Penalties for deceased persons have been an area of contention recently.  For those individuals who die not having their tax affairs in order, HM Revenue & Customs are able to go back and enquire into an individual’s tax affairs for the 6 tax years prior to the date of the deceased’s death, in the case of careless or deliberate understatement of tax.
However, HM Revenue & Customs are no longer allowed to apply penalties for deceased persons in relation to the tax affairs of the 6 tax years preceding the individual’s death as it is deemed to be a contravention of an individual’s human rights.
Eaves and Co have been able to apply this to a recent client situation where an individual had died not disclosing trading income to HM Revenue & Customs. This had led to undisclosed profits resulting in unpaid tax for the 6 years prior to their death. This would have incurred significant penalties for non-disclosure without the case law findings against the application of penalties.

3 thoughts on “Penalties for deceased persons in prior years contradicts human rights | IHT Planning

  1. Thank you for this penalties information. I assume that this would also apply to a penalty for the late filing of a deceased’s Tax Return. Please clarify.
    For example, a TR2012 is required for filing by 31 January 2013. The deceased dies in December 2002 not having filed that TR. The executors cannot collate the required info by 31 January 2013. They file that TR in say March 2013.

  2. Sreedhar Krishna Murthy says:

    I am not very sure of the provision in the Law under which a penalty is imposed on a dead person in respect tax defaults. In most advanced tax regimes, which follow British Law or their law is based on UK Tax Law, penalty is a levy which is “personal in nature” and hence it is levied on that Individual, unlike in the case of a corporate entity. or a partnership firm. Penalty is not an automataic levy, and the Tax authority has to exercise his judgement to show that the Individual or the person responsible for submitting the Return committed default “intentionally”. There is a mental element,called ” mensrea” that needs to b eetablished before deciding to levy penlty. Penalty for delay in filing the Tax return could be considered as routine default for which “menrea” need not be proved. However, in respect of failure to disclose correct and complete income in the Tax return, “mensrea” needed to be proved. The state of mind of the “deceased person” cannot be established, when he filed the Return. Perhaps,on this principle, the Tax penalty, for which a “conscious”/ “mental” element neds to be established, in my view, it would be diffult to justify levy of penalty in respect of a dead person/ individal.

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