The coronavirus lockdown has quickly presented a vast number of challenges for Executors in dealing with the probate process. These will, in almost every situation, exacerbate an already difficult time for families coping with the death of a loved one.
Being able to liaise quickly and effectively with H M Revenue & Customs (HMRC) and the Probate Registry is a key part of any application for a Grant of Probate, and both organisations have had to adapt quickly to the lockdown measures. While the core processes remain the same, many elements have been modified to ensure that probate applications can be made in spite of the difficulties caused by social distancing measures. We summarise these modifications here. For an overview of the probate process, please see our briefing note here.
1. The Inheritance Tax Return (the “Return”)
This is the document which is submitted to HMRC by the Executors and reports the assets and liabilities of an Estate. Depending on the complexity of an Estate, this can often run to several hundred pages.
1.1 Signature / approval
Where Executors are represented by a professional adviser, HMRC are now able to accept electronic or printed signatures on the IHT Return. This is on the basis that the adviser confirms that the Executors have approved the Return and authorised it to be submitted on their behalf.
When the IHT Return has been processed, HMRC have started emailing their receipt direct to the Probate Registry. This is needed to complete the application for a Grant and would normally have been posted to the solicitor to send on to the Probate Registry.
1.3 Practical effect
In our experience these changes have helped considerably to minimise the delays which had been expected at the Revenue, with remote working by most HMRC employees and the reduced workforce in the IHT department. They also eliminate the reliance on the postal service (which is already overstretched) and this is very welcome news.
Although an IHT Return should be filed within 12 months of death, HMRC have confirmed that the current pandemic will be regarded as being “within the scope of a reasonable excuse for late filing and as grounds for appeal against late filing penalties”. Executors should, however, continue to make every effort to meet the filing deadline as it will still be necessary to prove that COVID-19 has contributed to the delay.
2. Payment of Inheritance Tax
IHT becomes due on movable property (ie bank accounts and investment portfolios) either at the end of the sixth month from death or on submission of the Return (whichever is the earlier). 1/10th of the IHT on immovable property or business interests (ie a property or a share in a Partnership) becomes due at the end of the sixth month from death and thereafter in nine annual instalments.
HMRC will no longer accept cheques to pay IHT, which can be problematic when making payment from a deceased’s bank account, where the bank does not participate in HMRC’s direct payment scheme. These banks are now issuing cheques in the name of the solicitor’s firm and leaving it to the professional adviser to arrange the onward payment to HMRC. This can delay funds reaching HMRC and should be borne in mind if the deadline to pay IHT is near, although it is likely that they would view this as a reasonable excuse to appeal against any interest applied for a late payment.
It is worth noting that the interest rate for a late payment was reduced by HMRC at the beginning of April and is now 2.6 per cent.
3. Application for Grant of Probate
Even before the pandemic there had been talk of centralising Probate Registries and moving the process of applying for Grants online. Although the move to a centralised system was well underway, the electronic application process has been accelerated given the current crisis.
HM Courts & Tribunals Service have recently launched their online portal which can be accessed by legal professionals. As with all new technology, there are a number of teething problems and it is not yet possible to apply for all Grants online, but we have now successfully made a number of online applications.
Executors no longer need to complete a Statement of Truth (the already simplified version of the former Executors’ Oath) and instead, a professional adviser will complete an online declaration on behalf of their clients. This declaration can only be submitted with the prior consent of the Executors, and contains details about the deceased and the Executors and provides background information about the Estate. The adviser should then follow up the electronic submission by sending the original Will and any Codicils to the new Centralised Probate Registry in Harlow to be married up with HMRC’s receipt (see 1.2 above).
At the time of writing, applications which cannot be made online include Grants where the deceased did not leave a Will and also where a Trust Corporation has been appointed as an Executor. The Probate Registry have issued new forms for these circumstances which contain a legal statement, similar to the Statement of Truth, for Executors(/Administrators) to sign.
All of the above has significantly changed the way in which Executors deal with the probate process which we know is already very different to the process undertaken by many of our neighbours in the EU and other countries with a civil-law system. The position continues to change as HMRC and the Probate Registry adapt to these unprecedented times, but one thing that has not changed is our ability to guide our clients through the probate process as quickly and efficiently as possible.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, June 2020