The government has U-turned on its controversial probate fee legislation, which industry commentators had labelled a 'stealth tax'.
The Ministry of Justice (MoJ) U-turned on the proposed legislation on Thursday, saying there was not enough time for it to go through Parliament before the General Election on 8 June.
Put forward by Justice Secretary Liz Truss, the proposal looked to replace the current £215 flat fee with a tiered probate fee structure based on the value of a person's estate, effectively increasing costs for higher value estates to anything up to £20,000.
The legislation was first presented to Parliament in February, with a view to come into effect from May. It was expected to raise more than £250m for the Exchequer.
The probate fee order was quickly pushed through Parliament on Wednesday, indicated by the fact it had not appeared on the Parliament's calendar of business, before being halted by the MoJ.
A MoJ spokesperson said: "The statutory instrument on probate fees will not have time to complete its passage through Parliament before the General Election so it will now be a matter for the new government."
Deeply unpopular measure
Old Mutual Wealth tax and financial planning expert Gordon Andrews said the U-turn signalled the unpopularity of the regulation.
He said: "The label as a stealth tax has made it unpalatable to the government in the run up to the snap election."
Andrews pointed out this was the second ‘tax' proposal from the Budget to be revoked, following the planned national insurance contribution (NIC) hike for the self-employed. This meant there was now an even larger funding gap to be filled, he said.
Scottish Widows protection specialist Johnny Timpson welcomed the news but suggested the policy could resurface after the election.
Kingston Smith tax partner Lynne Rowland agreed, saying: "The message seems to be that inheritance tax (IHT) and the process of passing assets on death are easy targets that have been overlooked too long."
Excello Law private client lawyer Dawn Joughin, who had previously urged advisers to inform clients of the fee implications inherent in the policy, said: "It seems like a political move to avoid a difficult decision and it will be interesting to see whether it appears in the Conservative manifesto along with NICs. Possibly the government thought it would be a way to make the issue go away."
A tax not a fee
The probate fee hike initially came under fire from the Joint Committee on Statutory Instruments, which had issued a warning to the MoJ in March saying probate fee changes could be illegal without parliamentary approval due to their resemblance to tax.
Inheritance and succession planning specialist STEP had also expressed concerns with the order from the outset. Chief executive George Hodgson said: "Enacting proposals so clearly vulnerable to legal challenge will put many bereaved families and their professional advisors in a very difficult position."
Adviser Trystan Lewis had said the probate fee order would undermine recent government improvements on inheritance tax.
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