Inheritance tax UK: Justice Department forced to remedy ‘unacceptable’ probate delays | Personal Finances | Finance
Inheritance tax (IHT) is usually levied on the estate of a deceased person and passing on their assets. The bill is paid when an estate is valued over £ 325,000 and is typically billed at 40%. However, this process can be complex and, as such, families can use probate to obtain a grant of representation which confirms legal authority to administer / manage the estate.
These grants are usually requested by executors or administrators who will ensure that the correct amount of IHT is paid and that the assets are passed on correctly. However, applications for approval must be filed with a registry that has encountered difficulties related to the coronavirus throughout 2020.
The government specifies that approval applications take up to eight weeks to be processed, with paper applications facing particularly long waiting times. At the end of August, Marsha De Cordova, the Labor MP for Battersea, pushed the government on what is being done about it.
Ms De Cordova said: “To ask the Secretary of State for Justice, what steps her ministry has taken to tackle the delays in the probate system?”
Today, Chris Philip, the Conservative MP for Croydon South, answered this question on behalf of the Department of Justice.
“Despite the unprecedented challenges facing the licensing department during the COVID-19 pandemic, and due to the increased resources of HMCTS to meet demand, the average time to obtain a license after receipt of the required documents was maintained at between four and six weeks, ”he said.
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“The HMCTS continues to invest in improving the online certification system that has been developed as part of the larger HMCTS reform program to further streamline working methods, resulting in a simpler and more streamlined system. easy to understand for applicants; is accessible; and more efficient and robust to run.
“The introduction of digital and mass scanning systems has proven to be vital during the COVID-19 pandemic, allowing HMCTS staff to continue to process incoming requests and court users to access services from remote certification.
“The Exela contract is managed in accordance with the Justice Department’s policy for strategic contracts and is therefore subject to the highest levels of governance to ensure service delivery. Over half a million documents were scanned without error. in 2020 and on the rare occasion that errors occur, the majority of documents are re-scanned within 24 hours of request. “
Probate pressures intensified over the summer as the pandemic pushed inheritance and stamp duties on property to record highs. With a higher number of people dying from the coronavirus at the start of the year, the UK paid £ 571million in inheritance tax in July, the most ever paid in a single month.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, commented: “The pandemic pushed inheritance and stamp duty on real estate purchases to record highs in July. The horrific increase in coronavirus deaths earlier this year led to an increase in IHT. Meanwhile, the Treasury’s efforts to reinvigorate the real estate market after foreclosure with a stamp duty holiday have encouraged thousands of people to speed up their home buying plans, pushing the stamp duty on property to new heights. record.
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“The record-breaking tax levied in July is likely the result of the horrific increase in the number of deaths of people with coronavirus earlier this year. There is usually a long delay between a person’s death and when tax is paid, which can take up to six months.This means that what we are seeing now is a result of the tragically high death rate at the start of 2021.
“HMRC says it’s too early to say whether the higher death rate and higher tax levies are linked, but given that the last peak in IHT was in October, six months after the first vague, we can see a possible link.
“The IHT payment comes at the worst possible time. Families are still reeling from grief when they have to go through the administrative nightmare of probate and then figure out how to pay the tax bill. The more you can plan for this. tax up front, the less pressure it will put on your family when the worst happens.
“You can, for example, give gifts while you are alive. You have an annual gift allowance and can give gifts of any size, and as long as you live seven years past they are counted as out of your pocket. Estate for IHT Purposes Alternatively, you might consider a whole life insurance policy written in trust, which will be paid out of your estate and can be used to cover the cost of taxes.
The Bar responded to those plans, which were condemned for adding further constraints to an already struggling system.
The company explained that all homologation users would be affected as the current fee is £ 155 for business users and £ 215 for non-business users. Stephanie Boyce, President of the Bar, responded to the developments.
“The persistence of the Department of Justice in increasing the fees for the probate service is of concern, especially when there are continuous and significant delays in the probate service,” she said.
“With so many applications now online and the expansion of court and tribunal service centers to centralize administration, it is unclear why probate services overhead has increased to justify such a large fee increase. .
“It’s no secret that the Estates Department faced delays for people applying for probate grants or letters of administration. In 2020, people had to wait an average of 12 to 14 weeks for receive their grant.
“This is unacceptable, the service must be timely and allow executors to settle the estate of a loved one.
“Any increase in fees must be reflected in the service provided. The online service has been specially designed to streamline the process and the UK government needs to make the system work efficiently before increasing costs for business and non-business users.