Government plans to increase probate fees have been branded by the House of Lords Committee as a ‘misuse of power’. The fee increases have been proposed to address the £1.2 billion annual deficit for running the courts.
The cost of applying for probate is currently £215 (or £155 if a solicitor is used) regardless of the size of estate – but Ministry of Justice proposals could see those fees increase by 3,771% from April 2019.
The new fee structure is to be tiered, with fees ranging from £250 for estates worth £50,000 – £300,000 to £6,000 for estates worth £2 million or more. However, in most cases these fees exceed the cost of providing the service substantially which is thought to be around £250.
Although the Lords secondary legislation scrutiny committee acknowledged that Section 180 of the Antisocial Behaviour, Crime and Policing Act 2014 permitted the charging of fees “of an amount which is intended to exceed the cost of anything in respect of which the fee is charged” (e.g. the cost of providing the service), it further noted that “To charge a fee so far above the actual cost of the service arguably amounts to a ‘stealth tax’ and, therefore, a misuse of the fee-levying power.”
Commentators have agreed, stating that Parliament did not intend for the powers to be used in such a way. In ‘Managing Public Money’, a guidance publication provided to Government departments, it states that “different groups of customers should not be charged different amounts for a service costing the same, eg charging firms more than individuals. Similarly, cross subsidies are not standard practice, eg charging large businesses more than small ones where the cost of supply is the same.”
Further, the publication advises: “The Office for National Statistics normally classifies charges higher than the cost of provision, or not clearly related to a service to the charge payer, as taxes.”
The Institute of Chartered Accountants (ICAEW) have been amongst the critics, stating that because the proposed changes were effectively a new tax, these were beyond the powers of the Lord Chancellor. The ICAEW also accused the government of a “lack of transparency and accountability” due to the fact that the changes were not included in the Chancellor’s budget but were instead revealed a week after.
Although the fees have been slammed as a stealth tax, they are a substantial reduction on proposals put forward in 2017. Had those gone ahead, estates would have seen bills of between £300 and £20,000 depending on the estate value. The proposals were watered down after 97% of respondents to the consultation opposed them. However, the new fees will still place increased pressure on executors to find funds up front, particularly where the majority of assets in the estate are in bricks and mortar.
In response to critics, a Ministry of Justice spokesperson stated: “Parliament gave us the power to set these proposed fees and they will be fully scrutinised and debated by both Houses.”