Probate - new proportional fee structure.

[supremetwo]

Proportional fees going ahead.

https://consult.justice.gov.uk/digital- ... f-probate/

Following the consultation, the government has decided to proceed with all the proposals as set out in the consultation; a summary of the responses and details of the reasons for that decision are set out in the consultation response, published here alongside an assessment of the impacts of these proposals and an updated equalities statement.

https://consult.justice.gov.uk/digital- ... sponse.pdf

Table 1: New fee structure
Value of estate (before inheritance tax) Proportion of all estates in England and Wales Proposed Fee
Up to £50,000 or exempt from requiring a grant of probate 58% £0
Exceeds £50,000 but does not exceed £300,000 23% £300
Exceeds £300,000 but does not exceed £500,000 11% £1,000
Exceeds £500,000 but does not exceed £1m 6% £4,000
Exceeds £1m but does not exceed £1.6m 1% £8,000
Exceeds £1.6m but does not exceed £2m 0.3% £12,000
Above £2m 0.5% £20,000

All payable up front!

[Lootman]

I'd call that a tax and not a fee.

"63 respondents agreed with the proposal. 695 disagreed."

So they went ahead. Democracy in action.

[Bouleversee]

You beat me to it, Lootman. Just come in from an exhausting day gardening and found an email form justice.gsi.gov.uk with this wonderful news. Of course it's a tax. How could it possibly cost that much to process a probate application? How many times do they want to tax the same money? See you in Switzerland.

[Bouleversee]

Nothing on radio 4 news or in The Times or Financial Times about this today. Did anyone see/hear anything about it elsewhere?

[UncleEbenezer]

Nothing on radio 4 news or in The Times or Financial Times about this today. Did anyone see/hear anything about it elsewhere?

Heard about it on Radio 4 sometime within the last few days. A tax to be sure, but at a level that'll probably just about cover its own administration cost. More jobs for the tax avoidance biz.

How many wrongs does it take to (fail to) make a right?

[Lootman]

A tax to be sure, but at a level that'll probably just about cover its own administration cost.

Actually if you read the links that supremetwo provided, you will see a clear statement that these revenues are to help fund the courts and tribunals. So they are quite blatant about it not being to (just) cover the cost of the probate system, but rather to make a profit in order to fund the broader justice system.

So "Probate Tax" would be more accurate.

More jobs for the tax avoidance biz.

Yes, as if a 40% take isn't sufficient reason to do whatever it takes to avoid IHT, now there is another reason to avoid probate. The good news is that it's not too difficult if you're committed and plan ahead.

[chas49]

Moderator Message:
Legal Issues (Practical) is not the place for debating whether it's a tax or not please!

Without my mod hat on, it's worth pointing out that the fees are not yet applicable - the government need to make the necessary statutory instrument and set a commencement date. I would imagine that may well be 1 April? I presume it will apply to probate applications on or after that date, so there may be some advantage to getting applications in as soon as possible although I realise scope for speeding things up may be limited in many cases.

Once we know the precise dates, it will be useful to update this topic.

[JonE]

there may be some advantage to getting applications in as soon as possible although I realise scope for speeding things up may be limited in many cases.

I certainly hope my intended beneficiaries and executor(s) accept all limits on the scope and don't do anything to speed things up.

Cheers!

[Bouleversee]

It's due to start in May (no precise date given) subject to parliamentary approval etc. which I assume will be a formality, unless possibly we all organise a march down Whitehall or whatever. Having spent most of the day reading the pile of documents HMRC sent me and even worse trying to read on my laptop the tiny print of the guidance notes for IHT 400 which is the one they told me I needed to fill in but then sent me the 205 notes, I feel they should be paying me rather than imposing an extra tax. Can anyone make sense of this bit:

"This part of the form is about any gifts made by the deceased (the donor) in the period before the gifts shown on pages 2 to 4 of the form. To work out whether tax is payable on any gift, the law says that we must add it to any chargeable gifts made in the 7 years before the gift concerned. For example, if the deceased made a gift 6 years before they died, we will add that gift to any chargeable gifts made in the 7 years before the gift was made. A chargeable gift is any gift that is not wholly covered by exemptions and: • was made before 18 March 1986 • was made between 18 March 1986 and 21 March 2006 and was given to a company or the trustees of a discretionary trust • was made on or after 22 March 2006 unless it was a gift — to another individual — to a disabled trust — into a bereaved minor’s trust on the coming to an end of an immediate post-death interest Gifts from one individual to another are not chargeable gifts and should not be included in this section of the form. You should not include these earlier gifts with the estate on death because they are only relevant in working out tax payable on gifts. We will take any earlier gifts into account when looking at the gifts after you have taken out the grant." (I'm afraid it hasn't copied and pasted as formatted).

Who knew that they could go back more than 7 years for gifts, to 1986 in fact? And aren't gifts to individuals chargeable if they exceed the exempt amounts and you don't survive for 7 years afterwards? Fortunately, there have been no such gifts in my husband's case.

Much of HMRC's stuff is very badly written.

[Bouleversee]

Incidentally, if one has been foolish or ill enough to allow assets to accumulate to £2m on death, since the probate fee is apparently not deductible from the estate, one's estate is presumably paying tax on £20k it is not going to be able to distribute to heirs. Or have I had a glass too many?

[Bouleversee]

I wonder if the amount of fee payable will be fixed by the date they receive the application or the date they get around to dealing with it. I should think they will be inundated before May.

[AJC5001]

...trying to read on my laptop the tiny print of the guidance notes for IHT 400 ...

This one? https://www.gov.uk/government/uploads/s ... _Notes.pdf

As this is a PDF, it can be zoomed to whatever size text you are comfortable with, although you may then find you need to use the scroll bars.

Can anyone make sense of this bit: (I'm afraid it hasn't copied and pasted as formatted).

Try this.

"This part of the form is about any gifts made by the deceased (the donor)
in the period before the gifts shown on pages 2 to 4 of the form. To work
out whether tax is payable on any gift, the law says that we must add it to
any chargeable gifts made in the 7 years before the gift concerned.
For example, if the deceased made a gift 6 years before they died, we will
add that gift to any chargeable gifts made in the 7 years before the gift
was made.

A chargeable gift is any gift that is not wholly covered by exemptions and:
• was made before 18 March 1986
• was made between 18 March 1986 and 21 March 2006 and was given to
a company or the trustees of a discretionary trust
• was made on or after 22 March 2006 unless it was a gift
— to another individual
— to a disabled trust
— into a bereaved minor’s trust on the coming to an end of an
immediate post-death interest

Gifts from one individual to another are not chargeable gifts and should
not be included in this section of the form.

You should not include these earlier gifts with the estate on death because
they are only relevant in working out tax payable on gifts. We will take any
earlier gifts into account when looking at the gifts after you have taken out
the grant."

(From Page 22)

Who knew that they could go back more than 7 years for gifts, to 1986 in fact? And aren't gifts to individuals chargeable if they exceed the exempt amounts and you don't survive for 7 years afterwards? Fortunately, there have been no such gifts in my husband's case.

Much of HMRC's stuff is very badly written.

Well, I knew there was some additional requirement on earlier gifts, but not the details. Probably because I've seen the Guidance Notes before. I wouldn't be able to say what the requirements were from memory - I'd have to read the Guidance Notes to find out - just as you have. In my case I didn't need to complete IHT400, so didn't bother working out what this meant. As you say it also doesn't apply to you, I'd suggest you ignore it as well.

Incidentally, if one has been foolish or ill enough to allow assets to accumulate to £2m on death, since the probate fee is apparently not deductible from the estate, one's estate is presumably paying tax on £20k it is not going to be able to distribute to heirs. Or have I had a glass too many?

Can't this be paid outside of the estate, perhaps by one (or more) of the beneficiaries?

I wonder if the amount of fee payable will be fixed by the date they receive the application or the date they get around to dealing with it. I should think they will be inundated before May.

Are you expecting a larger than usual number of deaths between now and May?

Adrian

[Bouleversee]

AJC wrote:

"Are you expecting a larger than usual number of deaths between now and May?)

Well, some might expire under the stress of trying to complete probate applications before the new rates come in (me included) but what I meant was that people would be galvanized into getting them done in time rather than do them at a more leisurely pace so they will receive a lot at once.

[Clitheroekid]

Having spent most of the day reading the pile of documents HMRC sent me and even worse trying to read on my laptop the tiny print of the guidance notes for IHT 400 which is the one they told me I needed to fill in but then sent me the 205 notes, I feel they should be paying me rather than imposing an extra tax.

It frankly seems bonkers to me that anyone should put themselves through such misery when from what you say there's plenty of money in the estate to cover the cost of paying a professional to do it all for you.

If it's a matter of principle or pride then good luck to you, but the phrase "Life's too short" comes to mind.

[Bouleversee]

Having spent most of the day reading the pile of documents HMRC sent me and even worse trying to read on my laptop the tiny print of the guidance notes for IHT 400 which is the one they told me I needed to fill in but then sent me the 205 notes, I feel they should be paying me rather than imposing an extra tax.

It frankly seems bonkers to me that anyone should put themselves through such misery when from what you say there's plenty of money in the estate to cover the cost of paying a professional to do it all for you.

If it's a matter of principle or pride then good luck to you, but the phrase "Life's too short" comes to mind.

Well, it depends what the charge is. I have read about astronomic charges for dealing with simple estates, because the solicitors want a percentage of the value and I have had experience of solicitors who knew less about the law than I did. And actually, it is a matter of principle. I have spent much of my life in contributing to getting laws changed (e.g. I should think most people will be pleased that we now have independent taxation of wives' investment income, which was not the case before I got involved, having paid unfair tax at my husband's marginal rate on investments I owned before my marriage. It took a lot of lobbying to achieve that. Unless one goes through a process, one cannot know whether it makes sense or not. There is much in the probate/IHT process that does not make sense to me and I think for an uncomplicated estate, with no trusts, no gifts in excess of exempt amount, no gifts with reservation, and where nothing is left in excess of the exempt amount to anyone other than the spouse, so no IHT is due, it should not be necessary to read 84 A4 pages and umpteen schedules and several forms just because the estate value, most of it being the share of the jointly owned home, happens to marginally exceed £1m. I maintain that, unless one's affairs are particularly complicated, anyone with reasonable intelligence should be able to understand the documentation and fill in the requisite forms. I'd rather put in a bit of effort, save solicitors' fees, and give the savings to my grandchildren who are certainly going to need some help, and I'd like to make it easier for others to do the same.

And anyway, I've already got all the valuations in, so what is left for a solicitor to do other than fill in the forms?

Apologies if this is off topic but then I think Clitheroekid's post was as well.

[scrumpyjack]

Totally agree with Bouleversee on this. If you do instruct a solicitor you are going to have to do a lot of the donkey work yourself anyway, listing bank accounts, brokers, assets, liabilities etc, so you might as well send out the letters to these entities nad prepare the figures yourself. With your knowledge of the estate there are far less likely to be mistakes in identifying all the assets and liabilities.

In the cases I have been the executor I used a solicitor to fill out the forms, having handed him/her all the information on a plate, so it only took a couple of hours of form filling by the solicitor, charging on an hourly rate and with no percentage fee. They all try to charge a percentage 'risk' fee, but if you, not them, are signing and submitting the IHT forms, they are not taking any risk and should not charge anything other than an hourly rate plus disbursements.

If sadly I have to do this yet again, I will probably fill the forms out myself.

[Lootman]

In the cases I have been the executor I used a solicitor to fill out the forms, having handed him/her all the information on a plate, so it only took a couple of hours of form filling by the solicitor, charging on an hourly rate and with no percentage fee. They all try to charge a percentage 'risk' fee, but if you, not them, are signing and submitting the IHT forms, they are not taking any risk and should not charge anything other than an hourly rate plus disbursements.

Yes, I universally have a problem with fees being based on a percentage of value. This applies most notably with estate agents, but also pretty much anyone involved in the chain of buying and selling homes. And probate of course.

The value of an estate, asset or transaction does not necessarily have anything to do with how much work it is to process. A ten million pound estate comprising of one asset is easy. A million pound estate with foreign shares and homes might be a nightmare.

A pox on all percentage charging, with the possible exception of insurance where the premium really should be related to the potential loss and risk.

[Gengulphus]

In the cases I have been the executor I used a solicitor to fill out the forms, having handed him/her all the information on a plate, so it only took a couple of hours of form filling by the solicitor, charging on an hourly rate and with no percentage fee. They all try to charge a percentage 'risk' fee, but if you, not them, are signing and submitting the IHT forms, they are not taking any risk and should not charge anything other than an hourly rate plus disbursements.

Hmm... Experiences can vary a lot on things like that. E.g. in my most recent example of acting as executor, we (I had a co-executor) used a solicitor. No attempt whatsoever was made to charge a percentage fee, and that's not because we made any attempt to forestall it - we simply contacted the solicitor who prepared the will and asked what they would charge to assist as needed with handling it, and they came back with their hourly rates. We did the 'donkey work' of going through the deceased's possessions and financial records ourselves, but we did know from the start that there were complications that would make us want to use a solicitor, including foreign assets, a property that one beneficiary wanted to receive as part of their legacy and a Deed of Variation that would make a 6-figure difference to the amount of IHT payable. And the solicitor certainly did more than just a couple of hours of form-filling!

Not saying that we absolutely needed to use a solicitor for any of those complications - I'm sure we could have handled them ourselves with sufficient time and effort put into learning just what they involved and then doing it all with sufficient care to avoid expensive mistakes. But there are limits to how much work one can reasonably put into the job, and it makes sense to employ a solicitor's services when their expertise means that they'll take much less time to do the job than you would - whereas that wouldn't have been the case for the 'donkey work'. Indeed, on some aspects of the 'donkey work', we might well have ended up taking less time than the solicitor would - e.g. going through quite extensive financial records in a foreign language which we happen to know well, but is not one of the ones commonly learnt in schools in this country...

Gengulphus

[Bouleversee]

I may need to use a solicitor at some point but in the meantime have been doing the donkey work so that all that will be necessary will be an hourly fee.

[supremetwo]

Once we know the precise dates, it will be useful to update this topic.

It has been passed by Parliament and will apply from May 1 2017.