The snap general election has derailed controversial plans to increase probate fees, dubbed a ‘stealth death tax’, as the Ministry of Justice (MoJ) has said there is now insufficient time for the necessary legislation to pass through Parliament
Under the proposals, the MoJ planned to raise the legal fees for handling an estate following a death from the current £155 or £215, depending on whether a solicitor is involved, to up to £20,000, by introducing a sliding scale of charges from May.
The MoJ said it wanted to replace the flat rate system with a system of bands linked to the value of the estate (before inheritance tax), and the same rate applies regardless of whether the applicant is a solicitor or an individual.
Estates under £50,000 would pay no fee, and those from £50,000 to £300,000 would pay £300. This compares with the current system where the threshold for no payment of fees is £5,000. However, an estate of £500,000 to £1m would pay £4000, which doubled to £8000 for estates of between £1m and £1.6m, rising to £12,000 for estates in the £1.6m to £2m bracket and £20,000 above that.
The MoJ’s proposals were sharply criticised earlier this month, when the Parliamentary joint committee on statutory instruments said the charges appear ‘to have the hallmarks of taxes rather than fees, particularly in view of the amounts that would 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.’
The proposals also faced backlash at the Treasury Select Committee’s hearing on the upcoming Finance Bill with Chas Roy-Chowdhury, head of taxation at ACCA, saying that ‘the people who devised probate fees did not really know about tax.’ While Nick Parker, deputy president at the ICAEW, branded the project as ‘clearly a money raising exercise’.
The MoJ had said the new fees would generate an estimated £300m per annum in additional income, which it planned to use to fund other areas of the courts and tribunal service. The joint committee said it was disagreed with this approach, as a ‘fee’ should cover only the costs of the service provided, not other services.
The committee said: ‘The Lord Chancellor is not permitted to impose a tax.’
Now that a general election has been called, the MoJ has confirmed that the relevant statutory instrument would not be completed before the election, meaning the proposals will not be put before this Parliament before it dissolves. It will be up to the next government to decide whether to go ahead with the plans.