ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change has no implications for the amount of tax paid, who pays it or when. It affects (in principle but not in practice) only administrative matters. Change 150: Interpretation: definition of “personal representatives” for the purposes of the Income Tax Acts: section 989
This change applies the new defined term, “personal representatives” for the purposes of the Income Tax Acts. It completes the process started by ITEPA as a result of which definitions to the same effect were applied:
	by section 721(1) of ITEPA for the purposes of that Act;
	by section 279(1) of FA 2004 for the purposes of Part 4 of that Act (Pension schemes etc); and
	by section 878(1) of ITTOIA for the purposes of that Act.
The application of the defined term to ITEPA and ITTOIA is described in Change 159 in Annex 1 to the Explanatory Notes to ITEPA and in Change 151 in Annex 1 to the Explanatory Notes to ITTOIA. This note draws heavily on the contents of those notes.
With the exception of sections 111 and 151 of FA 1989, wherever the term “personal representatives” is used in the Income Tax Acts, other than ITEPA, Part 4 of FA 2004 and ITTOIA, the term is undefined.
Places where it is so used include the following provisions on which this Act is based:
	section 360A(2) of ICTA (meaning of “material interest” in section 360 of that Act (loan to buy interest in close company)) (see section 395(1)(d));
	section 364(1) of ICTA (loan to pay inheritance tax) (see section 403(1) and (2));
	section 417(3) of ICTA (meaning of “associate” for the purposes of Part 11 of that Act (Close companies)) (see section 253(1)(c)(i));
	sections 481(4)(c) and 482(6) of ICTA (meaning of “relevant deposit” for the purposes of section 480A of that Act (relevant deposits: deduction of tax from interest payments)) (see sections 856(5) and 860(4));
	section 686(6) of ICTA (accumulation and discretionary trusts: special rates of tax) (see section 483(1));
	section 703(11) of ICTA (cancellation of tax advantage) (see section 712(2));
	section 715 of ICTA (exceptions from sections 713 and 714 of that Act (accrued income scheme: deemed sums and reliefs)) (see section 640);
	section 721 of ICTA (accrued income scheme: death) (see section 636);
	section 777(7) of ICTA (provisions supplementary to sections 775 and 776 of that Act (sale by individual of income derived from his personal activities and transactions in land: taxation of capital gains)) (see sections 763(4) and 782(4)); and
	paragraph 50(1) of Schedule 16 to FA 2002 (meaning of “associate” for the purposes of that Schedule) (see section 381(1)(c)(i)).
Section 111 of FA 1989 (residence of personal representatives) has its own definition of “personal representatives”. Section 111(1) and (2) of FA 1989 have been rewritten in section 834.
The definition in section 111(3) of FA 1989, which is also applied for the purposes of section 151 (assessment of trustees etc) of that Act by subsection (3) of that section, provides that:
“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 55(1)(xi) of the Administration of Estates Act 1925 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.”
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 definitions in section 55 of the Administration of Estates Act 1925 and section 45(1) of the Administration of Estates Act (Northern Ireland) 1955 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 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 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 the executor is known as an executor nominate, or by the court, in which case the executor 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, such a factor 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 111(3) of FA 1989 are the persons responsible for administering the person’s estate.
Accordingly, the first limb of the definition in section 989, that personal representatives are:
“in the United Kingdom, persons responsible for administering the estate of the deceased,”
catches the same persons as does section 111(3) of FA 1989 in relation to each part of the United Kingdom, but does so more directly and succinctly.
It follows from what is said above, that the application of the first limb of the definition in section 989 in relation to the provisions in the Income Tax Acts which use the expression “personal representatives” without definition, including those rewritten in this Act, reflects the ordinary common sense meaning of those terms in each part of the United Kingdom.
The second limb of the definition in section 989 is in similar terms to section 111(3)(d) of FA 1989. It provides that personal representatives are:
“in a territory outside the United Kingdom, those persons having functions under its law equivalent to those of administering the estate of the deceased.”
Section 111(3) of FA 1989 has, accordingly, not been rewritten and the definition in section 989 applies for the purposes of section 834 of this Act and section 151 of FA 1989.
That leaves the question of whether there is any change involved in applying the second limb to provisions in the Income Tax Acts which use the expressions “personal representatives” 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” 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” without definition in the Income Tax Acts, including in those 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 which confirm that, on an individual’s death, rights and liabilities which are or would otherwise have been conferred on the individual are conferred on the individual’s personal representatives.
In this context it is clear that the references to “personal representatives” 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 and responsibility to deal with the deceased individual’s tax affairs as the individual would have had if the individual were still alive, and are subject to the same tax liabilities.
Provisions in this category rewritten in this Act include sections 703(11) and 777(7) of ICTA. Such provisions which are not being rewritten include section 97(1) of TMA which provides that, if it comes to the notice of the personal representatives that the deceased made an incorrect return etc, they are under a duty to remedy the error without unreasonable delay.
The second category covers those provisions which apply only because a person has died, so that his or her property is being administered by his or her personal representatives.
In this category of 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 the gap or satisfy the requirement. 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.
Provisions in this category rewritten in this Act include:
	section 364(1) of ICTA which extends tax relief to personal representatives in respect of interest paid on a loan to pay inheritance tax; and
	the meaning of “associate” given by section 360A(2) of ICTA and paragraph 50(1) of Schedule 16 to FA 2002 and by section 417(3) of ICTA as applied by section 312(1) of that Act, which provide that a person who has an interest in shares or obligations forming part of a deceased’s estate is an associate of the personal representatives of the deceased.
Provisions in this category which are not being rewritten include section 179A(3) of FA 1993 which provides that the carrying on of the underwriting business of a deceased member of Lloyd’s by the deceased member’s personal representatives is not to be treated as a change in the persons engaged in carrying on that business.
As a consequence of the inclusion of this definition in section 989, the definitions to the same effect in section 721(1) of ITEPA, section 279(1) of FA 2004 and section 878(1) of ITTOIA are no longer necessary and are repealed by Schedule 3. Sections 111(3) and 151(3) of FA 1989 are also repealed.