldwide Disclosure blog.

How to amend Companies house accounts?

Everybody makes mistakes, so just in case you made one while filing accounts with Companies house information given below will be helpful.

Amended accounts can be filed in paper format by sending them via post to Companies house or via software.

Paper process given below:

They should have the word “Amended” on the first page, conspicuously declared.

You must clearly say in your new accounts that they:

  • replace the original accounts
  • are now the statutory accounts
  • are prepared as they were at the date of the original accounts

Please note both original and amended accounts will remain at Companies house i.e. anyone like a supplier, lender or HMRC will have access to both set of accounts.

Sometimes you may wish to amend only a part of the accounts, for example in case you missed to add a note to accounts or incorrect information was mentioned in a note. In that case you can only send a note stating clearly what has changed along with a copy of the original accounts. This is a better idea than sending a full set of amended accounts as it will save effort on the part of the future reader to compare the two accounts to find the amendment.

Where to send the documents?

Companies registered in England and Wales have to send their accounts to Cardiff.

Companies House
Crown Way
Cardiff CF14 3UZ

Lastly, Companies house can also send an acknowledgement of receipt of documents, if you enclose a stamped self-addressed envelope and a copy of covering letter.

Source: Gov.uk link

Tronc Guidance

A summary of new rules for Tronc.

Summary

  • Coming in force from 1st October 2024
  • All tips (without any kind of deduction) to be passed to workers (agency workers included) by end of following month.
  • Businesses required to have a written tipping policy to ensure fairness and transparency.
  • Code or Act does not affect taxation of tips.
  • Cash tips (if no control exercised by employer) are out of scope of Tipping Act and Code.
  • Tips will be distributed in the restaurant where collected. One restaurant’s tips cannot be paid to staff of other restaurant.

Tipping policy – Factors to Consider

Businesses need to prepare and distribute the tipping policy to all staff members including agency workers. Tipping policy needs to inform staff the basis of tips allocation. Basis can be on several factors, see example list below:

a. Type of role/work e.g. distribution between front of house and backroom workers

b. Basic pay (and how workers are engaged)

c. Hours worked during period when tips are received

d. Individual and/or team performance

e. Seniority/level of responsibility

f. Length of time served with the employer

g. Customer intention

Employers should consult with workers to seek broad agreement in the workplace that the system of allocation of tips is fair, reasonable and clear.

Records

Workers can ask for past 3 years records. Employer will need to provide total tips collected during their employment and amount allocated to the worker making the request but not the specific amounts paid to other workers.

If a worker does not wish to participate in Tronc, Tronc master should get this in writing.

Action:

Restaurants should start preparing a written Tronc policy.