B P Collins' private client lawyers have identified a problem facing lay executors following the HMRC’s requirement to formally register trusts and complex estates online.
As they don't have access to expert advice, a lay executor may be unsure of their obligations once their inheritance becomes a complex estate and if the deadline is missed, they could end up paying the HMRC up to 5% of the tax liability or a £300 penalty.
When must they register?
- If someone inherits an estate e.g. a property worth £472,000 (the average house price in London, ONS) in one particular tax year, this would not require registration because it is below the HMRC’s £500k threshold. However, this inheritance may become a complex estate if the executor chooses to sell the property say in 4 years’ time, at a price that matches the current growth rate of 1.54% as the asset would then exceed the HMRC’s £500,000 threshold to register.
- If an executor has a new complex estate which incurs tax liabilities in excess of £10,000 during the period of administration, they will need to register online with HMRC.
What are the deadlines?
Any existing trusts or estates needed to be registered by 5 October 2017 and any amendments need to be made by 5 October 2018. The ongoing deadline for any new trusts or complex estates is 31 January of the year following the death so the next deadline is 31 January 2019.