Advice sought on tax liability of late relative

[McDonagh]

I’ve already asked a question about whether or not probate is always necessary when a will is straightforward, but I have another related query about tax issues. I hope it’s okay to start a new thread, I’m hoping to attract any tax experts out there.

My grandmother died recently and the family is trying to help our grandfather sort out her affairs.

She was self-employed, with her own small business (which ended with her death), and we are completely in the dark about her tax situation.

We know that she paid tax up until a couple of years ago, before she became ill, but how much we just don’t know. She didn’t use an accountant, she looked after everything herself. We have a collection of her P60s but while her business wasn’t particularly profitable it looks to us like her returns were quite small. We simply don’t know if she paid enough tax.

My grandfather is eager for my grandmother’s tax affairs to be completely settled so they don’t arise later on, but neither he nor we really know where to start. She was hopelessly disorganised when it came to keeping financial records so we just don’t know how we can present Revenue, or an accountant, with whatever they need.

Has anyone been in a similar position? What can we do to sort this out?

I stress, we want to settle all my grandmother’s tax obligations, we are not looking for ways to avoid/evade payment, we just don’t know how we can do it and we are concerned that, in the absence of organised financial records, our grandfather will end up with a crippling tax debt. We would be very grateful for any advice, thank you.

 

[pat127]

I’ve already asked a question about whether or not probate is always necessary when a will is straightforward, but I have another related query about tax issues. I hope it’s okay to start a new thread, I’m hoping to attract any tax experts out there.

My grandmother died recently and the family is trying to help our grandfather sort out her affairs.

She was self-employed, with her own small business (which ended with her death), and we are completely in the dark about her tax situation.

We know that she paid tax up until a couple of years ago, before she became ill, but how much we just don’t know. She didn’t use an accountant, she looked after everything herself. We have a collection of her P60s but while her business wasn’t particularly profitable it looks to us like her returns were quite small. We simply don’t know if she paid enough tax.

My grandfather is eager for my grandmother’s tax affairs to be completely settled so they don’t arise later on, but neither he nor we really know where to start. She was hopelessly disorganised when it came to keeping financial records so we just don’t know how we can present Revenue, or an accountant, with whatever they need.

Has anyone been in a similar position? What can we do to sort this out?

I stress, we want to settle all my grandmother’s tax obligations, we are not looking for ways to avoid/evade payment, we just don’t know how we can do it and we are concerned that, in the absence of organised financial records, our grandfather will end up with a crippling tax debt. We would be very grateful for any advice, thank you.

I'm not a tax expert but I've been involved as an Executor is a similar situation. There are 2 aspects that I can see (a) she is known to Revenue and was paying tax up to a couple of years before her death. It can be concluded that Revenue was satisfied with her returns. (b) the business ceased when she died and you cannot find her financial records. If her returns were broadly similar year on year it is highly unlikely that her financial affairs changed radically in the final couple of years, in fact if it was like my situation, a small shop, business actually went down. In the absence of records I suspect that Revenue will accept the logic that her returns would have been about the same and will settle accordingly.

That's only my view but it might stimulate some more informed ideas.

 

[Z100]

I'm not a tax expert but I've been involved as an Executor is a similar situation. There are 2 aspects that I can see (a) she is known to Revenue and was paying tax up to a couple of years before her death. It can be concluded that Revenue was satisfied with her returns. (b) the business ceased when she died and you cannot find her financial records. If her returns were broadly similar year on year it is highly unlikely that her financial affairs changed radically in the final couple of years, in fact if it was like my situation, a small shop, business actually went down. In the absence of records I suspect that Revenue will accept the logic that her returns would have been about the same and will settle accordingly.

That's only my view but it might stimulate some more informed ideas.

Thank you so much for your reply Pat, really appreciate you taking the trouble. Your own experience and suggestions are hugely comforting!

What I should have mentioned in my original post, and what is causing my grandfather most concern in all of this, is that my grandmother left a much larger amount of money in several bank and building society accounts than he ever expected.

I'm not sure of the final amount, but I think it comes to about E150,000. A lot of that is explained by sensible saving, going back years, and sundry small investments, but he is concerned that a sizeable percentage of it is earnings from my grandmother's business - and that if she saved that amount she couldn't have been paying what she should have been paying in tax.

He could be wrong, she might well have paid what was due in tax, but that E150,000 figure is what has him worried. And, as I said, he just doesn't know where to start with it all.

 

[pat127]

I'm not sure of the final amount, but I think it comes to about E150,000. A lot of that is explained by sensible saving, going back years, and sundry small investments, but he is concerned that a sizeable percentage of it is earnings from my grandmother's business - and that if she saved that amount she couldn't have been paying what she should have been paying in tax.

He could be wrong, she might well have paid what was due in tax, but that E150,000 figure is what has him worried. And, as I said, he just doesn't know where to start with it all.

There is an interesting juxtaposition between "her business wasn’t particularly profitable" and the fact that she managed to save €150,000! Being serious though, managing to save so much over perhaps many many years may simply indicate that she had a shrewd and thrifty nature.

The other aspect you need to consider is what might be the "crippling amount of tax" that your grandfather might have to pay. Although I can't claim to know for certain, I suspect that he cannot be held liable for her debts, beyond what is in the savings. Sore and all as it would be to have to give a lot of it to Revenue, it's said that you don't miss what you never had. I can relate to this as I was obliged to hand over a big lump of the inheritance to Social Welfare so I know how it feels. It can be argued though that some element of the savings had to have been legitimate, the problem being how to estimate how much.

At this point, I'd recommend that you make a appointment to see FISC, a free financial advice service provided through the Citizens Information Service and other outlets. You can check out their website at [broken link removed]

 

[McDonagh]

There is an interesting juxtaposition between "her business wasn’t particularly profitable" and the fact that she managed to save €150,000!

Thanks again Pat. My grandfather is no less surprised by those €150,000 savings than you and the rest of the family! He was aware of a fair percentage of that sum because it was in joint accounts but two more sole accounts came to light in the last few days which brought her overall assets to that amount.

There is simply no way (that we can see) that she earned that kind of money from her business, I’d be amazed if she cleared €10,000 a year in the last few years, less before that. But the €150,000 figure is what has him worried, although my reference to a "crippling amount of tax" was exaggerated. It’s just he’s panicking and has visions of being landed with a tax bill of more than €150,000, although even us with our limited knowledge of these things can’t figure out how that could happen!

The FISC sounds like a great idea, we need good advice on how to sort this out and sort out any tax liability for once and for all. I’ll have a look at their website and make an appointment with them. Thanks for everything again.

 

[ubiquitous]

You (or more particularly your grandfather) needs urgently to get professional advice from a reputable accountant or tax consultant. There is a possibility of a significant tax arrears problem here if the savings came from undeclared sources. Because of this, it is urgent and essential that your grandfather's rights are protected. The only way you can ensure this is by engaging a competent tax advisor to represent him in sorting out the case with the Revenue.

 

[ubiquitous]

Although I can't claim to know for certain, I suspect that he cannot be held liable for her debts, beyond what is in the savings.

This most certainly is not true.

At this point, I'd recommend that you make a appointment to see FISC, a free financial advice service provided through the Citizens Information Service and other outlets. You can check out their website at [broken link removed]

From the FISC website...

Financial Information Services Centres ("FISC") is a voluntary organization which provides financial information, free of charge to people and voluntary organizations who cannot afford the services of accountants.

The FISC volunteers will hardly be interested in providing free advice to someone with €150k cash in the bank!!

 

[pat127]

This most certainly is not true.


From the FISC website...

The FISC volunteers will hardly be interested in providing free advice to someone with €150k cash in the bank!!

That's interesting. You are saying that even if the business was in the sole name of the deceased, her husband could be liable for debts over and above the value of what belonged exclusively to her, being any residual value left in the business, the full value of the Sole accounts and presumably half the value of all shared assets? I do seriously want to know on what basis a relative becomes responsible for any such debts.

Regarding FISC, I think that the €150,000 doesn't actually belong to the grand-father at this point of time and even if it did, the question remains open as to what might be taken from it if Revenue expressed an interest. We don't otherwise know his financial situation and to what extent he could or couldn't afford to pay his own professional advisor.

As a former Volunteer in a CIC, with experience of working with both FLAC and FISC advisors, I've never known them to check a client's financial situation before advising them. I have never heard an advisor asking for proof that the client hasn't any money! The one situation where there might occasionally have been difficulties is where the client is obviously trying to double-check what their own Solicitor or Accountant has advised. The OP has nothing to lose and possibly much to gain by contacting FISC and it's worth a try therefore. Also it doesn't mean that a professional advisor won't have to be employed thereafter anyway.

 

[ubiquitous]

You are saying that even if the business was in the sole name of the deceased, her husband could be liable for debts over and above the value of what belonged exclusively to her, being any residual value left in the business, the full value of the Sole accounts and presumably half the value of all shared assets?

No, I'm not. Please don't misquote me. I merely rebutted your earlier comment....

I can't claim to know for certain, I suspect that he cannot be held liable for her debts, beyond what is in the savings.

...which was a lot different than you make out above.

I do seriously want to know on what basis a relative becomes responsible for any such debts.

Do you, now? If you ask nicely someone might be kind enough to tell you. But if you "do seriously" demand an answer...

Regarding FISC, I think that the €150,000 doesn't actually belong to the grand-father at this point of time and even if it did, the question remains open as to what might be taken from it if Revenue expressed an interest.

..which is why the OP (or a member of their family) should urgently seek professional advice, as recommended.

As a former Volunteer in a CIC, with experience of working with both FLAC and FISC advisors, I've never known them to check a client's financial situation before advising them.

Why then do FISC themselves say that their service is provided....

to people and voluntary organizations who cannot afford the services of accountants.

The OP has nothing to lose and possibly much to gain by contacting FISC and it's worth a try therefore.

...except that any delay in contacting a professonal advisor will delay the eventual resolution of the case, thus (1) increasing the stress and worry of the grandfather and family in the meantime (2) increasing the interest cost of any settlement with Revenue; (3) possibly annoying the Revenue and reducing the possibility of a favourable outcome to the case.

Also it doesn't mean that a professional advisor won't have to be employed thereafter anyway.

So why waste time running around trying to scab off a free service desgined for those experiencing genuine financial hardship?

 

[Megan]

If he engages a professional advisor surely he will be able to offset his charge against any tax due.
Was is an all cash business she run if not you should get some records from the bank re lodgements etc.

 

[McDonagh]

I really didn’t want my family’s concerns about my grandfather’s situation to be the cause of two people going to war on this thread - calm down!

The difference of opinion between Pat and Ubiquitous on this isn’t the first time we’ve got very differing views on the situation, which is why we’re in the dark.

Some thought there could well be a significant tax liability there, others felt that the savings were easier to explain (eg because they stretch back over 20 years or more, my grandmother was anything but a big spender, she did a lot more saving than spending, and she and my grandfather had small outgoings in recent years, eg house paid for, etc). Also, the fact that Revenue was aware of my grandmother, as Pat pointed out, and never queried any returns she made is a source of some encouragement. I know, of course, that that doesn’t mean everything is okay.

But I agree, we need professional advice, which we will seek.

Was is an all cash business she run if not you should get some records from the bank re lodgements etc.

Megan, to my knowledge my grandmother received payments in cash and cheques, probably more in cash – which makes her tax situation even more difficult to work out.

 

[pat127]

No, I'm not. Please don't misquote me. I merely rebutted your earlier comment....

My quote:-

‘You are saying that even if the business was in the sole name of the deceased, her husband could be liable for debts over and above the value of what belonged exclusively to her, being any residual value left in the business, the full value of the Sole accounts and presumably half the value of all shared assets?’

The above is a question and nothing more, asked in the interests of clarification because I wasn’t sure (correctly as it turned out) that ‘beyond what is in the savings’ adequately explained what I was attempting to say.

In what way did I misquote ‘This most certainly is not true’?

I was not attempting to ‘demand’ anything and frankly I’m quite surprised that you thought that I was. Perhaps it might have been clearer if I’d said ‘Seriously, I do want to know…’?

Although your advice ‘to get professional advice from a reputable accountant or tax consultant’ is incontrovertible I don’t believe that we have enough information with which to recommend this as the only course of action. People have the right to know about their options and are then fully equipped to make their own decisions. In that sense you are perfectly correct in cautioning that delay could have unfortunate consequences.

Your use of the phrase ‘scab off a free service’ is in my opinion an insult to people who for whatever reason choose to use one. It isn’t exclusively a matter of affordability. Many people, unaccustomed to dealing with officialdom, or the legal or accountancy professions, are glad to have the opportunity to begin by having an informal chat with a volunteer professional and thus assured to take it to a more formal level.