Inheritance Tax 

HMRC introduces temporary process for probate

HMRC introduces temporary process for probate

HM Revenue & Customs has introduced a temporary process for probate applications as it is preparing to switch to the new fee structure.

The tax office stated today (March 27) it will accept applications for probate before an inheritance tax account has been processed.

Currently to get probate the person dealing with the estate must first submit an inheritance tax account, which must then be processed by HMRC before any further application can be accepted.

However, due to the new fee structure being introduced by the government, HMRC put in place a temporary exemption.

For applicants to qualify they must include a note to say that the appropriate inheritance tax forms will follow shortly, however.

From April 1, the minimum probate fee – paid when administering someone's estate after they die – will increase from £215 to £250 for estates with assets of less than £500,000. It will be set at £4,000 for estates valued at more than £1m and £6,000 for estates worth more than £2m.

This charge is additional to inheritance tax.

In February, MP members of the delegated legislation committee, which had probed the nature of the fee, agreed with the Ministry of Justice that the mandatory charge on the estates of deceased people was a fee for the provision of services, and not a tax.

If it were a tax, the plan to increase probate fees, which were first unveiled in 2016, would have to be included in the Finance Bill and so debated and voted on in parliament. A fee increase does not have to be voted on by MPs.

FTAdviser reported earlier this month that the hike is likely to be considered a tax for statistical purposes, but the government will go ahead with the increase anyway.

Sophie Rowe, probate manager at law firm Cripps, said clients who have recently been bereaved should start the application for probate as soon as possible.

The exemption now introduced by HMRC "should allow time to submit the application before the fees are due to increase," she added.

Ms Rowe explained that financial advisers should take into account when advising their clients on this matter that the fee structure is based on the net estate for probate, which is different from that used for inheritance tax purposes.

This means assets such as property held as joint tenants or joint bank accounts; foreign assets; life policies held in trust, and any other assets held in trust for the benefit of the deceased during their lifetime, will not be included in the calculation.

Ms Rowe said: "If your client is near one of the boundaries of the fee scale, it may be appropriate for them to make lifetime gifts.

"If they survive seven years after making these gifts, then the gifts also fall outside of their estate for inheritance tax purposes, as long as the client has not retained the benefit of the assets in question. Anything gifted to charities will also be exempt for inheritance tax purposes."