Increasing late payment interest charges put focus on probate delays

HM Revenue and Customs (HMRC) has again increased the rate of interest it charges on late paid tax – the new rate is 7.75%.  This increase raises the issue of additional tax costs caused by delays which are not necessarily the taxpayer’s fault.  In particular delays in obtaining grants of probate can now result in hefty interest charges where the inheritance tax (IHT) bill cannot be settled until after estate assets have been sold.

Delays at the probate registry mean that it often takes more than 6 months to obtain a grant of probate even if all parties have acted as efficiently as possible.  It generally takes a few weeks from the date a person dies to obtain date of death valuations of their assets.  Once the IHT account has been submitted to the Revenue, we are required to wait 20 working days before submitting the application for a grant of probate to the probate registry and the probate registry currently estimates 16 weeks from submission of the application to issue of the grant.  Only then can properties be sold and values realised to pay the IHT which is especially a problem where much of one’s wealth sits in property.

IHT is due by the end of the sixth month after the person died (IHT deadline).  It is possible to pay the tax due on property assets by instalments, but interest accrues on all IHT due from the IHT deadline onwards. It is not possible to appeal an assessment of late payment interest.

Some probate practitioners suggest that HMRC should delay charging interest in certain situations i.e. where parties have acted efficiently.  Another suggestion is that HMRC should be more flexible in accepting the placing of a charge on an estate property.

If you need assistance obtaining probate or with any other legal matters, please contact us.

Lindsey Sharples is a solicitor in the private client team at Barker Gotelee, Solicitors in Ipswich.

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