When someone passes away and leaves an estate bearing inheritance tax (IHT), there are deadlines for filing the Account and paying the tax due. In many cases, the tax is paid before the Grant of Probate is sent for application. However, if there is land in the estate, some of the tax can be paid by instalments. Extra inheritance tax interest is applied if tax is paid late.
Unfortunately, many executors are facing higher inheritance tax payments due to backlogs in processing the applications for the Grant by the Probate Registry. Families are therefore facing punitive inheritance tax interest rates — currently at 3.25% — on top of their inheritance tax bills because of the long delays in the Courts due to no fault of their own. IHT must be paid within 6 months of the end of the month in which the death occurred or interest will accrue.
Executors are being informed that the processing time for a Grant of Probate is currently between 8-12 weeks which is much longer than the normal 2-3 week wait. In some cases, the applications are taking in excess of the 12 weeks. The Solicitors for the Elderly (SFE) group have also warned that if mistakes are being made on the original application for probate, there will be further delays as corrected forms are placed at the back of the queue which causes more frustration for many families.
Until a Grant of Probate has been obtained, executors cannot usually gain access to funds in the estate to settle the outstanding tax due. These delays are causing a number of additional problems such as delays to the sale of a house and potentially mounting debt as creditors cannot be paid.
How to avoid extra Inheritance Tax interest due to delays
Executors will need to ensure that assets are collected as quickly as possible once the Grant has been issued in order to prevent further interest accruing. They should also collate the estate details as soon as possible following a death, to ensure that the application for the Grant is dealt with by the Court in a timely manner.