HMRC’s nasty inheritance tax debt trap is no way to treat the bereaved

Inheritance tax
Inheritance tax

First World problem alert: I can’t pay my inheritance tax. This might sound like nothing more than a little local difficulty, but the root cause is rapidly becoming a national scandal. You see, like thousands of others who have recently lost loved ones, I’m trapped in the great probate backlog. Having been lucky enough to have been left a share of a nice house in the Cotswolds by my late mother, I now owe the public coffers a six-figure sum. Thanks to crashing government inefficiency, however, I am not in a position to pay. While faceless bureaucrats fiddle around, deciding whether to bother issuing the piece of paper I need in order to settle the debt, I – along with a growing number of other people caught in this nasty trap – am being slapped with extra charges on the debt. What a sweet deal for HMRC – and what a way to treat the bereaved!

Like most of those fortunate enough to be left property by a loved one, I have long been braced to pay death duties. The size of the state’s claim on my late mother’s relatively modest assets – primarily a lovely old house that has been in the family for a century – was depressing, but no surprise. For all the Tories’ hot air about scrapping or at least reducing the burden of inheritance tax, the threshold at which it is paid has barely changed since they came into power in 2010. What came as a shock was not the figure itself but the staggering inefficiency surrounding the administration of the levy. The discovery that HMRC has found a nasty little way to make yet more money adds insult to injury.

At the heart of the problem is the phenomenally protracted process known as probate: obtaining the legal right to deal with someone’s property, money and possessions when they die. Without this bit of paper from the Government, beneficiaries of an estate can’t sell what they’ve been left. With a few exceptions, everything remains frozen, while HMRC checks draft calculations submitted by executors and ensures all is in order with the will. It falls to HM Courts and Tribunals Service, an agency sponsored by the Ministry of Justice, to rubber-stamp the final application.

A fair system would make the tax payable within a few months of beneficiaries having access to whatever assets they have been left. That way, property could be sold to pay the bill. However, in a manifest injustice, under the existing system, at least 10 per cent of the estimated bill must be paid within six months of death – whether or not there has been a grant of probate. Beyond this point, beneficiaries – who still can’t gain access to any of what they have been left – are slapped with stinging interest rates on whatever they’ve been unable to pay.

In the halcyon days when public-sector employees routinely turned up to work, and HMRC call centre handlers actually answered the phone (the Revenue recently admitted that almost 842,000 calls to its offices were “not handled” in the first month of this year alone), this wasn’t quite so mean. Back then, it was possible to obtain a grant of probate in around four months. Now, it routinely takes 12 months, with some unfortunate families waiting almost two years. This is appalling, leaving grieving families who are already going through a hard time adjusting to their loss facing mounting liabilities and no cash.

Rewarding the Government for its own inefficiency, HMRC is charging estates 7.75 per cent interest: more than two percentage points above the Bank of England’s base rate. Thus the state has a perverse incentive to string out the process.

We are where we are, of course, because the Tories have not had the courage of their convictions and scrapped this hated tax altogether. Privately, they almost all despise it, recognising the fundamental iniquity of the state using death as an excuse to retax assets that have already been taxed time and again during the deceased person’s lifetime. Then again, relatively few people are lucky enough to be left more than £325,000 worth of assets, meaning most people don’t pay any inheritance tax. (Only around 4 per cent of estates are affected, with various measures, such as the sharing of the allowance between spouses, enabling many modest family homes to be bequeathed tax-free.)

Amid a corrosive culture of envy encouraged by politicians on the Left, and the redistributive agenda that has always been at the heart of socialism – and appears to have been adopted by the Tories – successive prime ministers and chancellors have calculated that there is more to be lost than gained by abolishing the levy.

It is now almost eight months since I lost my mother, and in the interim, I have come to feel like a human cash machine for our increasingly dysfunctional state. Progress to obtain probate feels glacial to non-existent. Her affairs were not remotely complicated but I will probably be lucky to receive the grant by Christmas. Navigating the utterly byzantine and spirit-sapping form-filling process required the assistance of multiple expensive professionals. Nonetheless, I did my bit. Evidently it is too much to expect the relevant authorities to do theirs.