You are here

Probate fee hike may not be legal, say MPs

Joint committee argues new fees amount to an inheritance tax by the back door

6 April 2017

Add comment

The Ministry of Justice’s plan to fund the courts and tribunals service by hiking probate fees by up to £20,000 for some estates has been thrown into disarray after a parliamentary report cast doubt on the Lord Chancellor’s authority to introduce the charges.

The government ignored overwhelming opposition in March to push ahead with increases to probate fees. Some 695 of the 853 responses to the consultation said it would not be fairer to move to a proportionate fee structure. Lawyers have since warned that asset-rich but cash-poor families could put their welfare at risk as they attempt to minimise the impact of the fee rise.

The new fees, which apply from 1 May, will be calculated on the estimated value of the estate before inheritance tax and are payable upfront. There will be no fee for estates valued at less than £50,000, which the government estimates account for 58 per cent of estates. Above that threshold, fees will start at £300 for estates valued between £50,000 and £300,000, rising to £20,000 for estates above £2m.

Probate fees are currently set at £215 if the process is handled directly by the executor, and £155 if represented by a solicitor.

The fee change was authorised by the Lord Chancellor, Liz Truss, in February. However, the report from the Joint Committee on Statutory Instruments suggests that the new fees amount to an inheritance tax by the back door and that the Lord Chancellor may be acting beyond her powers.

The committee’s report ‘draws the special attention of both houses to this draft order on the grounds that, 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 committee is doubtful whether section 180 [of the Antisocial Behaviour, Crime and Policing Act 2014] does in express words entrust the Lord Chancellor with the power to impose charges of the magnitude proposed by the draft order and for the purposes connected with her department specified in the explanatory memorandum.’

Section 92 of the Courts Act 2003 and section 180 of the 2014 Act state that before setting a fee the Lord Chancellor must have regard to the financial position of the courts, including any costs incurred by the courts not being met by current fee income and the competitiveness of the legal services market.

Rebecca Fisher, a partner at Russell-Cooke, explained: ‘The Committee were concerned that the Lord Chancellor was acting beyond the enabling powers because she would, to all intents and purposes, be imposing a tax rather than a prescribed probate fee.

‘This is because the fee is directly linked to the value of the estate rather than any work involved by the courts and the fee is being used to fund the court service as a whole. The Ministry of Justice refuted that any fee must directly relate to the cost of the service and that fees raised must be reserved for the probate service.

‘Ultimately the committee were doubtful that a power could be used to increase probate fees for the purposes of funding services that would not be used by the executors, i.e. courts and tribunal services dealing with litigation. Unlike litigation, obtaining probate is akin to a registration service not litigation.

‘Any form of taxation requires the consent of parliament. Given the committee believes this is akin to taxation and the manner in which the Lord Chancellor seeks to use her powers is quite extraordinary, the ball is firmly back in the Ministry of Justice’s court.’

John van der Luit-Drummond is deputy editor of Solicitors Journal

john.vanderluit@solicitorsjournal.co.uk | @JvdLD

Categorised in:

Private client Wills, Trusts & Probate Tax & Wealth structuring

Tagged in:

probate fees