On 18th February 2016, proposals were set out to increase the charges which the Probate Court can make when processing applications for probate. Any charges are used to cover the £45m cost of the Probate Service, which the consultation proposals have classified as a service which is ‘unsustainable’ and ‘in desperate need of reform’.

The changes would only affect ‘non contentious’ business, where the application is approved on the basis of the paperwork only, rather than a formal Court hearing where matters are in dispute.

Currently, the fee is minimal – £155 if the application comes from a professional, and £215 where the application is made direct, and where the Court is involved in a little more work. If the estate is less than £5,000, there is no fee, although most estates of that size can be dealt with informally.

The new proposals treat any estate according to various bands, as set out below. Do note that these figures have been drawn from the consultation document itself and appear to add up to more than 100%

Net value of estate before IHT Proportion of all estates Fee
£50,000 57% £0
£50,000 to £300,000 27% £300
£300,001 to £500,000 10% £1,000
£500,001 to £1,000,000 5% £4,000
£1,000,001 to £1,600,000 1% £8,000
£1,600,001 to £2,000,000 0.2% £12,000
Above £2,000,000 0.4% £20,000

If the proposals succeed it will generate an extra £250m per annum, all met from the estates of those who died with assets in excess of £50,000. 84% of estates, where any charge was made historically, will see a change of a few hundred pounds either way so the increased revenue will clearly derive from larger estates.

The consultation also notes the Inheritance Tax savings which will be felt by those qualifying for the new main residence nil rate band. However, it does not mention that the saving is unavailable for those whose estates exceed £2.7M, or those who are not leaving assets to those directly descended from them – such as charities. There is no comment on the fact that, for example, a married couple in London owning a terraced house, and who leave everything to one another and thereafter to their children could pay £40,000 in Probate Court Fees. Equally, there is no thought given to property rich but cash poor couples.

We find that clients feel very strongly about Inheritance Tax, and it is hard to believe that they will see this any differently. Although no timetable appears to have been set out for the implementation date, we intend to respond to the proposals suggesting that they are a step too far.

This entry was posted on Wednesday, 24th February 2016 at 9:42 am and is filed under Inheritance Tax, News. You can follow any responses to this entry through the RSS 2.0 feed.

Tags: expatriate, Financial