Last November the Ministry of Justice (MOJ) announced plans to increase the fees charged for probate applications and today should have been the day these came into force. However, the necessary legislation has not been passed in Parliament and the rise has been delayed indefinitely.
The increase in question was sufficient for many commentators to conclude it amounted to a ‘stealth tax’, levied on more valuable estates and payable no matter how much inheritance tax was due or indeed, whether inheritance tax had to be paid at all.
Prior to the proposed changes the flat fee for a probate application was £155 if a solicitor was involved in the process and £215 if an individual acted on their own behalf.
Under the new regime, the charges would rise on a sliding scale relating to the value of the estate in question. In most cases, the charge amounts to 0.25-0.5% of the estate.
Amongst those bodies which labelled this proposed increase ‘an inheritance tax by stealth’ was the Law Society, which also pointed out that the actual cost of processing a probate application does not change on the basis of the size of the estate.
Put simply, it costs the same to process an application for an estate which is worth £10,000 as it does for one worth £1 million or more.
A higher ceiling
Under the new rules an estate of ‘average’ size (something that is constantly shifting) would generate a fee of £750, rising to a ceiling of £4,000 for estates worth more than £1 million and £6,000 for estates worth £2 million or more.
MPs who sit on the delegated legislation committee looked into the proposed fees in February and agreed with the MOJ that it was, despite appearances to the contrary, a fee for the provision of services rather than a tax.
This distinction meant that the increase in probate fees didn’t have to be included in the Finance Bill to be voted on by parliament. As a fee increase, it doesn’t have to be voted on in the same way, but this doesn’t mean that it doesn’t have to go through parliament at all.
The legislation announcing the fees still has to be read out in Parliament, giving MPs the chance to object. Due to the chaos caused by Brexit deliberations, the MOJ hasn’t managed to find the required time to present the legislation, and so the change won’t come into force as expected.
When the MOJ finally finds the time – and with rumours of a general election persisting there’s no saying when that will be – there is still the very slight possibility that, if an MP objects, it could be debated and voted down. On this type of legislation, that is extremely rare. Even if it does clear Parliament, however, this will still take at least 21 days, with many Labour MPs vowing to slow the process down.
The likely scenario, will see many people, who are currently exempt from paying inheritance tax (and the upper threshold for this is currently £475,000, although in some cases it can be double that) having to hand over several thousand pounds in fees.
The MOJ estimate the new charges will bring in an extra £145 million per year.
Because of the delay, personal representatives, or PRs, have been told that, for now, they can submit applications for probate before the inheritance tax figure has been verified by HMRC.
The applications will have to be accompanied with a note stating that the relevant inheritance tax forms will follow shortly. As things stand, people who manage to avoid the new fee regime will join currency speculators in that select band of people – ‘Individuals benefitting from the chaos surrounding Brexit’.
The situation requires professional advice and now is a great time to get your personal effects in order. If you would like to discuss your needs or those of a family member or friend in more detail, please contact Tracey Lane on 01543 431932 or firstname.lastname@example.org