Inheritance Tax  

How the pandemic has affected probate

  • Describe some of the challenges facing executors at present
  • Explain the impact of the pandemic on the administration of probate
  • Describe the significance of the regional probate registries
CPD
Approx.30min
How the pandemic has affected probate
Melinda Gimpel/Unsplash

The last two years have been difficult for all government departments, as the pandemic first forced their workforce home in less than ideal circumstances, and then reduced it as Covid-19 spread through the population.

For those dealing with the probate process, whether professionally or personally, this has been compounded by the redeployment of tax experts from the Inheritance Tax department at HM Revenue & Customs (HMRC) to various Brexit taskforces, and changes to the way the Probate Service operates, which had begun prior to the pandemic and have led to inevitable teething problems.

This has been a perfect storm which has caused huge delays when dealing with the administration of deceased estates. Improvements to the process have nonetheless been made, and will hopefully continue to make the process more straightforward.

Steps in the probate process

When someone dies with substantial assets (broadly speaking, assets worth over £325,000), then the executors or administrators of their estate must report the value of all their assets to HMRC (on form IHT400, being an IHT account), and pay IHT if required. Once this has been done, HMRC issues a receipt for the IHT paid which can be used to apply for a grant of representation (which is a grant of probate where someone had a Will, or a grant of letters of administration where they did not). The grant of representation is a legal document which allows the executors/administrators of the estate to deal with the assets, such as closing bank accounts, selling or transferring properties and investments. 

It is worth noting that if an estate is subject to IHT, then the tax must be paid by the end of the sixth month after the month of death (though IHT on properties and certain investments can be paid in 10 yearly instalments, with only the first instalment becoming due by that deadline).

Any IHT remaining unpaid after the deadline (including the balance of IHT due on properties which is being paid by instalments) will accrue interest at HMRC's rate – 3.25 per cent per annum as of 5 April 2022.

In order to pay the IHT it is vital that an IHT reference is supplied as the payment reference. An online application for an IHT reference should be made at the earliest possible opportunity, to avoid any delays with payment, as it takes at least a week for the reference to be issued by HMRC.

For those estates that must be reported to HMRC (whether or not tax is payable), an IHT account must be submitted by the end of the twelfth month after the month of death. If the account is submitted after this deadline, then a penalty of £100 may be payable.

Given that the smooth running of the process requires both HMRC and the Probate Service to act in a timely manner, delays with both agencies have meant that over the past two years, those dealing with deceased estates have been presented with months' long delays.

Dealing with HMRC during the pandemic

The IHT department at HMRC was initially affected by Brexit, as many of its tax experts – those who deal with any detailed IHT queries, often undertaking 'compliance checks', or detailed reviews, of complex estates – were moved away from their normal job roles to temporarily assist with governmental Brexit planning.