The Lemon Fool

Presumably if you arranged a chain of marriages you could keep an estate out IHT indefinitely, but would you keep accumulating nil-rate bands from each partner in turn?

Lootman wrote:I am not sure where you are going with that since I never mentioned anything about foreign spouses or domicile.

I wasn't going anywhere other than to point out the potential issues where non domiciled individuals are concerned.

Lootman wrote:

tjh290633 wrote:

DrBunsenHoneydew wrote:Some people might be having a very lavish funeral for the costs deduction!

Or a few charities will get very generous donations.

Or people will find more creative methods of avoiding probate altogether, which may result in a loss of IHT revenue as well, meaning that this new probate tax will be self-defeating.

This sort of frictional cost can lead to later pain if it discourages people from dealing with estates promptly.

My late father once dealt with a client (albeit confirmation not probate) where the GGF owned the property, he died, his son, GF, continued to live in the property, he died, his son , F continued to live in the property but then decided he wanted to sell it, of course he had no title. Just to make matters even better no wills by any of them.

My father's firm then had the wonderful (well certainly re the fees)task of going back to sort confirmation re GGF and GF so that F could actually sell the property.( This was all back in the 1970s)

I had a more recent near similar experience re one of my accountancy clients, his mother died (he lived with his family in the family home), his father had left him his half share upon his earlier death which at least had been dealt with by solicitors but I had a protracted twelve months trying to persuade my client that it was a good idea to ensure good title re the remaining half by having a solicitor deal with his late mother's estate. (my client was one of five siblings and whilst the other four were happy he inherited his mother's half interest in the family home I could see significant issues looming if matters were not dealt with promptly). Thankfully he eventually took my advice.

JohnB wrote:Presumably if you arranged a chain of marriages you could keep an estate out IHT indefinitely, but would you keep accumulating nil-rate bands from each partner in turn?

I think to get accumulated IHT bands the spouses would need to die, seems a tad on the drastic side re tax planning.

A friend once floated the idea to me that he could divorce his wife then marry his son's unmarried partner pre his death, she could then inherit and then marry his son. (Of course all sorts of risks re such an arrangement)

My late father for years would say (tongue in cheek) that as the W.S. widows fund kept insisting he paid into them even though he had no wife at the time he was going to wait until he was on his deathbed then marry a 16 year old so that on his death they would hopefully have to pay her a widow's annuity for seventy years; he wanted value for money re his WS contributions.

PinkDalek wrote:

Lootman wrote:I am not sure where you are going with that since I never mentioned anything about foreign spouses or domicile.

I wasn't going anywhere other than to point out the potential issues where non domiciled individuals are concerned.

I think that is an interesting topic. It just wasn't the one I was discussing in the post that you replied to and quoted me in.

There are really two issues, I think. One is the question of how non-dom spouses are treated with respect to IHT. I was aware that HMRC's policy of treating them differently was under review but am not aware if there is a firm outcome to that. Either way, collecting any tax due is harder.

Then there is the broader issue that I was talking about, which is how probate greatly helps HMRC both determine IHT is due and coveniently freezes the assets of an estate (usually), which makes collection easier. If probate is avoided then both those tasks become much harder for HMRC and the implication there is that HMRC will collect less as a result.

A related problem, getting back to your point about non-residents and non-doms, is that someone might gift all their assets to an overseas person prior to death, and then die within 7 years. As I know you know, if the estate is then null, HMRC can go after those foreign beneficiaries. But again, how successfully is another matter.

Since probate is so useful to HMRC (one could argue it is the biggest beneficiary of probate) I am surprised that it apparently wants to deter it happening.

Alternatively a high stakes game of poker with your heirs at which you unluckily lose everything to them shortly before you die? With independent witnesses of course!
No probate, No IHT?

No time to discuss in depth. As you know, I've seen many of your posts on a similar subject.

Lootman wrote:I think that is an interesting topic. It just wasn't the one I was discussing in the post that you replied to and quoted me in.

You mentioned marrying a beneficiary which would make IHT go away as well. Whether or not you were discussing it doesn't mean it isn't worthy of discussion, as you now appear to accept.

A related problem, getting back to your point about non-residents and non-doms, …

I don't think I mentioned non-residents. I haven't looked back at the link I provided, purely for academic interest, but wouldn't that have related to UK resident non-UK domiciliaries?

Since probate is so useful to HMRC (one could argue it is the biggest beneficiary of probate) I am surprised that it apparently wants to deter it happening.

Are you talking about the Probate Fees or IHT or both? If the former, I've yet to see if HMRC think the fees are a good or bad idea.

PinkDalek wrote:I don't think I mentioned non-residents. I haven't looked back at the link I provided, purely for academic interest, but wouldn't that have related to UK resident non-UK domiciliaries?

I do not claim a profound understanding of the rules, and was talking more about the practicalities. I believe you are correct that the exception applies to non-doms and residency is not a factor. But residency is always a factor when it comes to collection of taxes due because, in many cases, someone who resides overseas can probably ignore HMRC letters, assuming HMRC even knows where to send them.

PinkDalek wrote:

Since probate is so useful to HMRC (one could argue it is the biggest beneficiary of probate) I am surprised that it apparently wants to deter it happening.

Are you talking about the Probate Fees or IHT or both? If the former, I've yet to see if HMRC think the fees are a good or bad idea.

The former. It seems reasonable that the Probate Office would have consulted with HMRC regarding such a change. I was expressing the view that HMRC is disadvantaged by anything that motivates people to avoid probate, for the reasons cited.

Indeed, does HMRC even know someone has died without the Probate Office notifying them of an application for probate? As ScrumpyJack implied:

scrumpyjack wrote:No probate, No IHT

Personally I have no problem with Probate Fees being used as a quasi-tax because a low-rate tax across the board on wealth passing is certainly fairer than IHT which is almost voluntary to the very rich since 1986 (when the potentially exempt transfer regime replaced CTT). In addition IHT is so riddled with ridiculous wide reliefs that only those who hate their heirs more than the Chancellor pay it: examples are in abundance but agricultural property relief immediately comes to mind on tenanted agricultural land , as does business property relief on unquoted shares and the widely laughable conditional exemption for heritage property. However, using the fees to subsidise other court expenses is hypothecation of the worst kind and really cannot be supported.

As for the various side issues concerning non-domiciles and marrying Thai brides who always seem to have an apocryphal return to Phuket (but are much more likely to go to Chiang Mai), I would worry about the non-domicile issue until it is fully resolved and I would also study very carefully the double tax treaties - even the Thai treaty has agreements on exchanges of information.

Eb.

Eboli wrote: I would also study very carefully the double tax treaties - even the Thai treaty has agreements on exchanges of information.

Tax treaties tend to be mostly concerned with the determination of tax due rather than its collection. I am not aware that HMRC devotes a lot of resources to trying to enforce collection from UK residents of tax due to foreign nations.

HMRC may invest more effort in trying to get foeign tax authorities to collect UK tax due from UK non-residents, but I don't know how successful that is outside of a few high profile cases.

Bouleversee wrote:I totally agree. How many times do they want to tax the same money. I had just received an email from my daughter with the following link and might as well post it anyway. https://www.thisismoney.co.uk/money/art ... ilies.html.
I do despise this sneaky behaviour.

We got it stopped last time and I, for one, will be kicking up a stink again. It will come back to bite them in the backside anyway as it will discourage people from accumulating savings for old age care and more will become dependent on the state.

8 labour MPs voted against.

But all nine Conservative members of the 14th delegated legislation committee voted for and there will be no debate in Parliament unless objections to the SI are raised.

Lucy Frazer, the justice minister is MP for South East Cambridgeshire.
She persists in stating that a fee is exempt from the normal scrutiny that relates to a tax increase.

The others are Kevin Foster (Torbay), Robert Goodwill (Scarborough and Whitby), Trudy Harrison (Copeland), Peter Heaton-Jones (North Devon), Nigel Huddleston (Mid Worcestershire); Amanda Milling (Cannock Chase); Maggie Throup (Erewash) and Michael Tomlinson (Mid Dorset and North Poole).

None of the above appear to be in areas where the significant amount of an estate will be the property value.

supremetwo wrote:

Bouleversee wrote:I totally agree. How many times do they want to tax the same money. I had just received an email from my daughter with the following link and might as well post it anyway. https://www.thisismoney.co.uk/money/art ... ilies.html.
I do despise this sneaky behaviour.

We got it stopped last time and I, for one, will be kicking up a stink again. It will come back to bite them in the backside anyway as it will discourage people from accumulating savings for old age care and more will become dependent on the state.

8 labour MPs voted against.

But all nine Conservative members of the 14th delegated legislation committee voted for and there will be no debate in Parliament unless objections to the SI are raised.

Lucy Frazer, the justice minister is MP for South East Cambridgeshire.
She persists in stating that a fee is exempt from the normal scrutiny that relates to a tax increase.

The others are Kevin Foster (Torbay), Robert Goodwill (Scarborough and Whitby), Trudy Harrison (Copeland), Peter Heaton-Jones (North Devon), Nigel Huddleston (Mid Worcestershire); Amanda Milling (Cannock Chase); Maggie Throup (Erewash) and Michael Tomlinson (Mid Dorset and North Poole).

None of the above appear to be in areas where the significant amount of an estate will be the property value.

Your last sentence is significant. I do live in an area where property prices are in some cases very high (my own not so much but high enough) and would love to know how many people wrote to our MP and protested. I think it can still be debated in both houses if an MP stands up and objects on the grounds that it is an additional tax on the same money, which it is, rather than a fee. I should imagine that there will be no shortage of Labour MPs who would be more than happy to do that. I think the Conservatives have made a stupid mistake which they will regret. The public are not so easily fooled. I am amazed that all those Tories voted in favour. I should have thought that Poole was a pretty expensive area. I wonder if they were whipped or whether they will be if it does go before Parliament.

Don't forget it has to be paid on the first death as well as that of the survivor and there may not be all that much cash around after paying funeral expenses.

I understand from the Law Society that if an MP objects, it will have to be voted on but will still not get debated in Parliament. How ridiculous!

Sign the petition and write to your MP.

https://petition.parliament.uk/petitions/232192

Probate Fees in England/Wales should remain a low flat fee covering admin costs.

Have written to my MP more than once about this and suggested she should be the one to stand up and object but she hasn't responded for once.
I have also now signed the petition. It's not beyond the realms of possibility that if enough people sign, it will quietly disappear as the slightly different proposals last time did so I hope people will make the effort.

I stick by what I have said above.

Let's go back to the pre-2010 position and lose the transferable main residence allowance worth up to £140,000 and reinstate the previous probate fees. Get real!

Eb.

Eboli wrote:I stick by what I have said above. Let's go back to the pre-2010 position and lose the transferable main residence allowance worth up to £140,000 and reinstate the previous probate fees. Get real!Eb.

But you are making the case for a tax, which this is not supposed to be.

"Fees are an essential element of funding an effective, modern courts and tribunals service, thereby ensuring and protecting access to justice." "...all income raised will be spent on running the courts and tribunal service."
https://www.gov.uk/government/speeches/ ... obate-fees

BobGe wrote:But you are making the case for a tax, which this is not supposed to be.

Now been classed as a tax in today's OBR report.

Will there now be a proper debate?

supremetwo wrote:

BobGe wrote:But you are making the case for a tax, which this is not supposed to be.

Now been classed as a tax in today's OBR report.

Will there now be a proper debate?

Where can I read that?

Bouleversee wrote:

supremetwo wrote:

BobGe wrote:But you are making the case for a tax, which this is not supposed to be.

Now been classed as a tax in today's OBR report.

Will there now be a proper debate?

Where can I read that?

There's an example on page 72 below:

https://cdn.obr.uk/March-2019_EFO_Web-Accessible.pdf

The classification of several policies that we have provisionally recorded as taxes in this forecast: the digital services tax, probate fees and the immigration health surcharge.

Page 87 states:

Having reviewed its initial plans, the Government has altered its proposed schedule of fees payable for an application for a grant of probate. The new rates come into effect in April and range between £250 and £6,000, depending on the value of the estate. Given the structure of the fees, the Treasury expects the ONS to classify them as a tax on capital rather than a payment for a service (which is treated as negative spending and had been factored into the Ministry of Justice’s RDEL budget). This will add to receipts and spending equally, because the new tax is offset by the removal of the negative spending from RDEL.

Page 165 includes:

The new probate fee structure is expected to generate £155 million a year in additional tax receipts.

I haven't looked further.