Last week we looked at the Revenue new clearance procedure focusing particularly on Section A of the Due Diligence form. That section is just principally introductory information while the meatier information is contained in Section B. We go through each of the questions in Section B in this blog. Yes, there is detail, yes it is onerous, but in the vast majority of cases, with some early preparation, the procedure will assist practitioners in streamlining the probate process.

The first question on Section B, kicks off with a broad sweeping question and we look at this and the other first half of questions in this blog below.

Have all returns and payments been filed and paid for all taxheads?

Wow.! That is fairly broadsweeping. For a deceased individual in one sense it is an impossible question to answer. Who knows the tax affairs of any particular individual and their private financial affairs. How far should one go back? In addition to income tax, this will cover every other possible tax. Was the person a sole trader? Is their VAT and employers’ PRSI up to date? Did the deceased receive any taxable gifts or inheritances? What about their LPT? etc etc. So the list will be long.

On the other hand, one must be able to take a reasonable view of these matters. For the vast majority of persons their tax affairs are in order, their income and assets are relatively modest and manageable. However, the question is a broad sweeping burden on any personal representative.

Has a Return of Income and Gains been filed for the year of death?

This is the next question on the form. We looked on the last blog about ways of finding out the income of the deceased. The income can be gleaned from bank statements, social welfare statements, payslips etc. Completing an income tax (Form 11 or Form 12) return will normally be outsourced by a solicitor to the deceased accountant or regular accountant. It appears that all that is required is the filing of the income tax return for the year of death. So that is from 1 Jan to the date of death. It appears that the income tax return does not need to be attached to the clearance request. It would be worth confirming in the submission to Revenue through My Enquiries that the submission has been made.

Are all business activities and income sources reflected in the tax returns submitted in the 4 years to date of death?

Again a difficult question for any per rep. How is a per rep to know whether all business activities and income sources are reflected in previous tax returns? If a deceased had been making tax returns it may be necessary to get access to these and request the assisting accountant to confirm that the current return is consistent with the historic returns.

Are the estate assets and any jointly held assets consistent with known levels of income, inheritances, proceeds of asset disposals?

A very difficult and subjective question. In the vast majority of cases a personal representative will have to make a judgment call on the issue. Further, in the majority of cases it will be relatively obvious if a person has assets consistent with income. However, there can be cases of those individuals with low income who have large cash reserves. This may have arisen out of frugality or savvy investment but a personal representative will be in a difficult position if they do not have a sensible explanation or reason for an obviously apparent mis-match.

Are all assets in the last Will reflected in the estate assets or jointly held assets?

It appears an unusual question, as, any assets not specifically mentioned will be covered by the residue clause. What it appears to be asking, is, is there any specifically important asset or a significant asset not mentioned in the will or not disposed of in the will? Perhaps its focus is on foreign assets? It might also be referring to windfall assets or assets that come to the deceased after making the will. It could also be referring to inheritances received after the will or to be received during the course of administration. Generally however one would have thought that the will would reflect the assets of the deceased.

Further, the question appears to also focus on assets that were mentioned in the will but not now in the Schedule of Assets. So, this will focus on assets that may have been sold or disposed of during the lifetime of the testator. This will, in addition, have to be dealt with as part of the due diligence process.

Are all estate or jointly held assets reflected in the latest Accounts and Balance Sheet of the Deceased

The vast majority of clients will not hold accounts or have a balance sheet and so this question will not be relevant. Further, if a client’s assets are so significant that they need their own set of accounts or if they are running a business, then these accounts will need to be accurate for day to day tax compliance and one would have thought that the answer to this question in the vast majority of cases would be yes.

Where estate or jointly held assets include residential or commercial properties, other than the PPR, was the income generated from each, if any, reflected in the tax returns submitted in the 4 years to the date of death?

Classic fishing exercise by the Revenue. However if anyone ever dealt with clearances and Revenue in estate situations, one would have known that this was a regular hot topic for Revenue in clearances cases. Trying to unearth undeclared rental income is a regular focus of investigation for the Revenue. Again a challenge for any per rep. The per rep in these cases will be relying heavily on the accountant of the deceased or whoever was assisting with tax returns.

On balance this first set of queries appears daunting. However, as I mentioned in my blog last week, the deceased will either have so much assets as to have a person assisting them or so little that the cases will be straightforward. The more challenging cases will be those in the mid way point – those clients who were particularly secretive and had some assets and income. It will be difficult in those cases for a personal representative to give a definitive view. In those cases, all a personal representative can do, is to provide assistance to the solicitor, as honestly and thoroughly as possible.

I hope you find this blog of assistance. I will be conducting two further blogs in this series on the Revenue clearance procedure over the coming weeks.

If you have any queries on probate, will drafting or capacity issues please email me at ckelly@hcalaw.ie