Income Tax Bill (in Dispute) That Can't be Paid, Tax Payer Near Death, What happens Now?

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Asking for a friend. Her husband has cancer and is near death. He has been sent a tax bill from 2012 for £25,000, this is in dispute though. They have no money, a few hundred pounds in savings, no property together and live in a rented house. The husband does own a 20% share in his sons house (not her son), this is probably worth about £25,000. The husbands son lives in the house with his partner and baby. I don't know if he would have the money to buy out his dads share.
Three questions.

1. The husband is going to die very soon, almost certainly within the month. How will this tax bill be resolved then? The husbands disputes it is owed, it was from a time he was working abroad and paying tax abroad.
2. Would HMRC force a sale of the son's house to claim the £25,000 or could the son slowly pay this money back to HMRC.
3. My friend works full time, but in a low paid admin job, I would guess she earns between 16-20 thousand pounds a year. She is very worried that HMRC will make her pay her husbands tax bill from her wages after he dies (she has no/very little savings). I have assured her that this won't happen but she is still very worried. I am right about this last point aren't I?

Thank you in advance if anybody knows the answer to these questions.

If tax bill / dispute is not sorted until after the death then the debt / dispute would pass to the deceased estate. The executors would then have to wait for the dispute to be sorted out before the estate can be settled.

If the tax bill has to be paid from the estate, there would need to be sufficient assets in the estate. It sounds like the husbands share of the sons house would be sufficient. Whether or not hmrc could force the sale of the house I don't know. I think it would depend on the basis of the ownership of the house.

The wife is not responsible for her husbands debts. Only he or his estate is. If if there are joint assets then half of these would be the husbands / husbands estate. But hmrc will not pursue the wife.

Thank you so much. I have tried the speak to HMRC about this for her but with no luck/answers.

I would try to get some advise from CAB.

HMRC won't discuss the case with you or his wife unless the appropriate authorisation is in place. When you say it's in dispute, what do you mean exactly (chartered tax advisor here)? I'm assuming that he remained tax resident in the U.K. whilst working abroad, is that right? Have they got a tax advisor or accountant involved?

HMRC won't discuss the case with you or his wife unless the appropriate authorisation is in place.

I'm pretty sure this isn't in place, is it worth the wife trying to do this? What will happen when he dies?

When you say it's in dispute, what do you mean exactly

I don't know. His wife just tells me HMRC wrote to him saying he owes this much, he says he doesn't but hasn't written back or done anything about it because of his condition. He couldn't respond now, he's far to ill. It relates to 2012 when he says he was working abroad, paying tax abroad. I don't thing he has actually done anything to challenge HMRC on this.

*I'm assuming that he remained tax resident in the U.K. whilst working abroad, is that right?^

I don't know where he was tax resident. His wife is foreign, outside of EU, she came to the UK about six years ago to live here, if that might be a clue to his tax residence. Husband worked most of his life outside the UK.

Have they got a tax advisor or accountant involved?

No

The thing the wife is most worried about is having to pay the tax bill out of her monthly wage after he's died. I don't thing she's that fussed about any inheritance she might lose.

Sorry I was rushing out. Thank you very much for replying.

What a sad time.

You've had great advice.

One unanswered question of yours, is whether HMRC would talk to your friend after her husband's death. The answer is yes - she needs to ring to tell them that she's his personal representative when the time comes. They will then liaise with her. The bill will need to be paid from the estate so she'll have to talk to them about it. If there's not enough money in the estate your friend would not be pursued as PP have said. They might put a charge on his share of the son's property (I don't know for sure) but they definitely wouldn't force a sale.

Meanwhile I think your friend should call them. They won't discuss his affairs but they will write a note on his record summarising the position. She should make it clear that it will be disputed and on what grounds. She should then obtain proof from the foreign tax authority that he paid tax there during that time - she could type a letter to them and get him to sign it.

Legally I'm not sure what will happen, but I'd say it's wise to have as many facts from your friend's DH as possible, dates, exactly where he worked, amounts earned - that way his legal representative can make further enquiries and get proof of residence, income, tax paid. Either before or after death, if there if any paperwork (contracts, pay slips, proof of residence for the period) comes to light this should not be destroyed as it could be evidence to help clarify the position.

I'm sure they won't call on her to pay the debt out of her income as it's his debt. However, if he has any joint accounts or owns property with his wife then they could call on that.

The Inland Revenue will want their money (if there's enough in the estate) but at the same time will be aware this is going to take a while to sort out.

Thank you all for the advice. I am still reading and passing everything on to my friend.

Why doesnt he just transfer his share of the house over to his son before he dies. Will make it harder for HMRC to get at it.

Yes, it may be not a penny is due by the way and the best way to prove that is obtain limited information from the dying man eg where are his income records and records of tax he paid abroad from that time? That might answer the issue.

By the way make sure she knows if the house owned with the father is owned as joint tenants or tenants in common. if joint tenants I think the 20% might entirely go to the son on death automatically not the wife.

Also if he hasn't made a will make one now because estates are much more difficult to deal with without one.

Southall that would be a gift and would be unpicked if he's going to die shortly.

As a pp said they need to look at whether the dh's share of the property forms a part of his estate. If it does not and if the estate is exhausted after the cost of the funeral, it will not have to be repaid.
If the property share does form a part of the estate; HMRC would probably offer instalments, but may want to place a charge on the property until repaid. I do not think they would force sale unless they had no communication & no other options.
I work in a similar field for a LA

We have had to navigate tax from not living in the UK just this year.
The tax resident bit is totally dependant on how many days a year you stay in the UK. You also need to live out of the UK for at least one full tax year (so DH moved here June 2015, if we leave before April 2017 all earnings will be taxed as he hasn't been out of the UK for a full tax year).
You also need to know if there is a reciprocal tax agreement with the country he was living in.
It sounds like he may not be capable of resolving this now. But could his wife pull together how many days he was in the UK in the disputed year, and write to HMRC stating he was living and working abroad in X country, paying taxes (proof included), only spent Y days in the UK, and hence doesn't believe tax is due. Husband to then sign.

To be fair to HMRC, if the demand was just ignored, it isn't going to dissapear. They need telling the tax isn't due.
I'm sorry if this proposal is totally unachievable due to the current situation.

My friend's husband died this morning. I'm away for the weekend but will see her tomorrow. I doubt we'll be taking tax tomorrow though. I will try to find out where they are up to on this as soon as I can and help her navigate this as best I can.

I'm sorry to hear that

Just make sure they don't pay something that isn't due (although do remember any debts (and any tax refunds of course also) which are due continue and mortgage obligations after deaths.

Actually the question of whether the property is held as joint tenants with suon (which means he gets the 20% automatically on death) or tenants in common in which case the 20% will go with whatever the will (or if no will the law) says is probably even more important than the HMRC issue.

Ps and of course I am very very sorry to hear about the death.

I don't think my friend cares about any inheritance from him so would be fine if her husband's son inherited the 20% share in the house. It may be a cause of conflict because her husband also has another adult son. The brother of the son who owns the house, they are a year or two apart in age. He will get nothing if his brother inherited the house share. My friend also has a son with her husband, he's only a child though, he would also receive nothing.

If the house is held as joint tenants, the son just inherits the house, that means HMRC can't try to claim money from it? If there is no other money in the estate will she just have to prove that or will my friend first have to fight the tax case before HMRC will look at where any money will come from to pay this bill?

Thank you all for the advice. As I said I am reading and passing on even if I'm slow replying.

Actually, one other thing. I think (but don't know) he had and was receiving a private pension. Might this then go to the wife and the on to HMRC through her?

Such a sad situation, and very kind of a relative outsider, who may be less emotionally tied up, to try to help.

You would need to contact the provider of the private pension (with a letter to provide suitable authority to do so...) to establish whether any widow's pension is due. That would usually be partof the estate, but it all depends on how it is set up.