2 March 2017
This was first reported in the Farmers Weekly in the 11 March 2016 edition. Now, nearly a year later, the Government is going to introduce the changes even though the professional bodies response to the formal consultation was negative, to say the least.
The new fee structure will come into effect this May, the exact date is yet to be confirmed.
Under the current system probate fees are as follows:
- estates with a net value of less than £5,000 there is no fee payable; and
- estates with a net value of above £5,000 pay a fixed fee of £215, if the application is made in person, or £155 if it is made by a solicitor or accountant on behalf of the personal representatives.
Under the new system the probate fee will be as follows:
- estates with a value of up to £50,000 will be exempt from probate fees; and
- estates with a value above £50,000 will have fees according to the value of the estate so:
- a starting charge of £300 will rise with the value of the estate;
- for an estate worth between £500,000 and £1m it will be £4,000;
- for an estate worth between £1.6m and £2.0m the fee will be £12,000; and
- for all estates worth in excess of £2.0m the sum will be £20,000.
With the current value of farmland, farmhouses, cottages and buildings, this is likely to hit the farming community very hard and at a time when you are dealing with a personal loss. In addition, many farm businesses have little spare cash available as the estate value is wrapped up in the capital assets of the business.
To add to the cash flow problems, the personal representatives will have to fund the payment of the fee before they have access to the assets of the deceased. Hopefully the banks will agree to release funds to cover the fee where the deceased had a sufficient balance on deposit but if this is not the case, then the personal representatives will have to borrow in order to obtain probate.
This could be seen as an increase in the rate of Inheritance Tax. The really nasty bit is that this charge is payable even if there is no Inheritance Tax liability. So even though many of the farm assets would be eligible for agricultural property and business property relief, and thus not chargeable, this charge would still apply. It is quite unbelievable.
This new “stealth tax” is expected to raise in excess of £250m per annum.
If you expect your estate to be worth greater than £500,000, where the new fees jump from £1,000 to £4,000, you should seek advice. With careful planning we believe it will be possible in many cases to plan such that the fee is reduced considerably, but with all such planning, care must be taken and the elderly or vulnerable should not feel put upon into taking steps that might affect their financial security.
For further information on any of the above, or to discuss your specific circumstances, please contact me or your usual UHY adviser. Alternatively, to read more on our services to the rural sector please click here, or to read more rural blog posts please click here.
