UK govt drops plans to introduce 'death tax'

Frank Prenesti Sharecast | 21 Apr, 2017 11:25 - Updated: 11:52 | | |

contract-945619_1920

The government on Friday shelved a controversial plan to introduce what critics had called a stealth tax on death in a move that will cost the Treasury £300m.

The proposed increase in probate fees - charges levied on the distribution of an estate after someone dies – would have lifted some costs to £20,000. The government said the extra raid on taxpayers was necessary to fund the courts system.

With the snap General Election only seven weeks away, the Ministry of Justice said it could not get the necessary legislation through parliament in time.

The plans had attracted scorn from MPs and legal profession. A cross-party parliamentary committee suggested the MoJ had exceeded its legal powers.

In trying to avoid claims of introducing a “death tax” the MoJ was going to introduce the law by calling it a “fee” and using a Statutory Instrument (SI), which would mean that the measure did not need parliamentary scrutiny. The committee said the plan would “make an unexpected use" of the power attached to SIs.

The fee changes had also been opposed heavily during the public consultation process with only 13 out of 831 respondents agreeing with the proposals.

Under the new fee system, estates valued at up to £50,000 would pay nothing, with tiered increases up to £20,000 for estates worth more than £2m. They would have replaced a previous flat rate of £215 if an application was made by an individual or £155 if from a lawyer.

A Freedom of Information request tabled by mutual insurer Royal London in April found that the MoJ did not actually know what the costs of handling a probate application were.

The company accused the ministry of treating bereaved families as a "nice little earner". The request also asked for the cost of handling applications broken down by the size of the estate.

In the reply, the MoJ said not only did it not have this information but that it had 'no business or managerial' reason to have it.

Former pensions minister and now Royal London's director of policy Steve Webb said the plans were "clear evidence that the new charging structures are nothing to do with recovering the reasonable cost of processing probate applications and are simply a backdoor way of raising money from people in their time of greatest need".

"It is one thing to make a reasonable charge for the provision of a public service. But the Ministry of Justice has now admitted it does not know the unit cost of handling a probate application and sees no reason to find out what it is," said.

More news

23 Jun Capital Economics sees limited upside for FTSE 100 in 2017 (and next)

The UK economy's performance will continue to exceed forecasts but multiple headwinds will just about brake any further gains in the FTSE 100 in 2017, analysts at one of the City's top research shops said.

23 Jun US oil rig count keeps climbing, Baker Hughes says

The number of oil rigs in operation in the US continued to climb last week, increasing by 11 to 758, according to the results of the most widely-followed survey tracking them.

23 Jun FX round-up: Sterling gains on dollar thanks to UK policy hawks coming to fore

Sterling managed Friday gains on the US dollar thanks to UK monetary policy hawks coming to the fore in recent days, but was otherwise down against a raft of commodity currencies.

23 Jun Europe close: Stocks end off lows as oil futures perk up

Stocks came off their worst levels of the day as crude oil futures perked up and trading on Wall Street got off to a positive start.

23 Jun London close: FTSE labours through Friday as sterling gains on underwhelming dollar

Stocks in London laboured through Friday as sterling made gains against an underwhelming US dollar a day after PM Theresa May met with European leaders in Brussels.

23 Jun US open: Stocks edge higher at the end of the week

Gains for steel and biotech shares saw Wall Street edge higher amid better than expected economic data and some dovish Fedspeak.

23 Jun Price pressures grow in US in June, PMIs show

Private sector firms in the US continued to record a solid rate of expansion amid signs that economic growth might pick up again, the results of a widely-followed survey showed.

23 Jun US new home sales beat forecasts in May, prices jump

Activity in America's residential real estate market continued to hum along at a solid pace last month, the latest official revealed, amid sharp price increases.

23 Jun Avingtrans gets extension on possible Hayward Tyler bid

Hayward Tyler updated the market on its discussions with Avingtrans on Friday, regarding the possible offer by Avingtrans for the company as announced on 31 March.

23 Jun BMR raises £0.35m as Kabwe plant construction progresses

BMR Group announced on Friday that Peterhouse Corporate Finance had raised £0.35m - before expenses - by way of a placing of 9,333,333 new ordinary shares of 1p each in the capital of the company, at 3.75p per share.