Simplification seems to be a buzzword in government these days, between ISA simplification, IHT simplification and now tax simplification through technology. This is no bad thing as layer upon layer of tax changes over the past number of years has built a cake that is verging on toppling over. However, the crucial element here is that all the simplification initiatives join up and do not add yet another complex layer.
In principle automatically giving adults a personal tax account is a sensible idea, but as with everything there will be kinks that need to be worked out. For instance, while a personal tax account gives people the ability to do all sorts of activities including checking state pension and claim tax refunds, just giving them an account doesn’t guarantee they will know or engage with the tools it provides.
As the OTS acknowledges, technology is a double-edged sword as it presents opportunities to make life easier but also comes with risks. It is therefore encouraging they are continuing to review the impact, particularly on vulnerable customers.
“In an age where everyone’s lives are touched by technology every day, it only seems right that technology also speeds up the probate process after someone’s death. Particularly since on average, probate takes between six to nine months to complete and can take up to eighty working hours. Today’s announcement that people will now be able to apply, pay and swear a statement of truth all online finally brings this process in line with modernity. It aligns with the government’s ambition to make tax completely digital and hopefully goes some way to simplifying this complex area.
“However, with increased simplicity, you would hope the process becomes more cost efficient. At the end of last year the MoJ essentially introduced a stealth tax by doing away with the flat rate probate fee of £215 or (£155 if using a solicitor) and implementing a new tiered charging structure meaning those who have a larger estate could face up to a £6,000 fee. If the MoJ want to use a fee hike to pay for developments within their department it must go through proper parliamentary rigour and be considered as an additional tax.
“With property prices at historically high levels, a number of estates will suffer with this new charge. However, using trusts can help reduce the value of an estate for inheritance tax purposes, meaning a lower charge will apply. People concerned about how beneficiaries will pay the probate fees could leave sufficient funds in a life insurance policy, and provided the policy is written in trust, it can be accessed immediately on death, without the need for probate.”