Probate fees hike – where are we now?

 In Comment, Gill's Blog

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Since writing this update the Government have shelved the proposals due to the General Election which has been called for 8 June 2017.  I have no doubt this topic will be back on the agenda so please do keep lobbying your MP.  I will keep you updated with news on this website, in my monthly newsletter and in my blog posts on LinkedIn.

Gill Steel Blog prefUnless you have spent the last few weeks in the desert or Siberia without an internet connection I am sure you know that the Ministry of Justice (MoJ) chose to proceed with its 13,000% increase in the cost of obtaining a Grant of Probate. They announced this in their response to the consultation on 18 February 2017:  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/594451/probate-consultation-response.pdf and laid a statutory instrument ready, or so they thought, for the rise to come in in May 2017.

Actions taken

Fortunately, word spread rapidly amongst practitioners. A petition against the rise was put on the Parliamentary petitions site https://petition.parliament.uk/petitions/188175 (36,240 signatures at the time of writing) and activists started to write to MPs. Jacob Rees-Mogg MP alluded to our concerns in the House of Commons saying that the proposed increase, whilst removing small estates from fees altogether, came at a cost of huge increases for everyone else, in what can only be described as a stealth tax.

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John Stockdale, a solicitor, shared with me his research, and here is the extract I quoted to my MP:

HMT’s Managing Public Money

6.2 Basic principle

6.2.1 The standard approach is to set charges to recover full costs. Cost should be calculated on an accruals basis, including overheads, depreciation (eg for start up or improvement costs) and the cost of capital. Annex 6.1 sets out how to do this.

6.2.2 This approach is simply intended to make sure that the government neither profits at the expense of consumers nor makes a loss for taxpayers to subsidise. It requires honesty about the policy objectives and rigorous transparency in the public interest.

6.3.5 The standard approach is that the same charge should apply to all users of a defined category of service, so recovering full costs for that category of service. Different charges may be set for objectively different categories of service costing different amounts to provide. Box 6.2 shows how this can work.


Box 6.2: how different charges can apply to different categories of service

Different categories could be recognised by:

    • distinguishing supply differences, eg in person, by post or online
    • priorities, eg where a quicker service costs more
    • quality, eg charging more for a premium service with more features
    • recognising structural differences, where it costs more to supply some consumers.

6.3.6 However, different groups of customers should not be charged different amounts for a service costing the same, eg charging firms more than individuals. Similarly, cross subsidies are not standard practice, eg charging large businesses more than small ones where the cost of supply is the same.

6.4 Setting a charge: non-standard approaches

6.4.1 Ministers’ policy objectives for a service where a charge is levied may not fit the standard model in section 6.3. In such cases it may be possible to deliver the policy objective in another way. Some ways of doing this are described below. Explicit Treasury consent, and often formal legal authority, is always required for such variations. It is desirable to consult the Treasury at an early stage to make sure that the intended strategy can be delivered.

Charging above cost

6.4.3 ONS normally classifies charges higher than the cost of provision, or not clearly related to a service to the charge payer, as taxes. Such charges always call for explicit ministerial decision as well as specific statutory authority. The Treasury does not automatically allow departments to budget for net expenditure associated with above cost charges. Netting off, or netting off up to full costs, may be agreed in certain instances, considering each case on its merits.

6.4.4 Sometimes when a change of this kind is classified as a tax, departments also propose to assign its revenue. The Treasury always treat such proposals with caution (see 5.6.3).

Cross subsidies

6.4.5 Cross subsidies always involve a mixture of overcharging and undercharging, even if the net effect is to recover full costs for the service as a whole. So cross subsidised charges are normally classified as taxes. They always call for explicit ministerial decision and parliamentary approval through either primary legislation or a s102 order.

By the MoJ’s own admission, it was seeking to charge way more than the current fees of £155/215 which meet its cost of delivering the Probate Service, in order to fund improvements in the Courts and Tribunal Service generally.Probate fees hike

My MP, Steve Brine, is a Minister and a member of the Whips Office, so he agreed to feed my concerns to senior colleagues about the above and the problems for Winchester constituents (who face a likely increase in fees, on the basis of average house prices, to £1,000). He later confirmed that a question on the matter would be debated at Treasury questions on 18 April 2017.

I also pointed out that it seemed odd in the extreme that at the same time as the MoJ was trying to seriously hike probate fees the Office of the Public Guardian (OPG) was reducing the fees for registering Lasting Powers of Attorney from £110 to £82 because it was making too much profit, which it is not allowed to do. Is the MoJ trying to raise probate fees because it can; whereas, other courts and tribunals may not be able to do so? Is this fair or what Parliament intended?

Jan Wright (a fellow committee member at STEP UK Practice Committee and on the Agent Advisory Group at HMRC with me) wrote a similar letter to her MP, highlighting the difficulties for farmers in her constituency in Cumbria where Tim Farron is the MP. He was interested in the problem, particularly the disparity between the action of the OPG and the MoJ.

Parliamentary response

The Joint Select Committee on Statutory Instruments reported its view on 29 March 2017 that the MoJ’s proposed SI should be rejected https://lnkd.in/duVqpqS because “if it is approved and made, there will be a doubt whether it is intra vires, and that it would in any event make an unexpected use of the power conferred by the enabling Act.” The view of this committee is that the hike is in fact a tax.

The MoJ have not taken this rebuke lying down and have requested a debate on the SI as drawn. Thank you to SFE for pointing out that this debate is to take place in a General Committee meeting on 19 April 2017:

https://calendar.parliament.uk/calendar/Commons/All/2017/4/19/Daily

Other action

STEP have conducted a successful media campaign to raise awareness of the problem with the general public who were horribly ignorant of the issue. In that regard, the Daily Mail has been a major contributor to the debate:

e.g, http://www.dailymail.co.uk/money/news/article-4336656/Death-tax-trap-cost-grieving-families-thousands.html?ITO=1490)

and other newspapers have taken part: The Times on 6 April 2017.

Strength of feeling is definitely behind the objections but also practical difficulties. By using the date of the application as the changeover date rather than the date of death, a significant problem in taxable estates arises, given the average time taken at present by HMRC to issues receipted IHT 421 forms (8 weeks).

The MoJ addressed this by saying that they would accept full correct applications for a Grant without the IHT 421 and will log the application as under the old fee system if received before any announced start date; but it will only issue the Grant once they have received the receipted IHT 421.

As I am off on holiday at the crucial time (13 – 24 April) I shall leave the on-going lobbying in your hands – please sign the petition if you have not already done so; please continue to lobby your MP, as even if the MoJ cannot proceed with the SI as drawn it intends to increase the fees and will start again and please let your clients know.

11 April 2017

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