Death Tax: What's The Deal?

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Proposed increases in Probate Court fees, set to commence in May, are causing much concern. A parliamentary committee has even questioned their legality. Many claim the changes to be a tax through the back door. We explore what the changes could mean in reality and advise what to do to avoid paying the new rate ...

Documents published in last month's budget showed that proposed new increases in Probate Court fees could lead to a tax grab that would net the Treasury £1.5 billion in just five years. There is opposition to it, as it appears to be a tax through the back door. Court fees are usually meant to cover the administration costs of the courts. In fact, the Office of Public Guardian has recently reduced its registration fees because the current rate more than covers the administrative cost.

With a barrage of media commentary ranging from how homes worth up to £1m could be passed on inheritance tax free (as long as you understand the rules) to outrage at a double whammy for grieving families (families are already hit by a tax office back log on probate applications that means their relatives' estates may not get progressed before the new fees kick in), an online petition was set up to try to force the Government to reconsider. The petition, at the time of this article going to press, had reached 34,752 signatures. To force a debate in parliament, 100,000 signatures are needed.

Meanwhile, the parliamentary Joint Committee on Statutory Instruments has been looking into the proposed changes and yesterday, April 6th, published a report questioning their legality, stating:

“The charges appear to the committee to have the hallmarks of taxes rather than fees, particularly in view of the amounts that would be payable for larger estates and the scale of the proposed increases (from £155 to as much as £20,000 — a rise of nearly 13,000%) — and because the charges are disproportionate to the service provided by the Probate Registry.”
“It is an important constitutional principle that there is no taxation without the consent of Parliament, which must be embodied in statute and expressed in clear terms.”
“The committee is doubtful whether section 180 of the 2014 Act does in express words entrust the Lord Chancellor with the power to impose charges of the magnitude proposed by the draft order.”

If the draft order becomes law, probate costs will soar in May (see figure 1) and, as HMRC has a backlog already, with people rushing to apply for probate before the fees increase, there are fears that many will be unfairly taxed.

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Source: The Sun. How Probate Costs Will Soar in May 2017


My Estate Planning Expert's Top Tip

If a family member has died recently, or dies before May 1st and you have not received your inheritance tax form from HMRC (or do not), submit everything but the inheritance tax form before May, and make a note that you will send it separately afterwards.

You will then be able to pay the current fee.

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