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24th February 2016

Executors liable to pay deceased's income tax themselves

Two executors who accidentally under-declared the deceased's income for his final year, and then distributed the residue of his estate without waiting for HMRC's clearance, have been told if they cannot recover the estate they distributed, they will have to pay the tax from their own pockets.

They must now try to recover the legacies they paid out to beneficiaries, in order to pay the £14,500 of extra tax they now owe HM Revenue & Customs. The general rule is the executors have a personal liability to settle any debts or liability that is properly due and payable from an estate that they are administering in as far as the estate is sufficient to meet that liability, whether the executors have retained sufficient assets to meet the liability in question or not.

This case of Usher & Perkins v HMRC: acts as a warning to executors who choose to act in person without professional advice. They cannot expect any “allowances” to be made by HMRC for inexperience or lack of legal or tax knowledge.

An executor should give hard thought when considering whether not to take professional advice to assist them with the administration of the estate. As shown in this case, a decision not to take professional advice could end up costing the executors dearly.

If you would like Hewitsons to help you administer an estate, please contact Alex Turtle on 01604 463376 or click here to email Alex.

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