Tuesday 08 October 2019
Notaires are responsible for processing inheritance tax declarations, which they sometimes fail to do expeditiously.
In February 2010 the sole legatee of an estate in Brittany instructed a local notaire to undertake the formalities of an inheritance tax declaration - a déclaration de succession.
Subsequently in May 2010, the notaire wrote to him advising his client that there were inheritance taxes amounting to €202K that were due, which had to be paid within 6 months of the death, ie 1st August 2010.
The taxes in this case appear to have been so high as the beneficiary was not a member of the family of the deceased. In such cases, the inheritance tax rate is 60%. It was also a large estate.
No inheritance tax declaration was made by the notaire, as in March 2011 the legatee of the estate received a letter from the local tax office requiring that the declaration be made within 90 days, failing which penalties would be imposed.
The same month he also complained to the notaire that he had not acted on his instructions, including a request he had made for phased payment of the tax over 5 years.
The inheritance tax declaration was finally sent to the tax office in April 2011, nine months after the date when the law required that it should have been submitted.
However, the notaire had made an error in the amount of taxes due, which was notified to him by the tax office in May 2011, who asked that a revised declaration be made, and also notified penalties of €25K payable by the beneficiary for late filing of the declaration.
By May 2013, with the tax office having had received no reply to their letter, they imposed presumptive taxation of €205K, as well as further penalties on the beneficiary amounting to over €82K.
In reply, the notaire stated that he had never received the earlier tax office letter, but in June 2013 finally sent a corrected declaration of succession.
During subsequent months the notaire sought to reduce the penalties, arguing with the tax office that the beneficiary was unable to pay the taxes due or to sell the property he had inherited.
As a result, the level of the penalties was substantially reduced, but were still over €30K. The level of inheritances taxes due was also negotiated down to €152K.
As a result of the mismanagement of the succession by the notaire, the beneficiary took legal action.
The court of appeal ruled that the notaire had failed in their obligation to notify the beneficiary of the need to make the inheritance tax declaration within six months, and that the notaire had failed to exercise due diligence in following up and examining the case for almost a year.
Although the notary claimed that he had never received the letter from the tax office asking for a revised declaration, testimony in court from the tax office showed that two telephone calls had been made to him.
The court also considered that the notaire had failed before 2013 to inform the tax office that his client did not have funds to meet the tax bill and neither did the notaire seek phased payment as requested by their client.
The absence of a declaration of succession within the prescribed period, combined with the absence of timely rectification of the incorrect declaration of succession, was at the root of the tax penalties.
In compensation the court awarded his client a sum of €50,000 as well as €5,000 costs.