Carol Cummins is a Senior Associate (Tax & Advisory) in our Private Client team in Bristol. She is very experienced in dealing with tax issues, particularly those that can arise for elder clients and Court of Protection cases.
Every person potentially needs to submit a Tax Return. The UK tax year runs from 6 April to 5 April each year and all tax returns must be submitted on paper by the following 31 October, or online by 31 January of the following year.
Court of Protection Deputies and Attorneys need to take special care to make sure that they do not fall foul of reporting obligations. The Self Assessment tax system puts the onus on the taxpayer (or their Deputy or Attorney) to work out if a tax return is due and to submit it and to pay the tax on time. If they fail to do this, penalties and/or interest will be payable.
Here are some areas that can cause difficulties, particularly in Court of Protection cases:
- Children – a taxpayer can be any age. We have recently been involved in a case where a child was awarded a large settlement at a young age. The funds were held by and invested by the Court Funds Office. The family were unaware that there was a problem and several years of tax returns declaring untaxed interest and chargeable gains went un-submitted as a result. We became involved when the Court of Protection appointed a Deputy when the child reached age 18, and it became apparent that a large amount of tax, interest and penalties was due for payment.
- Untaxed Income – we are used to most bank and building society interest being paid net of tax. However, interest on Court of Protection funds held at the Court Funds Office is usually untaxed at source and will in most cases cause tax to be payable.
- Benefits – some benefits are taxable and others are not. You should only declare taxable benefits. You can check which ones are taxable here: HM Revenue & Customs: Taxable and non-taxable income at a glance
- Tax Codes – these are a guide to attempt to collect tax during the tax year from pension and employment income. They use estimates of benefits, allowances and other income. They don’t mean that that the right amount of tax has been paid. Deputies and Attorneys should check the tax position annually to work out whether a tax return should be submitted, or whether too much tax has been paid and a repayment claim should be made.
- Don’t forget to register – Before a Self Assessment tax return can be submitted, the taxpayer needs to be registered for Self Assessment. This can take a few weeks so you should register as soon as you know that a tax return is needed. Click here: SA Registration for more information.
- Submitting Online – Deputies and Attorneys have an extra three months if they submit tax returns online rather than on paper. They will first need to set up an online account for the taxpayer and be issued with the access codes. This can also take a few weeks. This will let you submit the tax return through the HMRC website.
- Advice – if there is anything you are unsure of or you would like a professional to deal with the tax return using their own tax software you should take advice from a professional who is experienced in dealing with tax compliance for Court of Protection cases.
If you have any concerns about tax issues for an elderly or vulnerable person please contact Carol on 0345 209 1275, or by email at firstname.lastname@example.org.