Inheritance tax is one of those contentious areas of taxation which is almost impossible to pitch correctly to the electorate. With so many people having different views on the subject – and indeed single individuals capable of possessing seemingly conflicting views – it is very much a "damned if you do and damned if you don't" kind of affair.
Whatever the case, the process of inheritance tax and probate in general presents considerable challenges to the personal representatives of estates, regardless of whether they are executors or administrators.
Against this background, it seems a little disingenuous that the government should have recently proposed to raise probate fees in the way that they have. Gone will be the flat-rate system and instead will appear a tiered system to calculate fees based on the value of an estate – call it an additional inheritance tax by stealth if you like: a death tax per se.
Make no mistake, this is what it is: a fee should reflect the cost of the service provided and should therefore be proportionate to the cost involved. This new probate hike? Well, it is anything but.
The Law Society is clear on this issue. A spokesperson sates: "It is unfair and discriminatory to expect the bereaved to fund/subsidise other parts of the court and tribunals service. Court fees are a necessary source of funding but should not be charged over and above the cost of the specific service."
Currently, the fee for a grant of probate for an estate worth more than £5,000 is £155 (if you use a solicitor to apply), otherwise it's a fee of £215.
Under the new scheme:
- estates valued at less than £50,000 will pay no probate fee
- estates valued in excess of £50,000 will be liable for a probate court fee of £300
- estates valued in excess of £300,000 will pay £1,000
- estates worth in excess of £500,000 will pay £4,000
- estates worth in excess of £1m will pay £8,000
- estates worth in excess of £2m will pay £20,000
You could be forgiven for wondering why more valuable estates are so much more expensive to administer. Well, the short answer is that they aren't. What makes probate expensive is complexity and contention – value alone is no useful indicator of these things. So, the fee increase is appears be a tool to raise funds for the Courts and Tribunals Service and, given that the payment of these fees comes at a time when people are having to grieve as well as deal with the innumerable practical fallouts a death can cause, it smacks of bad taste.
And there's a further conundrum; it is going to be particularly painful for those estates having a large amount of equity in a family home but little in the way of liquid assets. Both the probate fee and the IHT have to be paid before application for grant of probate can be made – for some families this could mean hundreds of thousands of pounds will need to be found before they are able to access the remainder of the estate. The fee and duty will be recoverable from the estate, but only after grant of probate.
This is no small problem; property values have risen dramatically over recent decades and many cash-poor families are going to be hit. And some will not even be in a position to borrow.
It is inconceivable that the government isn't aware of the problems relating to the probate fee hike. After all, the Ministry of Justice published details of a consultation in which probate lawyers, accountants and more were clear in voicing their concerns about the fairness of the system. In fact, of the 853 responses to the consultation, 695 said it would be less fair to change to a proportionate fee structure. Especial criticism was reserved for the decision to calculate the fee based on the value of the estate before payment of inheritance tax.
The government appears not to care. It wants the revenue and seems to be prepared to let the bereaved suffer, whatever the consequences.
While the new probate court fees have not yet received full parliamentary approval, the new system has been slated for implementation on May 1. Many interested parties hoped for a back down; however, it was confirmed in the 2017 Budget that the new fee regime would be “in effect in May”.
It was also stated that the Treasury expects the ONS (Office for National Statistics) to classify the fee as a tax in National Accounts.
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