Pressure is growing on ministers to extend the 12-month claims window for loss relief on share price falls for inheritance tax as lengthy delays in processing probate are making it impossible for people to claim.
When someone dies, inheritance tax on their estate is calculated using its value on the date of death. Loss relief can be claimed on shares if they are sold within 12 months from the death date, but the shares can only be sold once probate has been granted.
“Due to ongoing processing delays with probate applications, executors are losing the opportunity to claim relief from IHT,” the Association of Taxation Technicians told parliament in a letter this month, requesting changes be made in the upcoming Budget on March 15.
“The ATT therefore considers that the current 12 month window is too short and needs to be extended to a two-year period, or at least an 18 month period from the date of death, on a permanent or temporary basis,” the letter said.
“I would say at least 50 per cent of cases where we are instructed are unresolved . . . within 12 months of death,” said Oliver Budiño, principal associate at law firm Nockolds, adding his support to calls for an extension of the loss relief window for share sales.
Tax advisers bemoan delays at HM Courts & Tribunals Service in granting probate, the legal right to deal with someone’s estate when they die. “It can be a complete lottery as to whether an application is dealt with properly or not,” said Rebecca Fisher, partner at law firm Russell-Cooke.
Straightforward applications can be done online and take an average of just under four weeks to be processed, according to the latest data from HMCTS. This rises to 17 weeks for applications that have had to be checked, usually if there is a query or minor error in the application.
The main problems arise with applications made by post, including where an attorney makes the application, the deceased is not domiciled in the UK or if they died without a will and the beneficiaries are under the age of 18.
For paper applications the average submission to grant period currently takes more than 20 weeks — a 50 per cent increase over the past year, despite the fact the total number of grants issued fell over the period.
Fisher said she had just had a case resolved that began in April last year, and in her experience paper applications were taking six to eight months — longer than the stated average.
Jan Wright, partner at law firm Harrison-Drury, said delays were caused not only by the probate registry but also factors such as how organised the deceased was, the efficiency of banks and HMRC’s timeliness in dealing with inheritance tax applications.
Applications for probate can only be made once inheritance tax has been paid. Advisers said the average time between the date of death to a probate application being submitted is generally three to five months when inheritance tax is payable.
Housing assets benefit from a much longer claims window than shares. If a property is sold for less than it was valued at for inheritance tax, loss relief can be claimed if it is sold within four years from date of death.
HM Courts and Tribunals said: “The death rate has been considerably higher since 2020 causing a surge in probate applications but we are dealing with them in seven weeks on average — almost one week quicker than a year ago.”