Remittance from beyond the grave?

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23 April 2010

Section 832 of the Income Tax (Trading and Other Income) Act 2005 imposes a tax charge where an individual is resident in a tax year and Relevant Foreign Income (“RFI”) is remitted to the UK.

This could produce a somewhat odd situation if an individual dies within the tax year (say on 7 April) as it is technically possible for other family members  (so called "relevant persons") to remit something to the UK later in the same tax year, thereby creating an inadvertent remittance by the person who has died.

Under the old rules, it was only remittances by the individual him/herself that were covered. The tax burden would of course be left to the executors to pay.

Fortunately in correspondence we have had with HMRC, they have confirmed that the RFI of an individual that arose before his or her death but which is brought into the UK after his or her death will not be regarded as taxable remittance.

The correspondence goes on to indicate that there may be some limited circumstances where the RFI may be taxable. For instance, if payment is made after death for services provided for the benefit of the individual in the UK prior to death. This may be via a pre-established direct debit of electronic transfer payment or where the personal representatives are effectively discharging a pre-death liability. These occurrences are expected to be relatively exceptional.

Although, there is technically still the possibility of an income tax charge to the deceased in respect of RFI, HMRC has indicated that it hopes that its officers and advisors will continue to take a pragmatic approach in such circumstances.

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