Estates: is a tax return needed?

When dealing with the administration of an estate, it is important to consider whether there may be a requirement to complete a tax return for the administration period on behalf of the executors. The considerations are:

• Is the value of the estate more than £2.5m?
• Do the proceeds of assets (including a house) sold by the personal representative exceed £250,000?
• Does the total income tax and capital gains tax liability amount to £10,000 or more?

If the answer is YES to ANY of these questions, the executors will be required to notify HMRC of the requirement for a tax return. The tax return will fall into the self assessment regime and the usual submission deadlines will apply. The onus is on the executors to ensure that they submit a return when required, and penalties and surcharges may be charged for late submission of tax returns.

If a tax return is not required under the above rules but tax is payable on the income or gains of the estate, the tax position can be dealt with on a more informal basis.