Following the case of Harris v HMRC (2018) UK FTT there was a valuable reminder to Executors and administrators (also called Personal Representatives) that, with limited exceptions, they are personally liable for settlement of an estate’s inheritance tax liability (section 200 IHT Act 1984)
Mr Harris the personal representative under a grant of letters of administration (the legal document authorizing his appointment) paid a heavy price for dealing with the administration of an estate in person without seeking legal advice.
Mr Harris was the personal representative (PR) for the estate of the late Helena McDonald. During the course of the administration Mr Harris paid a substantial amount of estate funds to the deceased’s brother, a beneficiary of the estate, with the agreement that he would settle the estate’s liabilities including the inheritance tax (IHT). Unfortunately for Mr Harris the beneficiary travelled to Barbados, where in lived, without settling the taxes due on the estate and Mr Harris has since been unable to re-establish contact.
Mr Harris appealed against HMRC’s decision on the basis that he no longer had sufficient estate funds to settle the outstanding liability but The First-tier Tax Tribunal (FTT) has held that Mr Harris is responsible for settlement of the tax liability a sum in excess of £340,000.
This case highlights the importance for PR’s to ensure that they retain sufficient estate funds to settle all liabilities and tax before making any distributions to beneficiaries.
There is no defence for a PR to be ignorant of their statutory obligations nor is it a defence that the assets have already been distributed, albeit with the agreement that the beneficiary will settle the tax liability.
We have a strong team of probate lawyers here at Beers and are happy to help with all elements of an administration whether it is just providing advice on the procedure, completing the necessary steps to obtain the grant or dealing with the estate in full.
Please call us on 01548 857000.