2018 Budget (somewhat) resurrects previously-scrapped changes to probate court fees
Back in early 2017, a government consultation into a change in probate court fees took place. See my earlier blog as a reminder. Thankfully, this change ultimately never transpired. The most recent Budget heralds a second attempt. What are the differences this time?
So, another Budget has come and gone: inevitably, they are divisive. Before the June 2017 UK "snap" general election, the consultation on changes to probate court fees was derided by some as being a "stealth tax", with the amount payable based on a sliding scale dictated by the value of the estate in question. You'll see from my previous blog that estates worth over £2m could, under the old proposals, have suffered fees of £20,000 – quite a step up from the current £215 (personal applications) or £155 (via a solicitor). Does this offering differ from its predecessor? Yes and no.
It's a sliding scale once again. Not as drastic as last time, as the following illustrates:
The new proposed fees structure:
- Up to £50,000 - No fee
- £50,000-£300,000 - £250 fee
- £300,000-£500,000 - £750 fee
- £500,000-£1m - £2,500 fee
- £1m-£1.6m - £4,000 fee
- £1.6m-£2m - £5,000 fee
- £2m plus - £6,000 fee
Whilst for larger estates it's better than (as before) a personal representative having to get their hands on £20,000 to be able to submit the probate application, £6,000 is still by no means modest for a court fee, especially if the estate happens to be 'asset rich' but 'cash poor' – e.g. all money tied up in valuable real estate. In any event, with all assets frozen at date of death it's problematic.
Let's consider a few more pros v cons that immediately spring to mind:
The (probate) courts can, in theory, provide a more efficient service due to the additional funding from estates that can, in theory, afford it – but with planned changes and simplifications to the court system (e.g. 'going online'), will this investment actually show results? Potentially. It depends on how streamlined and effective the new systems are. Under-Secretary of State Justice Lucy Frazer QC MP describes the changes as contributing to a "fair and more progressive way" to pay for court services – that is, to assist in the government's investment and overall aim of modernising and simplifying access to justice for all with the projected additional £145m income generated
Estates left to charities (gifts to whom are exempt from inheritance tax) will indirectly now suffer an additional cost. Some sources speculate that millions of pounds of charity legacy money could be reduced as a result. Charitable work is for public benefit and relies heavily on the generosity of legacies
Smaller estates (i.e. those below £50,000) will have no court fee. Remember, small estates can require a grant regardless of their simplicity, so a modest saving will be made in that regard. In fact, the government thinks that it will render the majority of estates (80%, apparently) liable for no more than a £750 fee - although some disagree on that statistic
On a more 'human' level, this will hardly go down well with bereaved families, especially if the probate court's service is not perceived to noticeably improve, or even change. Public confidence in our justice system is hugely important
The government confirms it has "listened" to feedback on the 2017 fee change proposals and amended the figures accordingly. Their consultation paper (available for all – see footnote 2) discusses some sort of fee remission scheme
When will this happen?
As in 2017 before the proposal was withdrawn, we are left to guess and to attempt to reassure our clients that we will do all we can to meet the deadline, when we know when it is. In February 2017, the government responded to the consultation paper confirming it intended to go ahead with the proposals. No specific date is yet set, but as per its response the government is "bringing forward the necessary statutory instrument" to get the changes formally in place. Watch this space for updates.
Similar to my last blog, albeit to a lesser extent: smaller, non-taxable estates will make a saving of up to £215, whilst larger estates will now suffer up to £6,000. Some of those estates will not incur an inheritance tax liability, but will nevertheless be faced with these higher fees. Remember the court fee is calculated based on the net estate for inheritance tax purposes (at its simplest level, assets minus liabilities).
I suspect this will leave a bad taste for many – not just at the costs at the heart of it, but also at the aforementioned perceived "stealth tax" approach taken. Many people's opinions probably aren’t going to be changed on that point. How well, or otherwise, this works will be told by time following implementation.
Please contact me or my experienced colleagues in Blake Morgan's Succession and Tax team for further advice on this and related points. We can advise on this and practically all other aspects of estate administration.