What’s happening in England and Wales?

Denese MolyneuxMy tenure as Chair of STEP’s England and Wales Regional Committee began in January and I would like to thank Rita Bhargava TEP for being such a hard act to follow. January also heralded the arrival of STEP’s new Chief Executive, Mark Walley. Mark has been quick to get his feet under the table and has ambitions to move STEP forward while keeping the organisation true to both its mission and vision.

The last England and Wales committee meeting pinpointed the areas that the committee felt warranted the most attention: raising the profile of TEPs in the public eye; education, career development and networking; educating professionals; and influencing government/policymakers. We are working on a plan to support and input into further work in these areas over the next year.

As detailed in Rita Bhargava’s blog in December, much has been done in recent years to raise the profile of TEPs in the public eye.  STEP’s Communications Team continue their sterling work with the ‘Talk to a TEP’ campaign and public-facing website, advisingfamilies.org, which continues to receive over 1,000 TEP searches a month.

The mammoth job of upgrading the STEP website is underway. The update will include a new member area, and a full site redesign, which should lead to big improvements and help you find exactly what you are looking for. The new site should be with us by January 2020.

The probate fees issue rumbles on. Rita Bhargava and STEP’s Policy Team have been leading the charge. Despite their best efforts, the government was, until very recently, pushing ahead with the Order. With recent political events, however, this is all looking a little less certain than before, and seems unlikely to come in much before the end of the year, and there is some speculation that, due to its unpopularity, it might not happen at all…  You can keep up with developments on the STEP Blog as they happen.

The EU Fifth Anti-Money Laundering Directive (5AMLD) is under consultation by the Treasury.  It is to the credit of our technical and policy team that they have pulled together such a comprehensive response to this consultation, and in addition have organised two roundtables with a number of senior industry practitioners to discuss the impact of the Directive in the UK. Watch this space for updates as they happen.

A hearing for the All-Party Parliamentary Group on Inheritance and Intergenerational Fairness was attended by a delegation from STEP in April. This APPG has held a series of hearings, some of which have helped inform recent recommendations in this area from the Office of Tax Simplification (see blog). We are hoping for more fundamental changes in this area, however, and look forward to recommendations from the APPG later this year.

And our Professional Development Team has a number of plans for the next year, not least the introduction of more flexible diplomas, enabling practitioners to tailor their STEP Diploma to better suit their specialisms.

Since joining the England and Wales committee six years ago, I have been constantly in awe of the amount of work that goes on behind the scenes, undertaken by committee members and the Head Office team, a fraction of which I have reported above. It is a pleasure and a privilege to work alongside so many dedicated professionals.

I look forward to updating you with further blog postings during my time as chair.

Denese Molyneux TEP, Chair, STEP England and Wales Regional Committee

OTS inheritance tax review, second report: A welcome start, but could go further

The UK Office of Tax Simplification (OTS) has published a second report following its ‘Inheritance Tax Review: Call for Evidence’ published in April 2018.

The first part of the review focused on inheritance tax (IHT) forms, administration and guidance and the OTS published their response in November 2018.

The second part of the review focuses on various areas of the IHT regime and how they interact with one another. The report, published on 5 July 2019, contains three areas of recommendations for the simplification of inheritance tax: lifetime gifts; interactions with capital gains tax (CGT); and businesses and farms in relation to agricultural property relief (APR) and business property relief (BPR).

STEP is very keen to see the inheritance tax regime simplified due to complexities in the current system, so any proposed simplification is to be welcomed. However, we are disappointed to note that there are no recommendations in relation to the nil-rate band, the residence nil-rate band or the treatment of trusts. We believe that the government could expand upon these recommendations and look at a wholesale change in policy towards IHT.

The summary of recommendations on page 13-14 are as follows.

Key area 1: Lifetime gifts

Gift exemptions package

1. The government should, as a package:

  • replace the annual gift exemption and the exemption for gifts in consideration of marriage or civil partnership with an overall personal gifts allowance
  • consider the level of this allowance and reconsider the level of the small gifts exemption
  • reform the exemption for normal expenditure out of income or replace it with a higher personal gift allowance

Gifting period and taper package

2. The government should, as a package:

  • reduce the 7 year period to 5 years, so that gifts to individuals made more than 5 years before death are exempt from Inheritance Tax, and
  • abolish taper relief 

3. The government should remove the need to take account of gifts made outside of the 7 year period when calculating the Inheritance Tax due (under what is known as the ’14 year rule’).

Liability for payment and the nil-rate band

4. The government should explore options for simplifying and clarifying the rules on liability for the payment of tax on lifetime gifts to individuals and the allocation of the nil-rate band.

Key area 2: Interactions with Capital Gains Tax

5. Where a relief or exemption from Inheritance Tax applies, the government should consider removing the capital gains uplift and instead provide that the recipient is treated as acquiring the assets at the historic base cost of the person who has died.

Key area 3: Businesses and Farms APR/BPR

6. The government should, as a package:

  • consider whether it continues to be appropriate for the level of trading activity for BPR to be set at a lower level than that for gift holdover relief or entrepreneurs’ relief
  • review the treatment of indirect non-controlling holdings in trading companies, and
  • consider whether to align the Inheritance Tax treatment of furnished holiday lets with that of Income Tax and Capital Gains Tax, where they are treated as trading providing that certain conditions are met

7. The government should review the treatment of limited liability partnerships to ensure that they are treated appropriately for the purposes of the BPR trading requirement.

8. HMRC should review their current approach around the eligibility of farmhouses for APR in sensitive cases, such as where a famer needs to leave the farmhouse for medical treatment or go into care.

9. HMRC should be clearer in their guidance as to when a valuation of a business or farm is required and, if it is required, whether this needs to be a formal valuation or an estimate. Other areas of Inheritance Tax.

10. The government should consider ensuring that death benefit payments from term life insurance are Inheritance Tax free on the death of the life assured without the need for them to be written in trust. 

11. The government should review the POAT rules and their interaction with other Inheritance Tax anti-avoidance legislation to consider whether they function as intended and whether they are still necessary.

Useful links

Emily Deane TEP, STEP Technical Counsel

STEP Employer Partnership Forum examines best practice in employee engagement

Speakers and others at our EPP ForumLeading industry practitioners speaking at last week’s STEP Employer Partnership Programme (EPP) Summer Forum discussed how to understand employee engagement, and put new ideas into practice. Particular topics for discussion included flexibility in the workplace, and understanding gender diversity and inclusion. The day was chaired by STEP CEO, Mark Walley and hosted by RSM at its London office. 

Feedback forms and focus groups

Janine Mayor noted employees can easily become disengaged or disillusioned with their roles, and that employers need to find a way to ensure that their people ‘walk into work each day wanting to give their best, and connect with the goals and values of their organisation.’

Key questions should include, ‘What are the relationships like in my organisation? Do people buy into where the company is going? and, Are they engaged with the business and recognised for their achievements?’ Janine recommended employee feedback surveys to understand their needs and wishes, noting that while managers cannot provide everything employees want, through training and good communication, they can effectively respond.

A clear and regular internal communications programme in place will let individuals know they are listened to, supported and recognised. In turn, they will feel part of, and engaged with, an organisation’s journey and goals.

Lorraine Wheeler TEP gave a case study of how her company is putting such steps into practice. She particularly highlighted the use of focus groups.

‘The views of the staff are the key benchmark for what needs to change in any company, and senior staff need to buy in to those views and the changes suggested,’ she said. ‘Focus groups bring inclusivity and also showcase cross-sections of the workforce, and the different needs of different employee demographics.’

Employees must have a ‘safe space’ in which to raise concerns, she added, and management needs to address them. ‘To engage them, they have to be involved, listened to, and taken seriously,’ she said, adding, ‘and then they need to see the results.’

Flexibility and gender diversity

The gender diversity conversation is more important than ever in 2019, as Bonnie Steiner TEP and Rina Goldenberg Lynch stressed in their discussion of workforce inclusion.

They discussed the unconscious bias still existing against women: assumptions that they can’t lead effectively, aren’t ambitious, or will abandon their careers once they have had children.

‘Gender diversity policies are vital to promote change, not just from the ethical perspective, but from the business perspective,’ Bonnie explained.

Aside from the moral implications of a bias against women in the workplace, as well as the possibility of legal complaints against gender non-compliance, the two presented the business case for companies promoting women to boards, from recruitment and retention, to business development and attracting new clients.

Moreover, a balanced male-female board will always show improved decision-making and corporate governance through the different perspectives brought to the table. 

Caroline McCague discussed the importance of increased flexibility: not just for women in the workplace, but for all employees striving to find a work/life balance, noting that too many organisations focus on the physical presence of employees in the office, rather than their goals and productivity.

‘Flexibility should be a strategic tool to supplement engagement, productivity, performance and cultural change,’ she said. ‘Creating a supportive working environment is about helping people to work in different ways as they all work towards the same organisational goals.’

Reviewing the day, Mark Walley said: ‘the Employer Partnership Programme is really important to us at STEP, as it reinforces the relationship between us and the employers of our professional members. We have a shared commitment to the professional standards that we develop, to the training and education undertaken to reach those standards and to the professionalism that is required to become and remain a member of STEP. Together, those elements provide consumers the confidence they seek and is why they come to STEP members for their advice.

‘Events such as the Summer Forum are a fabulous opportunity for EPP partners to come together, share best practice, discuss the issues that they are dealing with and take away actions they can implement right away. The levels of engagement were huge: thank you to all that joined the discussion.’

Helen Swire is News Editor at STEP.

EW to extend online probate service

Daniel NesbittThe online system for England and Wales probate applications is to be extended further, after a Statutory Instrument was laid before the House of Lords last week.

The Non-Contentious Probate (Amendment) Rules 2019 updates previous legislation to allow solicitors and probate practitioners to apply for grants of probate without an invitation from a registry. It also modernises certain definitions, and corrects minor errors, in the Non-Contentious Probate Rules 1987.

As the legislation is a negative instrument, no vote has been scheduled to take place in parliament, so unless a motion to stop it is tabled within 40 days, it will automatically become law, and is due to come into force on 1 October 2019.

The full text of the Statutory Instrument, along with further explanatory information, can be found here: The Non-Contentious Probate (Amendment) Rules 2019 (PDF) .

The changes are unrelated to the government’s Non-Contentious Probate (Fees) Order 2018, which has still not been scheduled for a final vote in the House of Commons.

 

Daniel Nesbitt, Policy Executive, STEP

EW probate delays and disruption: an update

Emily Deane TEPSTEP met HM Courts & Tribunals Service (HMCTS) this week, together with The Law Society and Solicitors for the Elderly, to obtain an update on the delays and disruption to the Probate Service in England and Wales.

HMCTS gave us the following update on work undertaken since our last meeting on 14 May:

  • It has taken on 30 new staff since the transfer to the new system.
  • It currently has 180 employees working across the Probate Service.
  • It has recruited additional legal advisors with probate experience.
  • The registry with the most significant backlog is Winchester, which is sharing its work with other registries.
  • HMCTS is issuing approximately 20,000 grants a month, of which 12-13,000 are from practitioners
  • It is dealing with grants in date order, oldest first.
  • It does not prioritise grants according to urgency, and will not deal with applications more quickly by request.
  • It is entering caveats into the system on the day of receipt.
  • It will not refund probate fees due to delay.
  • It will issue grants of probate in approximately six to eight weeks.

STEP’s request for waived interest, or longer timeframe

STEP is aware that the delays are making it difficult for members to pay IHT on estates, since they cannot gain access to funds until the grants have been issued.

STEP has asked HMCTS to consult with HMRC on this issue, to see if it will waive the interest accrued on outstanding IHT, or permit a longer timeframe for paying by instalments. We stressed that this would help ease some of the time pressure and negligence concerns of our members, and generate some much-needed goodwill.

HMCTS anticipates that once its new digital system is up and running, there will be less scope for administrative and human error. Users will be able to track applications and make corrections online.

It will continue to accept paper applications for those less able to deal with applying online.

  • HMCTS is holding a webinar to demonstrate the new online system for professional users on 4 July.

STEP will be meeting HMCTS again in August for a further briefing.

Emily Deane TEP, STEP Technical Counsel

A welcome return to STEP Canada to attend the 21st National Conference

Canada student winnersIt was an absolute pleasure to be back in Toronto, Canada for the 21st National Conference, the STEP Canada Board meeting and AGM. I had visited in February, early in my tenure, given the importance of the region to STEP overall and to learn more about how we operate in different parts of the world.

I was joined on this trip by Simon Morgan TEP, our worldwide Chair and Jim Walkinshaw, COO Finance and HR, from the London office.

We met the Canada Board on the first day, and then attended the AGM and Board meeting. It was great to meet the incoming and outgoing board members and get the opportunity to update the Canada Board on what we are working on in the worldwide office to further the vision and mission of the society.

In the evening we moved on to a reception which included Simon Morgan and STEP Vice Chair Nancy Golding TEP presenting Prof Albert Oosterhoff with Honorary Membership of STEP. Prof Oosterhoff became the second Canadian to receive such an honour and is one of only 11 worldwide.

The next morning saw the conference open and 784 delegates converge on the Metro Toronto Conference Centre. After the formalities, we were into the first session of the day with Richard Hay TEP leading us through a masterclass thought-leader piece on the effects of globalisation on the tax collection of nation states. The question of whether we could be headed toward a central taxing authority that imposes globally-coordinated taxation may not be so far-fetched; how would we have reacted to the current disclosure rules ten or 15 years ago?

Alongside the many important technical sessions the two other stand-out pieces for me (as a non-practitioner) were the lunchtime sessions. On Thursday we listened to S Jay Olshansky from the University of Illinois looking at ageing and longevity; some of the ‘markers’ for that were surprisingly basic, eg the younger you look, the older you tend to live, and what impact that should have on planning for future health and finances. On Friday we had the equally thought-provoking Caron Croland Yanis sharing her experiences on the intersection of family values, sustainable governance and technical compliance in philanthropy.

Before heading off to dinner we were delighted to attend the Student Awards ceremony where the latest winners were recognised (pictured). I always enjoy these type of events and getting to meet the brightest of the new professionals coming through, and I’m confident that we saw some of the future leaders of the profession. Dinner that evening had to be the networking and social highlight of the two days – held at Arcadian Court, an historic and impressive art deco event space.

For me the barometer of a conference’s success is how many people are still actively engaged at the end of the event – and STEP Canada certainly set the bar high by having a varied and well thought-through programme that kept most of the delegates through to the final sessions.

It certainly met our mission statements of promoting high professional standards, educating professionals and connecting advisors. As ever with these events, the eventual success sits deep in the planning, and I saw first-hand during my visit back in February how detailed, focused and accountable that planning was. Based on that, the event was always going to a success!

Altogether it was a very informative and enjoyable few days. I genuinely learned lots, I have seen content and formats that we can use, and/ or adapt for the Global Congress in Dublin next year, and the networking was outstanding.

Huge congratulations go out to the whole STEP Canada conference programme committee led by Corina Weigl TEP (Chair), Brian Cohen TEP and Richard Niedermayer TEP (Co Deputy Chairs) and the fabulous staff team led by Michael Dodick and Janis Armstrong. What a formidable force to have behind the biggest conference event in the STEP calendar.

It’s always interesting to see what other conferences are on in a major venue. As I arrived in Toronto the hotel and centre was full of body builders at the 2019 Toronto Pro Supershow and EXPO, and as we left the cannabis industry had moved in for the 2019 Toronto Cannabis EXPO – it’s a booming market after it was legalised last year…

Mark Walley is CEO of STEP

What can you do to improve employee engagement?

Christopher TaliaWe all know that employee engagement is important, but that doesn’t mean it’s easy to get right. Next month’s STEP Employer Partnership Programme (EPP) Summer Forum will look at this key area, and help you devise a strategy that works for your organisation.

Employee engagement can mean different things to different people. Some will see it as recognition, others as financial reward. No matter how you view it, employee engagement holds three distinctive characteristics: realising employee potential; clear and shared organisational goals; and promoting employee wellbeing.

Many organisations fall short of achieving one, or all of these factors, leaving employees feeling under-appreciated, and in turn, unwilling to perform at their full potential. So how can employers bridge the ‘employee engagement’ gap while ensuring business success?

The forum, Employee engagement: boosting employee capability and potential for business success, will be hosted by Platinum Employer Partner RSM, and will share valuable insights from the following industry practitioners:

All our speakers have substantial experience in different jurisdictions including Guernsey, Jersey, Switzerland and the UK. Each will share her own experiences, strategies and learning on how they have successfully developed and implemented programmes to support employee engagement.

Key topics will include: what employee engagement means, understanding flexibility in the workplace and understanding gender diversity and inclusion.

If you have ever wanted to know how you can increase both your employees’ potential and their engagement levels, then this is the forum for you. I look forward to seeing you there to learn more about employee engagement.

Christopher Talia, Programme Manager, Employer Partnership Programme, STEP (Christopher will officially join the EPP team from mid-July).

STEP meets HMCTS to discuss EW probate delays

Emily Deane TEPSTEP met HM Courts & Tribunals Service (HMCTS) this week to discuss the backlog of applications and continued disruption to the Probate Service.

HMCTS representatives explained its old database needed to be upgraded, which had prompted the decision to move to digital software. The new system was scheduled to go live in January but was delayed until 25 March following technical glitches. HMCTS explained that it had not anticipated this level of issues with the technology, in conjunction with such a high spike in probate applications.

The following points were raised:

  • HMCTS has brought in 15-20 more people for the national office; a 10-15 per cent increase in those working on the backlogged applications.
  • The remaining probate registries will be closed over the next 12 months. Staff will be given six months’ notice and HMCTS expects to help them all find other roles in the civil service.
  • The new digital system is being delivered from the Courts and Tribunals Service centre based in Birmingham. HMCTS is keen to get more solicitors using the digital pilot, and will be looking for volunteers shortly. This pilot will enable solicitors to issue up to 250 applications per week.
  • Cases are taking up to 30 working days to be processed at the moment.
  • The Probate Registry will publish regular bulletins to improve communication with the public.
  • HMCTS assures users its existing Registry staff are working hard to get through the applications, and issued 960 grants on a single day this week.
  • HMCTS requests users not to chase applications, as they are being dealt with by date order.
  • HMCTS is currently up to date with caveats.

STEP expressed its disappointment that the court service was not better equipped to deal with the spike in applications. The Ministry of Justice had issued reassurances earlier this year that the court service was prepared for an increase due to the proposed increase in probate fees. STEP noted HMCTS was ill prepared to merge the new online system, change the format of the certificate, close registries and cut staff all at once. 

STEP repeated its suggestion that HMCTS should change the fee implementation date to the date of death for applications, to relieve the pressure and generate some goodwill amongst the industry and the public. The idea should be seriously considered, given pressure on practitioners and members of the public is considerable, and is causing a great deal of anxiety. 

STEP has also provided feedback to HMCTS on errors in the new-style grants that members have received, together with feedback on how they could be improved. We have explained why the will should continue to be annexed to the grant of probate, and the difficulties caused if it is not.

The Statutory Instrument to increase probate fees is still waiting to be scheduled for approval in parliament, and we will continue to monitor and report any developments (latest update).

Emily Deane TEP, STEP Technical Counsel

What’s happening with the EW probate fees order?

Daniel Nesbitt

Update 18 July: The probate fees order has not been scheduled for debate in the week commencing 22 July. As this will be the final week before the UK Parliament rises for its summer recess, and the end of the parliamentary session, the order cannot now be debated or passed until parliament returns on 3 September 2019.

Original blog: The status of the EW probate fee order is the same as it has been since February – it is still waiting for its final stage. As it was not scheduled for debate next week, ie w/c 13 May, it will not be possible to bring the new fees in before June.

Following last week’s Business Questions (where the future parliamentary business is set out) there has been a slight change of tone from the government on scheduling the order. In answer to a question, the Leader of the House of Commons, Andrea Leadsom, said the order had already been debated in committee and an approval motion would be brought in due course. Previously she had said ‘where a reasonable request for a debate has been made, time should be allowed for that debate’.

This may mean the government will actively try to avoid a full debate in the House of Commons. Labour seems keen to bring it to a vote and has raised it at a few business questions.

Parliament is due to have its Whitsun Recess from 23 May to 4 June 2019, so that will further limit opportunities to bring the order to the House of Commons. The summer recess date has not yet been announced and will likely depend on the Brexit negotiations, and whether a deal can be passed (the last two summer recesses have started in late July, which may be a guide).

The summer recess will mark the end of the parliamentary session, and whilst secondary legislation not passed before this point is usually abandoned it can be brought back in the following session.  

There are rumours that Theresa May is not planning to hold a substantive Queen’s Speech at the opening of the next session, which would mean there would only be a limited programme of legislation for the government and it would be easier to find time to fit it back in. However, the government may try to bring the order to its final stage before the summer recess.

Daniel Nesbitt, Policy Executive, STEP 

5AMLD consultation: STEP’s view

Emily Deane TEP

The UK Treasury has published a consultation paper on the transposition of the EU’s Fifth Anti-Money Laundering Directive (5AMLD), which expands upon the scope of registration for trusts and widens the accessibility provisions to the beneficial ownership records. The 5AMLD Directive provides for public access, but it is up to each Member State to decide whether or not they will restrict this.

Express trusts

5AMLD will require that all UK express trusts register with HMRC, not just those with UK tax consequences (as was the case with 4AMLD). It will also bring into scope non-EU resident trusts that own UK land or property. STEP is concerned that under 5AMLD, a much wider range of trusts will need to be registered. Express trusts may include co-ownership of land, insurance trusts and other dormant trusts, which will significantly enhance the number of trusts that need to be reported. The consultation seeks to clarify the definition of express trusts, which we hope will provide some clarity and narrow the scope.

Access to the register

There will be expanded accessibility provisions. In the UK, the records will be accessible by law enforcement agencies, any UK obliged entity that enters into a business relationship with a trust, and anyone who can show that they have a ‘legitimate interest’ in the data. An exception is that if a trust has a ‘controlling interest’ in a non-EU company, then anyone will be able to access the information by making a written request and no legitimate interest is required. A trust will be deemed to hold a controlling interest in any corporate or other legal entity when the trust has 25 per cent or more of either the voting shares or other means of control over that entity as defined in the Persons with Significant Control (PSC) guidance. It is currently unclear how legitimate interest applications will be dealt with by the government since ‘legitimate interest’ is not defined within 5AMLD.

Legitimate interest

The government will need to decide whether or not requests for trust data meet the definition of legitimate interest. The current train of thought is that those with legitimate interest should be limited to people with active involvement in anti-money laundering or counter-terrorist financing activity, or those who have reason to believe or evidence that a particular trust or person is involved with money laundering or terrorist financing.

We hope that the government will require strong evidence of illegality and/or wrongdoing that clearly implicates the trust concerned before agreeing to consider a legitimate interest application. There are many people who seek to obtain confidential information about individuals and families with wealth for purposes other than the exposure of illegality or wrongdoing. People are often keen to obtain information about the affairs of the wealthy and those in the public domain, for example, and we are concerned that vague assertions of impropriety could be used to obtain confidential information about family trusts.

The consultation does, however, acknowledge that many trusts are used for children and vulnerable adults, and requests for personal information on either of these will be given ‘special consideration’ and will possibly even be withheld, which we fully endorse.

Registration deadlines

For trusts already in existence on 10 March 2020, the government proposes a deadline of 31 March 2021 for them to register. This gives a long lead-in time, given the greater number of trusts that will need to be registered.

For trusts created on or after 1 April 2020, the government proposes that the trust should be registered within 30 days of its creation. The government envisages that this approach will be the most straightforward, as registration can occur as part of the set-up process, when the required details should be readily available to trustees/agents. The proposal for registration within 30 days for new trusts means there is no single deadline each year and it seems sensible for the trust to be registered at the same time it is created.

It is also intended that this 30-day deadline will be used for any amendments that need to be made to the trust register data, for example, to update an address or change a trustee.

Penalties

Due to the fact that 5AMLD extends registration to non-taxpaying trusts, the government considers that the self-assessment penalty regime is not a suitable basis for the 5AMLD penalty framework. The new regime is also being consulted on within the paper.

STEP will be submitting a response to the consultation, which closes on 10 June 2019. The transposition deadline is December 2019, with an implementation deadline of January 2020. There is an extended trust register deadline for the UK of March 2020.

Emily Deane TEP is STEP Technical Counsel