Thursday 22 November 2018, Plans by the UK Ministry of Justice (MoJ) to drastically raise the fees paid by families to wind up the estate of someone who has died are an abuse of constitutional powers according to ICAEW. Increasing probate fees through statutory instrument (SI), and not through the Finance Bill and ultimately HM Treasury, means that there is a lack of transparency and accountability in a process that will raise funds for the Exchequer.
Currently a flat fee of £155 applies to all estates over £5,000 when probate is applied for by a licensed probate practitioner, increasing to £215 when family or friends make a personal application. The proposals – previously deemed “unlawful” by the Joint Committee on Statutory Instruments - will see fees increase to £250 for estates valued between £50,000 and £300,000 (before inheritance tax), rising to £6,000 for estates valued over £2m. All fees will have to paid by the executor in advance of selling the assets
Those whose loved ones have property in London and the South East will be particularly vulnerable to having to find the money to pay for probate fees in advance of house sales due to higher property prices. In addition, the proposed probate fees do not take into account the Inheritance Tax (IHT) threshold of £325,000, so families will be paying probate fees on the full estate but IHT on the lesser amount.
Jane Berney, ICAEW Business Law Manager, said:
“When MoJ first consulted on these changes in 2016, 97% of respondents were against them, yet the department is still going ahead. Moreover, the parliamentary Joint Committee on Statutory Instruments (SI), made up of MPs and peers, reviewed the proposals and concluded they were unlawful. They said pushing through the increases by SI was beyond the powers of the Lord Chancellor, as the increase was equivalent to putting a new tax in place as the fees were disproportionate to the service provided.
“Probate will become largely automated, not quite as simple as paying for your car tax but nevertheless all online, and currently costs £40 million to run. This drastic increase in fees is expected to raise £150m to pay for running the MoJ. As the new fees are effectively a tax on wealth, they should be subject to the right scrutiny, like any other tax.
“The possibilities available through automation for probate are ideal to make this a far less arduous task for the executor, but question needs to be asked as to whether the MoJ is abusing its constitutional powers. There is no doubt that there is a need for investment but this is effectively a tax on wealth, and should be treated as such. The probate offices will need to gear themselves up for an influx of applications in advance of the planned increases as executors rush through the process to try and beat the price hike.”