HMRC's most recent rise in the rate of interest charged on late payment of inheritance tax (IHT), now a punitive 7.75%, focuses attention once again on the delays at the Probate Registry and the significant impact these are having on taxpayers.

It can often take six months or longer to obtain a Grant of Probate, despite digitalisation of the process in recent years which was intended to lead to increased efficiencies. Even when personal representatives have acted as quickly as possible in gathering information required for the IHT account and submitting the probate papers promptly, Probate Registry delays will often mean that a Grant of Probate does not follow swiftly.

While some institutions can release funds direct to HMRC to meet the IHT bill before a Grant of Probate, where assets are illiquid or otherwise require a Grant in order to be sold, the estate may have to pay significant amounts of interest if IHT is not paid within the deadline of six months after death.  This is the case even with IHT which may be paid in instalments (such as that due on the family home) as interest runs on the total balance outstanding. The result is that IHT interest is now becoming a significant cost in many estates often as a result of delays which are out of the personal representatives' hands.

Some practitioners suggest that HMRC should extend the deadline for charging interest, perhaps in circumstances where the probate application has already been made. While this may be a helpful solution in the immediate term, it is more important than ever for personal representatives to gather the information needed for the IHT account and engage with the process as quickly as possible so as to speed up the pre-Grant stage. However, given current delays, this may not be enough and improving processes at the Probate Registry so that Grants are received quickly and any issues with applications are dealt with in a streamlined way would be the best outcome. Not only would this alleviate the financial implications of the current high interest rates, it would also ensure that the whole estate administration process keeps moving forwards thereby benefitting both personal representatives and beneficiaries.