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Press comment: Probate fee saga continues as OBR labels a tax

13/03/2019

In the Office for Budget Responsibility’s report it highlights the impact of the probate fee hike, including that the it expects the Office for National Statistics to classify them as a tax on capital and to generate £155 million a year in additional tax receipts (excerpt below). 

If you’re covering this, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:

Rachael Griffin“An exorbitant hike in probate fees are just weeks away from becoming a reality after months of contestation. In its accompanying report to the Spring Statement, the Office for Budget Responsibility, highlighted that given the structure of the fees, the Treasury expects the ONS to classify them as a tax on capital rather than a payment for a service.  In fact, it used the very word the Ministry of Justice has been desperate to avoid, tax. The OBR went so far as to put a figure on the amount raise by the fees, which can be up to £6,000 per estate, at around £155 million.

“Ultimately, probate fees should relate to the work carried out and should clearly be labelled as a fee. If they are being used for other purposes then it’s a tax and needs to be labeled as such and go through proper process.

“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.”

 

OBR report:

4.45 Having reviewed its initial plans, the Government has altered its proposed schedule of fees payable for an application for a grant of probate. The new rates come into effect in April and range between £250 and £6,000, depending on the value of the estate. Given the structure of the fees, the Treasury expects the ONS to classify them as a tax on capital rather than a payment for a service (which is treated as negative spending and had been factored into the Ministry of Justice’s RDEL budget). This will add to receipts and spending equally, because the new tax is offset by the removal of the negative spending from RDEL.

4.46 The new fee structure is expected to raise around £155 million a year. We have reduced our inheritance tax forecast by around £5 million a year to reflect the incentive for individuals with estates worth close to the new probate fee thresholds to reduce the value of their estates to pay a lower fee. This effect is expected to be small, since the inheritance tax liability itself already provides a significant incentive to reduce the value of estates.

For more information contact

Kathleen Gallagher023 8072 629307990 004932kathleen.gallagher@quilter.com

Notes to editors:

About Quilter plc:

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