Annex 1: Minor changes in the law made by the Act: Change 151: Definition of “personal representatives” and replacement of the expression “executors or administrators” with “personal representatives”: section 878
This change involves replacing the expressions “personal representatives” and “executors and administrators”, where they are used in the source legislation without definition, with a defined term, “personal representatives”. It also involves applying that new definition in relation to provisions in the source legislation which use the expression “personal representatives” as defined in section 701(4) of ICTA.
The term “personal representatives” is used without definition in the following provisions of the legislation on which this Act is based:
	section 103(3)(b) and (bb) of ICTA (which disapply the charge to tax on receipts after the discontinuance of a trade, profession or vocation in relation to consideration paid to the personal representatives of an author for the assignment of copyright, and consideration paid to the personal representatives of a designer for the assignment of a design right) (see section 253);
	section 108 of ICTA (which allows personal representatives to elect for tax chargeable on sums received after discontinuance to be charged as if they were received on the date of discontinuance) (see section 257);
	section 113(7) of ICTA (by which a change in the personal representatives of a person is not to be treated for the purposes of that section as a change in the persons carrying on a trade, profession or vocation carried on by the personal representatives as such) (see sections 258 and 361);
	section 525(2) of ICTA (which allows the personal representatives of a person on whom a charge to tax falls or would fall to be made by reason of the person’s sale of patent rights to require the tax payable to be reduced) (see sections 593 and 862);
	paragraphs 4(2), 6(7) and (8) of Schedule 13 to FA 1996 (by which the vesting of a relevant discounted security in personal representatives on a person’s death, and the transfer of such a security by personal representatives to a legatee, is to be treated as a transfer of the security for its market value) (see sections 437 and 440); and
	paragraph 14 of Schedule 22 to FA 2002 (which makes provision about the liability of personal representatives to an adjustment charge arising from a change of basis in computing the profits of a trade, profession or vocation) (see section 240).
The expression “executors or administrators” is used, also without definition, in the following provisions of the legislation on which this Act is based (using “personal representatives” in place of that expression):
	section 584(7) of ICTA (relief for unremittable overseas income) (see section 843); and
	section 585(8) of ICTA (relief on delayed remittances) (see section 837).
The definition of “personal representatives” in section 701(4) of ICTA applies to the following provisions of the legislation on which this Act is based:
	section 249(5) of ICTA (by which stock dividend income is deemed in certain circumstances to be part of the aggregate income of the estate of a deceased person) (see sections 410 and 664);
	section 421(2) of ICTA (by which the amount charged to tax in respect of the release of a loan made to a participator in a close company falls in certain circumstances to be treated as part of the aggregate income of the estate of a deceased person) (see sections 419 and 664);
	section 347A(3) of ICTA (which makes provision about annual payments made by personal representatives) (see sections 727 and 730);
	section 547(1) of ICTA (by which the amount of a gain treated as arising on the happening of a chargeable event in relation to a contract for life insurance etc is deemed in certain circumstances to be part of the aggregate income of the estate of a deceased person) (see sections 466 and 664);
	sections 547(7A) and 547A(3) of ICTA (which make provision for and in connection with the liability of personal representatives to tax on a gain treated as arising on the happening of a chargeable event in relation to a contract for life insurance etc) (see sections 466 and 470);
	section 697(1) of ICTA (which makes provision for the determination of the amount of the residuary income of an estate for a year) (see section 666);
	section 698(1) and (3) of ICTA (which make provision for the personal representatives of a deceased person to be deemed to have an absolute or limited interest in relation to the estate of another deceased person) (see section 650);
	section 701(8), (9) and (12) of ICTA (which define various concepts for the purposes of Part 16 of that Act) (see sections 651, 664 and 681); and
	paragraph 7(3) of Schedule 5AA to ICTA (which makes provision about the application in relation to personal representatives of provisions about the taxation of profits and gains from disposals of futures and options involving guaranteed returns) (see section 568).
The definition of “personal representatives” in section 701(4) of ICTA provides that:
““personal representatives” means, in relation to the estate of a deceased person, his personal representatives as defined in relation to England and Wales by section 55 of the Administration of Estates Act 1925 and persons having in relation to the deceased under the law of another country any functions corresponding to the functions for administration purposes under the law of England and Wales of personal representatives as so defined; and references to “personal representatives as such” shall be construed as references to personal representatives in their capacity as having such functions.”
The new definition in section 878 of this Act provides that:
““personal representatives”, in relation to a person who has died, means—(a)in the United Kingdom, persons responsible for administering the estate of the deceased, and(b)in a country or territory outside the United Kingdom, those persons having functions under its law equivalent to those of administering the estate of the deceased.”
This follows section 721(1) of ITEPA. It is also similar to the definition of “personal representatives” in section 229(1) of ICTA. This definition (which does not apply to any of the provisions listed above) provides that:
““personal representatives” means persons responsible for administering the estate of a deceased person.”
So the main difference between the definition in section 701(4) of ICTA and the definition in section 878 is that the former applies the definition in section 55 of the Administration of Estates Act 1925. Subsection (1)(xi) of that section provides that:
““personal representative” means the executor, original or by representation, or administrator for the time being of a deceased person, and as regards any liability for the payment of death duties includes any person who takes possession of or intermeddles with the property of a deceased person without the authority of the personal representatives or the court, and “executor” includes a person deemed to be appointed executor as respects settled land.”
It is also worth noting the definition of “personal representatives” in section 111(3) of FA 1989. This definition (which does not apply to any of the provisions listed above) provides that:
“(3)In this section “personal representatives” means—(a)in relation to England and Wales, the deceased person's personal representatives as defined by section 55 of the Administration of Estates Act 1925;(b)in relation to Scotland, his executor or the judicial factor on his estate;(c)in relation to Northern Ireland, his personal representatives as defined by section 45(1) of the Administration of Estates Act (Northern Ireland) 1955; and(d)in relation to another country or territory, the persons having in relation to him under its law any functions corresponding to the functions for administration purposes of personal representatives under the law of England and Wales.”
Section 45(1) of the Administration of Estates Act (Northern Ireland) 1955 provides that:
““personal representatives” means the executors or executor, original or by representation, or the administrators or administrator for the time being of a deceased person.”
The first question is whether there is any difference in coverage between the definition in section 701(4) of ICTA on the one hand, and the first limb of the section 878 definition on the other.
The definition in section 55 of the Administration of Estates Act 1925 (and that in section 45(1) of the Administration of Estates Act (Northern Ireland) 1955 mentioned in the definition in section 111(3) of FA 1989) refer to executors as well as administrators.
Under English law, executors are generally appointed by the will. Administrators are appointed by the court where no one is appointed as executor by the will or where the deceased dies without leaving a valid will.
English law recognises three other categories of executor. The first is “executor according to the tenor” who on the terms of the will is appointed to perform the essential duties of an executor where the deceased person has failed to nominate a person to be his executor. Secondly there is the “executor de son tort”, who is a person who takes upon himself the position of executor or intermeddles with the goods of the deceased person without having been appointed executor or administrator. Thirdly there is the “special executor”, the term given to a person who is a trustee of settled land at the time of the death. The position is similar for Northern Ireland.
For the purposes of Scottish law, an executor is appointed either expressly or impliedly by the deceased, in which case he is known as an executor nominate, or by the court, in which case he is known as an executor dative. So the term “executor” under Scottish law is broadly equivalent to an “executor or administrator” under English law. Scottish law also recognises judicial factors and executor-creditors who may be appointed by the court to administer the deceased's estate or part of it. Although a judicial factor could not be described as an executor, he might be regarded as an “administrator”.
So, in relation to any part of the United Kingdom, a deceased person’s personal representatives within the meaning of section 701(4) of ICTA (or section 111(3) of FA 1989) are the persons responsible for administering the person’s estate. The first limb of the section 878 definition therefore seems to catch the same persons as does section 701(4) of ICTA (and section 111(3) of FA 1989) in relation to each part of the United Kingdom, but does so more directly and succinctly.
Then there are the provisions in the source legislation which use the expression “personal representatives” or the expression “executors and administrators” without definition. It follows from what is said above that the application of the first limb of the section 878 definition in relation to these provisions as rewritten in this Act reflects the ordinary common sense meaning of those terms in each part of the United Kingdom.
So far as the second limb of the section 878 definition is concerned, if the first limb covers the same ground as section 701(4) of ICTA, it follows that the application of that first limb to countries and territories outside the United Kingdom must have the same effect as the application of section 701(4) to such countries and territories.
That leaves the question of whether there is any change involved in applying the section 878 definition to provisions in the source legislation which use the expressions “personal representatives” and “executors and administrators” without definition, as those provisions apply to countries and territories outside the United Kingdom.
The terms “executor” and “administrator” are not terms of art in relation to countries and territories outside the United Kingdom. But it seems likely that a court would hold that references to “personal representatives” or “executors or administrators” in tax legislation would, in the absence of a definition, cover the people that most closely resemble executors or administrators in the United Kingdom. In view of what is said above, that means the people who have functions corresponding to those of personal representatives in the United Kingdom ie functions equivalent to those of administering the estate of the deceased.
References to “personal representatives” or “executors or administrators” in the provisions on which this Act is based can be read as references to anyone with responsibility for administering a deceased person’s estate, including those with equivalent responsibilities in other jurisdictions. These provisions can be divided into two categories.
In the first category are provisions like section 108 of ICTA. These confirm that, on a person’s death, the rights and liabilities which are or would otherwise have been conferred on him are conferred on his personal representatives or his executors and administrators. Sections 584(7) and 585(8) of ICTA and paragraph 14 of Schedule 22 to FA 2002 also fall into this category.
In this context it is clear that the references to “personal representatives” (or “executors or administrators”) are to whoever in fact has the role of administering the property of the deceased person. These provisions are intended to confirm that such persons have the same ability to deal with the deceased’s tax affairs as he or she would have if he or she were still alive, and are subject to the same tax liabilities.
The second category covers those provisions which only apply because a person has died, so that his or her property is being administered by his or her personal representatives. See, for example, section 103(3)(b) and (bb) of ICTA. This says that the fact that someone who was previously carrying on a trade has died does not mean that certain sums received by his or her personal representatives are to be treated as post-cessation receipts of the trade. Sections 113(7) and 525(2) of ICTA and paragraphs 4(2) and 6(7) and (8) of Schedule 13 to FA 1996 also fall into this category.
In these cases the fact that someone has died creates a gap in the law (or at least a doubt as to what the law is) or requires some special arrangement to be made. The provisions in question fill that gap. So it is consistent with the aim of these provisions for them to be interpreted as applying in all cases in which a person has died and his property is being administered by others.
This change has no implications for the amount of tax paid, who pays it or when.