The voluntary sector is to step up efforts to oppose a new probate fee system that could cost charities £10m a year after the House of Lords supported the move yesterday.
The draft Non-Contentious Probate (Fee) Order would replace the current flat-rate fee of £215 with a sliding scale of fees rising from £250 to £6,000 on all estates worth £50,000 or more.
It will now go before the House of Commons and could become law in April.
Peers voted by 187 to 90 against an amendment by the Liberal Democrat peer Lord Marks of Henley-on-Thames to reject the order outright.
But the order attracted strong criticism, with peers describing it as a stealth tax or death tax rather than an enhanced fee.
This was reflected by the 186 to 161 vote in favour of another amendment by Labour peer Lord Beecham, which described the new fee structure as a stealth tax and a "misuse of the fee-levying power".
But because Marks's amendment to kill the order was rejected, it will now come before the House of Commons.
Matthew Lagden, chief executive of the Institute of Legacy Management, said he was disappointed by the outcome and his organisation would now seek to build a coalition in favour of a charitable exemption from the impact of fees.
The ILM last month estimated that the measures could cause the voluntary sector to miss out on £10m of legacy donations a year.
Lagden said he was disappointed by comments in the debate by the Conservative peer Lord Hodgson of Astley Abbots, who said some people in the voluntary sector were "scaremongering" about the impact.
Hodgson, who supported the order, told the debate: "However I work the maths and however I try to work through the ideas, I do not see the logic of the more extreme and indeed scaremongering issues that have been raised by many parts of the sector."
Lagden said: "We don't think we are scaremongering. We believe the £10m figure is robust and our concerns are legitimate."
Lord Keen of Elie, the government spokesperson for Ministry of Justice business in the Lords, said that under the new fee structure more than half of all estates would pay nothing, 80 per cent would pay £750 or less and none would pay more than 0.5 per cent of the value of the estate.
"These new fees are progressive and proportionate and will help to provide a stable financial footing for the Courts and Tribunals Service," said Keen.
But Marks said the fee increase would be "dramatic" and added: "For estates above £2m, the increase is twenty-eightfold. Just that increase would be 27 times the actual cost of administration."
Beecham told peers: "Of course the justice system desperately needs better funding, but this should be provided not by a stealth tax but out of general taxation including, possibly, inheritance tax.
"If ever there was a competition for the chronic misnaming of a piece of secondary legislation, the Non-Contentious Probate (Fees) Order 2018 would be a runaway winner. There is nothing non-contentious about it."
Baroness Meacher, a crossbench peer, said people with larger estates could experience a fee hike of 3,770 per cent.
The Conservative peer Baroness Browning called it a "death tax" that would hit hard-working people.
"As a Conservative, I find this appalling, because these are not Conservative policies," she said.
Nicola Evans, charities counsel at the law firm BDB Pitmans, told Third Sector that the Lords vote was disappointing but not unexpected and could have significant implications.
"If the House of Commons lets it through, then, as well as the as yet unknown unintended consequences, this new stealth tax will inevitably make apparently intended inroads into the charity exemption from inheritance tax," she said.