In a strongly-worded response to a Ministry of Justice (MoJ) consultation, both the ICAEW tax faculty and the business law committee have accused the department of effectively levying a tax to reduce its deficit in relation to courts funding.
ICAEW has argued the moves are inappropriate, not least because the department has no brief to set taxes, but also because by virtue of being non-contentious, the applications for grant of probate that the MoJ is seeking to “tax” do not require action by the courts
“This increase therefore represents a pure revenue raising exercise, unrelated to the costs of the service provided,” ICAEW said.
“The fee structure proposed has strong elements of redistribution of wealth, with fees being levied on the basis of the value of estates rather than their complexity or other factors which might influence the costs borne by the Probate Office before they can grant clearance.”
ICAEW is concerned that tax-levying by individual government departments will add further unwanted complexity to the tax system at a time when the government is trying to simplify it.
Inevitably, it says, this will result in “enormous inconsistencies” that will undermine “the logic and fairness of government policy in relation to revenue collection”.
Under the proposals, the flat fee will change to a banded fee approach that would see fees rise to £20,000 for estates valued at over £2m (currently, estates worth over £5,000 attract a fee of £155 if a solicitor makes the application or £215 for anyone else).
However, as ICAEW points out, there are no proposals for graduation between the fee bands. This means that a marginal increase in the value of an estate, for example by £1,000 from £299,000 to £300,000, would push the estate into a higher bracket and an increase in fees far exceeding the marginal amount.
Nor has the MoJ set out its views on how estates should be valued for fee purposes, which means there could be wide variations in the valuations.
ICAEW concluded that the consultation is “misleading and disingenuous.” And it adds, “We note that none of these inconsistencies or flaws are present in the IHT regime – which is not surprising in view of the long experience of HM Treasury in the design of taxes.
“Rather it re-emphasises the inappropriateness of less experienced government departments attempting a function which is both specialised and difficult.”