Key Facts
- Yes, a registered Property and Financial Affairs LPA grants broad authority over the donor’s financial affairs, including all tax related matters.
- Registering with HMRC is a mandatory step that many attorneys overlook.
- A registered attorney with HMRC authority can submit Self Assessment tax returns, claim tax refunds, correspond with HMRC about assessments and inspections, apply for tax relief, deal with inheritance tax matters, and manage capital gains tax issues.
- If the donor has an existing accountant or tax adviser, the attorney should inform them immediately and establish clear communication.
- Tax obligations do not pause because a donor has lost capacity or an LPA is being set up.
The most important questions donors ask when setting up a Lasting Power of Attorney is whether their attorney can handle tax matters on their behalf. The answer is yes, but with important conditions and responsibilities. A registered Property and Financial Affairs LPA gives the attorney authority to deal with HMRC, submit tax returns, and manage tax obligations when the donor no longer can. Understanding how this works, what registration involves, and what duties the attorney must fulfil is essential for anyone planning ahead or acting as an attorney. This guide explains the practical steps, legal requirements, and best practices for managing tax affairs under an LPA.
Does a Property and Financial Affairs LPA Authorise Tax Matters?
Yes, a registered Property and Financial Affairs LPA grants broad authority over the donor’s financial affairs, including all tax related matters. Once registered with the Office of the Public Guardian, the attorney can act on HMRC issues such as Self Assessment tax returns, income tax, capital gains tax, and inheritance tax. However, the attorney must complete a separate registration process with HMRC itself. HMRC does not automatically recognise an LPA based on OPG registration. The attorney must notify HMRC directly and provide evidence of the LPA before gaining access to the donor’s tax accounts and submitting returns on their behalf.
What Is Registering as a Representative with HMRC?
Registering with HMRC is a mandatory step that many attorneys overlook. The attorney must complete HMRC’s form for appointing a representative and submit copies of the registered LPA document. Once accepted, HMRC will issue a reference number and may provide access to the donor’s online tax account. This process typically takes several weeks.
The attorney should inform HMRC of the date the LPA was registered with the OPG and provide certified copies of the registered LPA. Until this registration is complete, HMRC will not accept correspondence or submissions from the attorney, even though the attorney is legally authorised to act.
What Tax Responsibilities Can the Attorney Handle?
A registered attorney with HMRC authority can submit Self Assessment tax returns, claim tax refunds, correspond with HMRC about assessments and inspections, apply for tax relief, deal with inheritance tax matters, and manage capital gains tax issues. The attorney can also access the donor’s HMRC online services account and view tax records.
However, the attorney cannot change the registered address or bank details for tax refunds without proper authority procedures. All decisions must be made in the donor’s best interests and in accordance with what your attorney can and cannot do under the LPA terms.
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What Is Working with the Donor’s Accountant?
If the donor has an existing accountant or tax adviser, the attorney should inform them immediately and establish clear communication. The accountant should be sent a copy of the registered LPA and HMRC registration confirmation. Where possible, the existing professional relationship should be maintained to ensure continuity and reduce confusion.
The attorney and accountant must work together on matters such as identifying deadlines, preparing return information, and understanding the donor’s tax position. This collaboration protects the donor’s interests and reduces the risk of errors or missed deadlines.
What Is Critical Deadlines and Penalties?
Tax obligations do not pause because a donor has lost capacity or an LPA is being set up. Self Assessment returns must still be filed by the deadline, currently 31 January following the tax year end. If a return is late, HMRC will impose penalties.
However, penalties can sometimes be challenged if the delay was directly caused by the LPA registration process. The attorney should keep records of when the LPA was registered, when HMRC registration began, and any correspondence confirming the delay. The attorney should prioritise completing registrations early to avoid this situation entirely.
What Is Record Keeping and Legal Duties?
The attorney must maintain detailed records of all tax decisions, correspondence with HMRC, and copies of submitted returns. These records protect the attorney by demonstrating that decisions were made properly and in the donor’s best interests. The attorney’s legal duties include acting honestly, carefully, and with integrity.
Any decisions must follow the donor’s instructions and preferences if documented in the LPA. If no specific instructions exist, the attorney must act in the donor’s best interests. All expenses incurred when managing tax affairs should be properly recorded.
Please note: Lasting Powers of Attorney apply in England and Wales only. Different rules apply in Scotland and Northern Ireland.
Frequently Asked Questions
What if the donor did not register the LPA before losing capacity?
The LPA can still be registered after the donor loses capacity, and the attorney can then register with HMRC. However, during the registration period, tax returns may become overdue. The attorney should explain the situation to HMRC in writing, as penalties may be reduced or removed if the delay was unavoidable due to the registration process.
Can the attorney claim tax refunds in their own name?
No. All tax refunds must be received in the donor’s name and paid to the donor’s bank account. The attorney is a representative and holds money or refunds in a fiduciary capacity. Any refund claimed must be recorded separately and not mixed with the attorney’s personal finances.
Does the LPA give the attorney power to appeal HMRC decisions?
Yes, the attorney can lodge appeals against tax assessments or HMRC decisions on the donor’s behalf. The attorney must act in the donor’s best interests when deciding whether to appeal. Written evidence of the LPA and HMRC registration must be provided to HMRC before they will accept any appeal from the attorney.
What happens to tax matters when the donor dies?
The attorney’s authority ends when the donor dies. The executor of the Will then takes over handling tax affairs, including inheritance tax. The executor and attorney should ensure a smooth handover and provide all relevant records, registrations, and correspondence to the executor.
Can the attorney access the donor’s tax records from previous years?
Yes, once registered with HMRC, the attorney can access and obtain copies of prior tax returns, correspondence, and assessments. This helps the attorney understand the donor’s tax history and current position. HMRC may require proof of registration before releasing sensitive information from previous years.
TL;DR: Can Your LPA Deal with HMRC?
A registered Property and Financial Affairs LPA allows the attorney to manage the donor’s tax affairs with HMRC, but separate registration with HMRC is essential before acting.
- The attorney must register with HMRC separately from OPG registration and provide copies of the registered LPA document.
- Once registered, the attorney can submit Self Assessment returns, claim refunds, and handle income tax, capital gains tax, and inheritance tax matters.
- The attorney should inform any existing accountant immediately and work collaboratively to meet deadlines and maintain the donor’s tax position.
- Tax deadlines continue regardless of capacity loss or LPA registration delays, though late payment penalties may be reducible in certain circumstances.
- Detailed records must be kept of all tax decisions, correspondence, and submissions to demonstrate proper administration and protect the attorney’s position.
More From Elwyn & Mabel
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