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Chancellor says “No new Death Tax” while Government Raises a New Death Tax - According to… the Government
07/04/2017, by Lee Sharpe, Tax News - Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
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Despite the Chancellor's comments in the 2017 Spring Budget, a Select Committee has warned the government that it risks breaking the rules by trying to introduce a new Death Tax without Parliament's consent.

Many readers will recall that the Chancellor said in his hit 2017 Spring Budget Speech that he would not be “exhuming Labour’s hated Death Tax”. This is not accurately recorded in the copy of the Chancellor’s speech on the government’s website. But it is in Hansard, which tells it like it is, or was.

Neither version admits that the government was, in fact, honing a new Death Tax, out of the new fee rates for Grants of Probate.

The current maximum fee for a Grant of Probate is either £155 or £215 (The former if applied for by a solicitor; the latter if applied for otherwise). In its February 2016 consultation, the Ministry of Justice (MoJ) had said that it wanted to increase the fees, the final version as follows:

Value of Estate (before IHT)

Fee

Up to and including £50,000 (or grant of probate not required)

£Nil

Above £50,000, not exceeding £300,000

£300

Above £300,000, not exceeding £500,000

£1,000

Above £500,000, not exceeding £1million

£4,000

Above £1million, not exceeding £1.6million

£8,000

Above £1.6million, not exceeding £2million

£12,000

Above £2million

£20,000

 

At the highest band, the new charge basically represents a staggering hundred-fold increase in the fee, topping out at 1% of the value of the estate, immediately that its value hits the highest band.

This was NOT because the costs of administering Probate were spiralling out of control – far from it.

This from para 27 of the consultation:

“Income raised through probate fees has reached full cost recovery of the Probate Service – around £45 million per year (based on current estimates for 2015/16). In light however, of the current financial circumstances, the need to eliminate the deficit and to meet the commitments in our Spending Review settlement, we need to go further to reduce the overall demands of the courts and tribunals on the Exchequer.”

The MoJ admitted that the current arrangement pays for itself. But the MoJ is struggling to manage its costs more generally thanks to austerity measures, so thought it would be OK to make estates contribute more – a lot more.

So this was all about raising money for something other than the Probate Service. Which, to most people, (including me), smelled like a new tax. On Death. A Death Tax, if you will. Despite the Chancellor’s subsequent assurances to the contrary.

This from para 21 of the consultation:

“Most people go through probate when they are at their most vulnerable, often shortly after a relative has passed away. We plan to make better use of technology to redesign the system so that it is focussed on making the experience of the bereaved as simple and hassle-free as possible.”

Or, to put it another way, the government wants to automate the Probate Service and put it online, to make it cheaper for them to raise even more money for the government, from people who are at their most vulnerable. No matter that online access evinces all the empathy of a Wellington boot.

Perhaps they could save a few pennies here and there by not splashing out on so many letters “s” in “focused”.

Unsurprisingly, the MoJ consultation evoked almost a thousand replies, which overwhelmingly said “this is a bad idea”. True to form, they pressed on regardless, and had already confirmed that the new rates would apply (with some inconsequential changes) from May 2017, by the time of the Chancellor’s Speech.

But even the government is now calling it a Death Tax. And it does not have the power to create a new tax, without Parliament’s permission.

The Joint Select Committee on Statutory Instruments (JSC) has reported the Statutory Instrument drafted to implement the changes as being ultra vires, on the basis that the new measures would “in substance, be imposing a tax on estates rather than prescribing probate fees”.

And, as the JSC observes: “The Lord Chancellor is not permitted to impose a tax.”

The JSC also reminded the government that: “It is an important constitutional principle that there is no taxation without the consent of Parliament, which must be embodied in statute and expressed in clear terms.”

The JSC is concerned that Parliament had not so consented, and that previous discussion of the relevant Act (particularly Anti-Social Behaviour, Crime and Policing Act 2014 s 180) had not suggested that persons requiring grant of probate might be required to contribute to the cost of a service unrelated to the grant of probate. Leaving the JSC to consider the semantics of whether a swingeing hike could be called a fee while devoid of any semblance of reciprocity, or simply a tax. The JSC opted for the latter.

I wonder if any consumer affairs programme might be able to get the MoJ to explain itself – the government does insist on referring to taxpayers as “customers”, after all.

About The Author

Lee is TaxationWeb's Articles & News Editor and writes for TaxationWeb. He is a Chartered Tax Adviser with experience of advising individuals and owner-managed businesses over a broad spectrum of tax matters.
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