Death And The Taxman....

[DangerUXD]

If someone dies and owes the tax man, not IHT but normal income tax for example, no doubt that comes out of the estate but if the estate is exhausted can the tax man go after relatives next of kin etc. I donlt think so but someone I know says a relative is being chased for the tax of a dead man. Can you settle an argument thanks.

[hc4361]

It could happen if the deceased gave all his assets to his relative before his death with the intention of avoiding care fees, income tax or debt.

[anniebird]

The estate must pay firstly the costs of burial/cremation and then all other debts before the balance is distributed to the beneficiaries. If there is only enough for the funeral the no-one else gets anything. If the surplus is not enough to cover all other debts then it is normally shared in ratio to the debt amount so that each debtor gets the same percentage. The beneficiaries would be left with nothing and the debts would be written off. No-one can chase the relatives for debts of the deceased unless they were a party to the debt or they obtain money/goods without the debts being settled.

[Buenchico]

As Hc4361 indicates, HMRC would apply the'7 year rule' (which applies to IHT) to other tax debts if it seemed that that the value of the estate had been diminished through gifts made within that period so that there were insufficient funds to meet the tax bill.

[heathfield]

With no money in the estate, tax due would have to be paid through the sale of any assets the deceased owned. The relatives do not have to pay out of their own pockets See section 18 here...

http://www.hmrc.gov.uk/menus/guidance-bereavement.pdf

[themas]

Buenchico - I've never come across what you say. I know about the IHT 7 year rule but had no idea it applied to other tax debts. Can you give me the legal basis for this please?

[DangerUXD]

can we ignore the whole IHT game for the benefit of this discussion. Say I had 0 estate but owed the tax man £1000 as I'm self employed. If I popped it would they go after my wife/kids etc fro the tax?

[arwyn]

In my Husbands case NO. They asked was there an estate I said no and that was the end of it..

[factor-fiction]

DangerUXD- if the estate has absolutely no assets then HMRC will get nothing from it. The family won't have to pay- they don't owe the tax man this money

[factor-fiction]

If you had a wife and family questions could be asked about what did happen to his property- did he have a share in the house, did he have any clothes or assets such as a car that could be sold

[FredPuli43]

No. The relatives are not liable because they are relatives or beneficiaries. The income tax debt is payable out of the deceased's estate. If there's no money then the debt can't be paid.

Your friend's relative may think that they are being pursued personally because money bequeathed to them may be subject to inheritance tax when they receive it; in the absence of any provision in the will that gifts are to be free of tax, that is that the estate pays any tax and the beneficiary gets the full amount, that's what happens

[Peter Pedant]

.

You may have been influenced by a Readers Digest story really years ago - where the widow takes on the deceased husband's debts

but it is not the case now. I think the story you tell has got garbled - clarify with the fella you know. Your fren' may be saying there is nothing in the estate because it has all been distributed. - or the estate wasnt zero and he just didnt want to pay it (who does ?)

We paid two years tax after my father's death (1972) because he had gone on a tax holiday in his final illness - but his estate wasnt zero.

[DangerUXD]

as I though thanks all