A Lesson About Knowing The Importance Of Your Responsibility As A Personal Representative

The question of whether individuals understand the personal liability they face as executors or personal representative with regards to an estate, was bought into focus in the case of  Glyne T Harris as Personal Representative of Helena Norma McDonald
(Deceased) [2018] UKFTT 204

Facts

On 12 June 2013, Mr Harris was appointed the personal representative of the late Helena McDonald. In April 2013, prior to the appointment, Mr Harris filed an IHT400 with HMRC. HMRC opened an enquiry in April 2014 and in October 2015 issued an inheritance tax determination on the basis that inheritance tax of £341,278.76 was payable. Mr Harris requested a review, and the outcome was advised in a letter dated 20 July 2016.

Issues

Mr Harris did not have the money available to pay the inheritance tax because he had given some if not  all of the estate funds to a Mr Harewood, brother of the deceased and a beneficiary of the estate. Mr Harris did so on the understanding that Mr Harewood  would pay the estate’s bill and taxes, however Mr Harewood did not pay the outstanding inheritance tax.

The issue concerns the liability of personal representatives for inheritance tax. 
Mr Harris appealed the conclusion of HMRC’s review.  HMRC applied for the appeal to be struck out on the grounds that it has no reasonable prospect of success.

The IHTA is clear on a) the requirement to deliver an IHT return and pay any inheritance tax due before the grant of representation is issued (section 216 IHTA) and b) the personal liability of representatives for inheritance tax on any deemed transfer on death ( section 200 IHTA).

Decision

The appeal was found to have no reasonable prospect of success and was struck out. The conclusion was that:

·      the personal representative of the deceased, in this case Mr. Harris, has the obligation to account for any inheritance tax arising in respect of the transfer on death.

·      It is not a defence that Mr Harris may have given the assets of the estate to a beneficiary on the basis that the beneficiary would be responsible for paying inheritance tax

·      it is not a defence that Mr Harris was ignorant of his obligations as a personal representative to pay the tax that is owed.

Significance 

Personal representatives are liable for inheritance tax that arises and is required to deliver and pay any inheritance tax that is due. Mr Harris has to pay the £341,278.76 inheritance tax due and any interest that accrues. 

Mr Harris appears to have either trusted or believed that Mr Harewood would pay the estate bills, but in reality Mr Harris had not discharged his duty as a personal representative of the estate in respect of the requirements under the IHTA.

Lesson: seek the services of a suitably qualified solicitor to ensure that you are carrying out your obligations correctly and in particular where IHTA may apply.

Beverley Beckford
Attorney-At-Law, Barrister
February 2025