New Probate Fees –Taxation in Disguise?

New probate fees are expected to be introduced in May 2017 with a jump in fee from £215 to £20,000 in some instances.

Currently there is a flat fee of £215 for all estates (or £155 if the estate is dealt with by a solicitor), with the exception of those under the value of £5,000, which do not have to pay a fee.  People who have very little savings and either receive certain benefits or are on a low income can apply for a fee remission.  If successful their fee is waived or reduced.

On 18th February 2016 the Government issued a consultation document entitled, Consultation on Proposals to Reform Fees for Grants of Probate.

The consultation sought views on the following proposals:

  • introducing a fee structure for applications for grants of probate (or letters of administration) based on the value of the estate (see Table 1);
  • increasing the threshold below which no fee is payable for applications for grants of probate (or letters of administration) from £5,000 to £50,000; and
  • disallowing applications for fee remissions.

Table

In September 2016 an unprecedented Joint Statement was issued by the Lord Chancellor and the Senior President of Tribunals.  Basically this pointed out that:

  • the Government was investing £1 billion a year in running the court system;
  • there was a long tradition of the users of the courts paying fees, dating back to the 13th century;
  • the Government was committed to delivering value for money to the taxpayer;
  • probate fees were to be reformed and would be expected to deliver £300 million a year in additional income.

The Government response to the Consultation on Proposals to Reform Fees for Grants of Probate was published in February 2017.  The salient points were that:

  • Only 8% of respondents agreed with the change from a fixed fee to a scaled fee based on estate value.
  • 29% agreed with the proposed increase in the no fee threshold.
  • Less than 2% agreed the proposed new level of fees.

Despite the overwhelming weight of responses against the proposals the Government response is that it will press ahead, with no amendments made to the main issues consulted upon.

The proposed new fee structure is expected to come into effect in May 2017 and is set out in Table 1.

Whilst it is good news to see that a much greater percentage of people will pay no fee in the future the general view of the profession is that the threshold has been set too high.  Estates of around £30,000 could afford to pay a fee, set at the current level of £215.  These estates will now be subsidised by the disproportionate fees levied at larger estates.’

It is clear from the statement issued in September 2016 that the Government is looking to reduce taxpayer expenditure on the justice system and that it had already decided to do so by increasing probate fees, regardless of the response form the consultation process.  However, the fee level for some estates will far exceed the actual administrative costs to the Probate Service.  Fees at those levels will therefore be subsidising other areas of the justice system.  As such they effectively act as a form of taxation in themselves.  This is essentially an increase in inheritance tax, which is already 40%.

A further issue for those needing to deal with the estate is that they are not legally able to access the assets of the estate until probate is granted.  But probate cannot be granted until the fees are paid. In other words, whilst the estate can repay the fee, it cannot pay it upfront.  Therefore, unless those administrating the estate have the money to pay the fee for the grant of probate, they will not be able to manage the estate at all.  It is expected that special short term loans will be needed to overcome this issue, similar to bridging loans.

If you would like further information or advice please contact Robert, Jane, Glenn or Amy on 01752 668246 or send an email by clicking here.

:
Robert Butler
:
Jane Gilding
:
Glenn Sambells
:
Amy Douch