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Seeing non-contentious probate fee reforms in context

Kathryn Purkis argues opposition to the government’s proposed changes to probate fees is misplaced, believing the move would have a Robin Hood effect in practice

12 May 2019

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The proposed Non-Contentious Probate (Fees) Order 2018 has been dubbed a “stealth death tax” and “a tax on grieving families”, sparking political outrage from the centre and the left.

This negativity feels misplaced because the proposal should have a Robin Hood effect in practice.

Now one step away from being signed into law, the order replaces the current £125 flat fee for probate (£155 if acting through a solicitor), with a graduated band of fees, determined with reference to estate size, and topping out at £6,000 for estates over £2m.

The scheme imposes no fee on sub-£50,000 estates and contains a power to remit the fee in exceptional circumstances. Approval for the proposal is likely to be sought from the Commons under the affirmative resolution procedure in May.

Labour and the Liberal Democrats are considering voting against the statutory instrument, arguing that as the fee increases are significant and bear no relation to the work required, they are in effect taxes and should not be imposed by statutory instrument.

Charities say they are likely to lose between £10m and £18m annually from the changes.

Lawyers point to an increased risk of evasion (presumably, failing to account fully), and the likelihood of active avoidance (sometimes exploitative), with concomitant losses to the inheritance tax take.

They also highlight the cashflow difficulties that higher upfront fees are likely to impose.

The procedural points are bad ones. The statutory basis for the order is section 92 of the Courts Act 2003, which confers wide powers on the minister for justice to prescribe court fees (including by scales).

Section 180 of the Anti-Social Behaviour, Crime and Policing Act 2014 qualified section 92 by expressly permitting the minister to set fees which exceeded the costs of providing the service to which they relate, though they “must be used to finance an efficient and effective system of courts and tribunals” (subsection (6)).

This has already been seen in operation in other court fee changes. Politicians are therefore five years too late to make the point that ‘taxing powers’ have been wrongly delegated to the minister. Lawyers’ comments only make sense if it is seriously contended that these fees are pitched at a level where evasion is a real risk and avoidance a motivator.

But according to HMRC’s IHT statistics analysis 2015-2016, only 1% of the estates admitted to probate or administration exceed the £2m value threshold.

The proposed fee will represent 0.3% of such an estate. 87% of estates are valued at less than £500,000. Most of them are, in fact, below £300,000, and slated to pay only £750 under the new scheme, or 0.25% of value.

Only around half of those who die in England and Wales in any year actually have a probated or administered estate. Cashflow issues will surely find a workaround.

The charities’ concerns are better founded. Fundraising UK describes 92% of charities’ legacy income as coming from residuary bequests rather than pecuniary gifts. If so, the correlation between higher court costs and diminished residue is direct.

But the changes have to be seen in context. ‘Funding for Justice 2008-2018: Justice in the Age of Austerity’, a report commissioned by the Bar Council in November 2018, notes that:

1. After negating the effect of price inflation, UK GDP (real GDP) grew by 13% over the last 10 years.

2. Government expenditure has remained relatively constant at around 40% of GDP in the same period (and has therefore grown in real terms overall). Health and social protection expenditure has seen real terms growth in excess of 13%, averaging 24%.

3. However, the Ministry of Justice budget allocation has declined by 27% in real terms, despite the legal sector facilitating economic growth, and population growth likely bringing greater need for access to justice.

4. While there has been significant investment into HMCTS in the last two years, these are one-off outlays relating to the court reforms programme and do not detract from the longer-term trends described.

5. Overall expenditure on HMCTS (only part of the MoJ budget) has declined in real terms over the period by 17%, but this takes into account new offset income from fees and fines, which have themselves increased by 27%.

This demonstrates that access to justice, and delivery of the rule of law, has been sacrificed not only to austerity but also in two other ways: by the impact of Maslow’s hierarchy on political choice (prioritising health and benefits funding), and by the refusal of government of any stripe to tax more overall.

The proposed increased probate fees are set to raise in excess of £145m towards the MoJ public purse budget contribution of £1.09bn, according to the promoting minister in the February Delegated Legislation Committee debate.

The debate, like the Bar Council’s paper, underscores that the fee income will be used like taxes, to cross-subsidise and prop up the justice system, and (to make the third sector feel better) perhaps to facilitate fee remissions that might not otherwise be available.

Progressive economists regard the failure adequately to tax wealth, particularly inherited wealth, as a main driver of ever-increasing financial inequality. These new, proportionately miniscule fees are thus a tiny ameliorative step. 

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Kathryn Purkis is a barrister at Serle Court

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Private client Wills, Trusts & Probate

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probate fees