The Government’s Probate Stealth Tax is Unconstitutional and Must be Stopped

On Thursday 7 February the House of Commons Delegated Legislation Committee will consider the Government’s plans to hike the fees people have to pay to access a deceased relative’s estate.

Don’t let the title of the ‘Non-Contentious Probate (Fees) Order’ fool you – this proposal is anything but non-contentious. Introduced by statutory instrument, the order would see the fees charged for a grant of probate soar from the current flat figure of £215 to as much as £6,000, depending on the value of the estate.

Not only is this an unfair way to squeeze money out of grieving and vulnerable families, but these fees are also not fees at all – they are a stealth tax. The Government has already admitted that the increased charges will be used to subsidise the other parts of the court’s service they have cut funding for, rather than merely for covering the cost of providing the probate service.

This deception matters because of an ancient constitutional principle. Since Magna Carta, kings and governments alike have been required to put legislation before Parliament for approval before raising a new tax. However, fees designed to recover the costs of providing a service, rather than raising revenue, can be introduced via a statutory instrument. This allows for reduced parliamentary scrutiny.

If the Government wishes to raise extra revenue from the estates of the deceased they should do so through changes to inheritance tax rates. However, by disguising this new tax as a fee increase, the Government hopes to be able to push it through the constitutional back door without giving Parliament a chance to scrutinise and vote on the proposals correctly.

Two influential parliamentary committees have already expressed serious doubts about the Government’s legal power to impose this stealth tax through a statutory instrument. However, this Government appears happy to ignore constitutional convention whenever it finds it inconvenient.

If the Government is allowed to get away with such an egregious misuse of its fee-levying powers, it will set a dangerous precedent for future tax rises.

The Law Society is leading the campaign to block these proposals. They are calling on people to write to their MPs urging them to take action – you can do the same by using their quick and easy online tool.

The Liberal Democrats have a long and illustrious history of defending the rule of law. Our party must continue to defend our constitutional democracy and hold overreaching governments to account.

* Hugo Forshaw is an activist with the Merton Liberal Democrats, and a political adviser specialising in justice policy working for the Law Society. He writes in a personal capacity. Follow him on Twitter @HugoForshaw

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18 Comments

  • Nonconformistradical 6th Feb '19 - 12:09pm

    Hugo – it seems to me likely that the greater the value of an estate the greater the amount of work which the Probate Registry will have to do if it is doing its job properly – I assume they do actually scrutinise probate applications. It therefore seems reasonable to charge more for a high value estate than for a low-value one.

    I can’t say that I’m all that bothered if – say – an estate valued at over £2 million will henceforth carry a charge of £6000. It seems to me that the existing flat rate charge of £215 means that effectively beneficiaries of low-value estates (from £5000 to £50000) may have been subsidising beneficiaries of higher-value ones if the Probate Registry does have more work which it should be doing for a high-value estate.

    Frankly that stinks. It is a system which benefits the better off at the expense of the poor.

    I wouldn’t worry if the charge continued in future to increase for estates of significantly greater value than £2 million instead of being capped at £6000.

  • Hugo Forshaw 6th Feb '19 - 12:32pm

    Hi Nonconformistradical, the amount of work the Probate Registry has to do – and therefore the cost incurred – does not differ based on the value of the estate. The fee is charged for a grant of probate, which is the means by which someone acquires the legal authority to become the executor of an estate. The process consists of filling in some forms and then taking an oath.

    The current system is therefore fair for everyone – no-one benefits from anyone else. The new proposals would, on the other hand, would unjustifiably extract extra revenue from owners of high value estates (which, I must stress, can include cash-poor but land-rich individuals such as farmers or owners of family businesses). The increased fees are not needed to cover the costs of the service – indeed, the Ministry of Justice has admitted that the extra money extracted will be used to plug holes in the Ministry’s budget elsewhere.

  • Joseph Bourke 6th Feb '19 - 12:41pm

    Hugo,

    “would unjustifiably extract extra revenue from owners of high value estates (which, I must stress, can include cash-poor but land-rich individuals such as farmers or owners of family businesses).”

    Is it not the case that these high value estates benefit from Agricultural Property relief and Business property relief from Inheritance tax?

  • Nonconformistradical 6th Feb '19 - 12:47pm

    OK – so what work does the Probate Registry actually do when they receive an application for probate? Or do they just mechanically arrange the interview and issue the grant of probate without checking anything?

  • “Cash poor, but land rich”.
    There’s a pretty obvious solution to that dilemma.

  • Hugo Forshaw 6th Feb '19 - 12:51pm

    Hi Joseph, in this case I would direct you to my point about the constitutional appropriateness of attempting to change or raise taxes through statutory instruments. If the Government wished to introduce primary legislation in order to change inheritance tax rates and/or relief I would not have a significant problem, as it would ensure Parliament has an opportunity to scrutinise and approve the proposal. However, regardless of the relative merits of the policy, anyone should be concerned by a Government that seeks to misuse fee-levying powers in order to impose a new tax with minimal scrutiny.

  • Hugo Forshaw 6th Feb '19 - 1:32pm

    Hi David, this is not a proportionate measure. We must be careful not to conflate inheritance tax with probate fees. Inheritance tax is (rightly) levied on bequests and operates on a progressive scale so that the richest pay the most. Probate fees are the charge that is required in order to apply to become the executor of an estate. This charge applies to the executor, who is not always the same as the beneficiary.

    I agree that the wealthiest should shoulder the greater burden of taxation – indeed, that is the point of inheritance tax. Had the Government attempted to alter and/or raise the rates of inheritance tax this would not be an issue. However it has instead attempted to manipulate its fee-levying powers in order to push through this stealth tax in a way that allows it to bypass proper parliamentary scrutiny.

    If you want wealthy people to pay more inheritance tax, by all means, let the Government introduce legislation to that effect so that Parliament can vote on it. However it is not acceptable for the Government to sneak tax rises through the back door by disguising them as fees, which can be provided for by regulations. This is a fundamental principle of our constitutional democracy that the Government is riding roughshod over.

  • Joseph Bourke 6th Feb '19 - 11:40pm

    Hugo,

    I appreciate the constitutiional point and agree that probate fee schedules should be set on the basis of covering the runing costs of the probate office and not as an extra or stealth form of taxation. However, I can see no objection to using a sliding scale as a means of distributing costs across estates dealt with. Neither do I think that a sliding scale of fees “unjustifiably extracts extra revenue from owners of high value estates (which, I must stress, can include cash-poor but land-rich individuals such as farmers or owners of family businesses).”
    A more fruitful area for the law society’s attention might be parking fines. I understad surpluses from parking activities should be spent on local transport projects. However, the exponetial growth in draconian parking regulations and costs seems to be only outstripped by the number pf potholes appearing in roads.
    You will probably have a lot more success in getting people to write to their MPs about the inequity of parking fines than a campaign on probate fees, important as that might be in defending the rule of law.

  • Hugo,
    Thank you for raising this important issue of principle. I wrote to my MP about it yesterday.
    It would be good if you would expand on why the amount of work required to approve executors is independent of the size of the estates they are executing. If I recall correctly the Probate Registry process is quite straightforward whereas the amount of work done by HMRC to determine any IHT liability quite obviously depends on the size and complexity of estates.
    It’s unfortunate that some of the comments have digressed onto the IHT scales. However, if the proposed fee scale is adopted it will, presumably, be charged on IHT exempt estates where there is a surviving spouse or civil partner. It would make sense to have exempted those estates from the higher charges.

  • It would be good if you would expand on why the amount of work required to approve executors is independent of the size of the estates they are executing.

    Having recently been through registering a death and probate loop, the work done by the probate office in granting probate is independent of the eventual size of the estate, in the same way how registering a birth, getting married and registering a death, at the registry office is independent of the wealth of the people involved.

    As can be seen from the comments, those who ardently believe the wealthy should pay more, won’t in general oppose this measure and so are less likely to raise an objection and so the government is more likely to get this measure approved on the nod.

  • Nonconformistradical 7th Feb '19 - 3:18pm

    As I asked already but haven’t had a response…
    “OK – so what work does the Probate Registry actually do when they receive an application for probate? Or do they just mechanically arrange the interview and issue the grant of probate without checking anything?”

  • “OK – so what work does the Probate Registry actually do when they receive an application for probate?”

    From what I saw, they checked that the completed form and supporting paperwork was all in order and then had you swear an oath (or not if you are a Quaker), after which the Grant arrived in the post.

    Professional probate services charge fees because they will do the leg work of assessing the estate, applying for probate and then dealing with the estate, all of which takes time and effort.

  • Joseph Bourke 8th Feb '19 - 12:53am

    Hugo’s campaign has hit the headlines – front page of the Daily Mail https://www.dailymail.co.uk/news/article-6680473/Fury-sneaky-6-000-death-tax-set-hit-300-000-families.htm

    Vince Cable is quoted ‘This is a clear abuse of executive power: bringing in a tax hike without proper parliamentary scrutiny…‘The fees themselves have to be paid up front, so the vastly increased sums involved will now see bereaved relatives having to take out loans just to access what has been left to them.”

    ‘This clearly isn’t defensible, and it would appear ministers are doing all that is possible to avoid defending it in the full glare of the House of Commons chamber.’

    It is a fair point about fees having to be paid up front rather than disbursed out of the estate.

  • Lorna Lancaster 8th Feb '19 - 11:40am

    As anyone who has spent endless, stressful hours completing umpteen cross referenced detailed forms to apply for probate knows, it is the applicant who does all the work including doing all the sums (I felt I was the one who should have been paid!) and the Probate Office merely rubber stamps it and writes a letter; hardly up to £6k worth. Swearing the oath just involves a 5 minute visit to the local register office, a pointless formality since I should imagine anyone who wanted to fiddle their return would just cross their fingers and do so. If you take your car into the garage for a service, you don’t expect to be charged according to your income or savings, do you? This is no different.

    The point is that this is clearly a stealth tax, yet another tax on the same estate in addition to IHT where applicable, and not deductible from the estate. Proposed tax increases should be debated in Parliament, according to law, and we should not allow this to be slid through without proper scrutiny. It will affect the middle classes, especially in the South of England rather than the very wealthy. This is all about raising money to fund the Law Courts, nothing to do with the cost of the Probate Service, and that should come from general taxation rather than fairly modest estates (largely based on the current value of one’s house) which will have to pay it on each death even where no IHT is payable. Don’t forget that that house will probably have to be sold before the second death to fund care home fees which in the south of England are exorbitant.

  • The record of the Delegated Legislation Committee’s is now published and depressing reading it makes. Link below:
    https://hansard.parliament.uk/Commons/2019-02-07/debates/457e96b5-ac21-404f-aef9-c5c33dae2d2b/DraftNon-ContentiousProbate(Fees)Order2018
    It seems that section 180 of the Anti-social Behaviour, Crime and Policing Act 2014 empowered the Lord Chancellor to charge enhanced fees and breaks the link between the scale of fees and the costs incurred in providing the service.

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