This article was originally published in the FTAdviser and can be found here.
The tribulations of dealing with probates during the pandemic and hope for the future
The last two years have been difficult for all Government departments, as the pandemic first forced their workforce home in less than ideal circumstances, and then reduced it as COVID-19 spread through the population. For those dealing with the probate process, whether professionally or personally, this has been compounded by the redeployment of tax experts from the Inheritance Tax (‘IHT’) department at HM Revenue & Customs (‘HMRC’) to various Brexit taskforces, and changes to the way the Probate Service operates, which had begun prior to the pandemic and have led to inevitable teething problems. This has been a perfect storm which has caused huge delays when dealing with the administration of deceased estates. Improvements to the process have nonetheless been made, and will hopefully continue to make the process more straightforward.
Steps in the probate process
When someone dies with substantial assets (broadly speaking, assets worth over £325,000), then the executors or administrators of their estate must report the value of all their assets to HMRC (on form IHT400, being an IHT account), and pay IHT if required. Once this has been done, HMRC issues a receipt for the IHT paid which can be used to apply for a grant of representation (which is a grant of probate where someone had a Will, or a grant of letters of administration where they did not). The grant of representation is a legal document which allows the executors/administrators of the estate to deal with the assets, such as closing bank accounts, selling or transferring properties and investments, etc.
It is worth noting that if an estate is subject to IHT, then the tax must be paid by the end of the sixth month after the month of death (though IHT on properties and certain investments can be paid in 10 yearly instalments, with only the first instalment becoming due by that deadline). Any IHT remaining unpaid after the deadline (including the balance of IHT due on properties which is being paid by instalments) will accrue interest at HMRC’s rate – 3.25% per annum as of 5 April 2022. In order to pay the IHT it is vital that an IHT reference is supplied as the payment reference. An online application for an IHT reference should be made at the earliest possible opportunity, to avoid any delays with payment, as it takes at least a week for the reference to be issued by HMRC.
For those estates that must be reported to HMRC (whether or not tax is payable), an IHT account must be submitted by the end of the twelfth month after the month of death. If the account is submitted after this deadline, then a penalty of £100 may be payable.
Given that the smooth running of the process requires both HMRC and the Probate Service to act in a timely manner, delays with both agencies have meant that over the past two years, those dealing with deceased estates have been presented with months’ long delays.
Dealing with HMRC during the pandemic
The IHT department at HMRC was initially affected by Brexit, as many of its tax experts – those who deal with any detailed IHT queries, often undertaking ‘compliance checks’, or detailed reviews, of complex estates – were moved away from their normal job roles to temporarily assist with governmental Brexit planning. Once the pandemic hit, moreover, all HMRC officers, including those dealing with queries on their IHT helpline, switched to working from home. This created huge issues which have not yet been fully resolved, as HMRC broadly only communicates by post and this has proven increasingly difficult. Correspondence has often gone missing, or not been sent at all, as the majority of HMRC case workers have continued to work from home and arrangements to have correspondence printed and posted by HMRC colleagues working from the office have consistently failed. As has been true for a number of years, although a specific case worker is assigned to each estate, no direct contact details are ever given – the only way to get in touch with HMRC other than by post is to call the above mentioned IHT helpline. During the pandemic this has been particularly frustrating, as those on the helpline can only access the notes left by case workers on the HMRC system.
In the first few months of the pandemic this meant that receipts for tax paid were routinely not issued. Thankfully the system has now much improved as the IHT department can now share receipts in electronic form direct with the Probate Service. Nonetheless issues remain, and there can often be delays with issuing the receipt – this could be because the case worker does not have access to all the paperwork (whether because it has not been sent to them or, more often than not, because it has not been scanned properly when received by HMRC). Although HMRC have 20 working days to issue the receipt, it is always best to call the IHT helpline after the 15th working day or so, as at that stage it may be possible to ask HMRC to expedite issue of the receipt. Generally speaking, calling HMRC on their IHT helpline is still the best way to move matters along, and should be done frequently – every few weeks.
It should be said that there have been some improvements at HMRC, as follows:
- IHT accounts may now be signed electronically. This measure was introduced during the pandemic and looks like it will be kept. Further details of this are given in HMRC guide to completing form IHT400, which can be found at:
Unfortunately, the IHT account itself must still be sent in to HMRC in hard copy.
- Where estates are deemed complex and are being dealt with by one of the IHT department’s tax specialists (usually referred to as ‘the compliance team’), it is now sometimes possible to switch to email communication. This should be requested every time, and approval will need to be given by all executors/administrators. Where the case worker agrees, his can lead to huge time savings.
Teething problems at the new Probate Service
Anyone who has been dealing with probates for more than a few years laments that they miss the days of regional Probate Registries. Each Probate Registry was manned by a small team of specialists, who could be contacted over the phone, and for professionals in particular this meant having any queries dealt with quickly. For both costs and efficiency reasons, most regional Probate Registries have now been closed, and probate services centralised into the Probate Service. Most probate applications are now dealt with by non-specialists, and this means that where circumstances are out of the ordinary, this can make the application process difficult.
Nonetheless, in the vast majority of cases, now that the new centralised system has had time to bed in, the process is quite straightforward (though still slower than when applications were dealt with by regional Probate Registries). The vast majority of applications can be made online, with any original documents required (such as the original Will or any codicils) posted to a scanning centre in Harlow. The probate application cannot be submitted until 20 working days have passed from submission of the IHT account to HMRC, but once it has been made, if everything goes smoothly and no documents are lost, then the grant may be issued as soon as one or two weeks after submission. This is a vast improvement on the timeline as it was early during the pandemic, which could stretch to two to three months.
Where issues arise is where documents are missing, which could be for a number of reasons, such as:
- HMRC has not issued the receipt for tax paid. The probate application should not be submitted until the applicant is certain that the receipt has been issued. If it has not, then the application could be placed in a separate, ‘stopped’ queue at the Probate Service. This will inevitably lead to delays, as it could take the Probate Service several weeks to review the matter again once the receipt is sent by HMRC.
- Original documents are not sent to the Probate Service by the applicant. When the application has been submitted, the confirmation page on the online system will confirm which original or copy documents must be sent to the Probate Service. As long as the documents listed are sent, there should be no problems.
- Original documents are received by the Probate Service but not scanned on properly. As mentioned above, all original documents are scanned in by a third party company in Harlow, and they often miss out that documents may be double-sided, or may not scan a document at all.
The online probate application system includes updates by the Probate Service whenever any action is taken, so it is helpful to checking this every few days to ensure progress is being made. If there are no updated on the online system, then the only option will be to call the Probate Service to find out more. Where it is agreed on the phone that the Probate Service will do something, then it is worth calling back every few days to check that whatever was agreed has actually been done.
The future for probates
As discussed above, both the IHT department at HMRC and the Probate Service have been problematic over the pandemic, and this has caused undue delays with the probate process. This must have been particularly distressing for those who have lost loved ones unexpectedly because of COVID-19, and have been thrown into dealing with probate for the first time in their lives. It has been an extremely frustrating time for both individuals and professionals dealing with these matters, but the good news is that improvements have been made: from online probate application to communication with HMRC compliance officers by email, the probate process is finally going digital, slowly but surely.