The UK government is pushing ahead with the new probate fee for estates worth over £2 million. News has sneaked out it has always viewed this as a tax according to a Daily Mail report. This was after its investigators trolled through all 200 pages of the Chancellor’s Spring Statement. It would be interesting to know how David Lidington plans to spend his extra £155 million a year.
Ministers Get It in the Neck for Saying It Was a ‘Fee’
Ben Wilkinson, deputy Daily Mail editor claims complaints are rolling in that certain ministers bypassed parliament by claiming the up to £6,000 ‘stealth tax’ was a fee, and not a tax. He quotes legal experts saying the matter will now have to come before parliament.
The controversy rages on around a peculiarity in UK tax law few of us may have known previously. A ‘fee’ is supposed to cover the cost of a service, whereas “a tax is revenue-raising and disproportionate to the cost of the services provided”.
Bereaved families will be watching these debates with interest. They previously paid a flat rate of £215 for a probate for an estate worth over £5,000. Now, only estates worth over £50,000 will come under the UK government’s taxing eye.
UK Charities Up In Arms Over Lost Income
UK policy provides tax relief for charitable donations. A donation from an estate reduces the amount due for inheritance tax. Donations could also reduce the tax rate by 10%, if they represent a tenth or more of the value of the estate.
Civil Society is expressing concerns the proposed changes to probate fee structures could be “detrimental to charitable giving,” They are seeking “urgent action” from the government. But will they get it?
The Charities Warn 87% of Their Income Is at Risk
Institute of Fundraising, Remember a Charity, Institute of Legacy Management and National Council for Voluntary Organizations have all written letters to the Ministry of Justice expressing concerns regarding the higher probate charges.
They are concerned the new fee, tax, call it what you like “has unintended consequences that could be detrimental to charitable giving.” They reason a percentage of estate value bequeathed to charities will be worth less after the government appropriation.
They currently only receive 13% of bequests in the form of fixed amounts. “While we understand that probate fees are an essential element of judicial funding, we are concerned that the cost is disproportionate,” they say.
The Charitable Bodies Have Therefore Proposed an Alternative
Civil Society reports the four charitable bodies are requesting a reduction in estate- and will-probate charges where there are legacy gifts. They hope this would “create an incentive to leave a charitable gift in a will”.
However, parliamentary under-secretary of state at the Ministry of Justice Lucy Frazer defended the changes. Estates will pay over no more than 0.5% of their value for probate, she points out. Therefore this only becomes significant when they leave a large part, or all of their residual to charity.
