Ex­ecu­tor is left on the hook for £340,000 in­her­i­tance tax bill af­ter ben­e­fi­ciary fails to pay

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Peo­ple left to man­age the es­tates of friends and fam­ily could find them­selves fac­ing hefty in­her­i­tance tax bills af­ter a court ruled against a man who mis­tak­enly left him­self to pay off £340,000 in death du­ties. Glyne Har­ris ended up ow­ing the tax­man hun­dreds of thou­sands of pounds af­ter dis­charg­ing the as­sets of an es­tate on what he claims was the un­der­stand­ing that the ben­e­fi­ciary would pay the in­her­i­tance tax (IHT) owed. But the ben­e­fi­ciary left the coun­try for Bar­ba­dos with­out pay­ing the tax bill, leav­ing Mr Har­ris to cover the cost of his mis­take.

Ex­ecu­tors and per­sonal rep­re­sen­ta­tives such as Mr Har­ris are per­son­ally li­able for pay­ing any in­her­i­tance tax due, even if they are not a ben­e­fi­ciary of the es­tate. Mr Har­ris chal­lenged this but his ap­peal was re­jected by a tax tri­bunal.

Al­though in­ci­dents of this scale are rare, ex­perts have warned that many peo­ple are un­aware of their le­gal and fi­nan­cial obli­ga­tions when deal­ing with the es­tates of the de­ceased.

Rachael Grif­fin, of Old Mu­tual Wealth, said: “Many peo­ple take on roles as es­tate ex­ecu­tors be­cause they are a fam­ily mem­ber, but they sim­ply don’t un­der­stand the po­ten­tial im­pli­ca­tions of what they’re do­ing. This case is a stark re­minder of how com­pli­cated this process can be.” Mr Har­ris be­came the per­sonal rep­re­sen­ta­tive of Helena Mc­Don­ald’s es­tate in 2013. As there was no will, Mr Har­ris was ap­pointed by a court and be­came re­spon­si­ble for dis­tribut­ing the as­sets of the es­tate.

He then filed an in­her­i­tance tax re­turn to HM Rev­enue & Cus­toms and paid the ini­tial taxes due. How­ever, as the es­tate in­cluded land, the re­main­ing bal­ance owed to the tax­man did not need to be paid upfront. The ma­jor­ity of Mrs Mc­Don­ald’s £1.2m es­tate was given to a sin­gle ben­e­fi­ciary, on the un­der­stand­ing, Mr Har­ris claimed, that he would set­tle the es­tate’s tax bill.

How­ever, the ben­e­fi­ciary trav­elled to Bar­ba­dos, where he lived, and did not pay the death du­ties owed. Mr Har­ris was un­able to make con­tact with him and was left solely re­spon­si­ble for pay­ing the £341,278.76 owed to HMRC.

Mr Har­ris launched an ap­peal, claim­ing that he no longer had the es­tate’s funds needed to pay the out­stand­ing bill and should not be li­able for it. How­ever, Judge Ni­cholas Alek­sander re­jected this in the tax tri­bunal late last year. De­tails of the rul­ing were re­leased only re­cently.

Judge Alek­sander said: “IHT is clear. It is the per­sonal rep­re­sen­ta­tives of the de­ceased (in this case, Mr Har­ris as ad­min­is­tra­tor) who have the obli­ga­tion to ac­count for any in­her­i­tance tax aris­ing in re­spect of the deemed trans­fer on death.

“It is no de­fence to any in­her­i­tance tax de­ter­mi­na­tion that Mr Har­ris may have trans­ferred the as­sets of the es­tate to a ben­e­fi­ciary on the ba­sis that the ben­e­fi­ciary would be re­spon­si­ble for pay­ment of the in­her­i­tance tax due.

“Nor is it a de­fence that Mr Har­ris was ig­no­rant of his obli­ga­tions, as a per­sonal rep­re­sen­ta­tive, to pay the in­her­i­tance tax ow­ing.”

An es­tate’s ex­ecu­tor is li­able for death du­ties if money is re­leased to heirs be­fore tax is paid, says Adam Wil­liams

This case high­lights the dif­fi­cul­ties faced by es­tate ad­min­is­tra­tors, par­tic­u­larly when there is no will.

Mrs Grif­fin called this a cau­tion­ary tale for oth­ers in this po­si­tion.

“Mr Har­ris was ap­pointed as the per­sonal rep­re­sen­ta­tive and filled in the in­her­i­tance tax forms, but he has made the pay­ments to the ben­e­fi­ciary on the con­di­tion that they would pay the tax due,” she said.

“The ben­e­fi­ciary ap­pears to have dis­ap­peared and Mr Har­ris has been left foot­ing the bill. How­ever, he has no pro­ceeds be­cause he has al­ready passed them on.

“Po­ten­tially the Rev­enue could go af­ter his own per­sonal as­sets. He could have a house which is up for grabs be­cause he has to pay this money. Mr Har­ris is on the hook.”

Suzan­nah Far­nell, a solic­i­tor at Prog­eny Pri­vate Law, said many

Island re­treat: the main ben­e­fi­ciary of the de­ceased’s es­tate left for Bar­ba­dos

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