STEP – the reality

STEP logo iconThere have been a number of recent press articles about the role of STEP, a leading professional body, in the wealth management industry. Some of these articles have presented a highly distorted view of STEP and the activities of our members.

STEP members, known as TEPs, spend their professional lives helping families plan for their futures: from drafting a will or advising family businesses, to helping international families and protecting vulnerable family members who may have mental capacity issues or other forms of disability. With around 20,000 members worldwide, TEPs are the acknowledged specialists in giving advice to families in these areas.

Some TEPs focus on servicing very wealthy families, often with a range of international interests, who need expert advice to manage their affairs to ensure all tax and legal requirements are met in multiple countries. Most TEPs, however, are engaged in helping ordinary families deal with everyday problems. All are committed to the high technical and professional standards that STEP promotes and insists on from all its members.

Internationally, STEP has an important role to play in improving professionalism among all those working with families in areas such as inheritance planning and the care of vulnerable relatives. We are thus proud to be actively involved in helping raise standards in jurisdictions where there have to date been few, if any, equivalent professional bodies.

STEP also works constructively and transparently with a range of policymakers. As acknowledged global experts in their fields, STEP members have an important role to play in ensuring that policy development is informed by the practical experience of professionals working in the relevant area. STEP’s responses to official consultations are all publicly available on the STEP website (see

George Hodgson is Interim Chief Executive of STEP

International Tax Compliance (Client Notification) Regulations

Emily DeaneThe UK’s International Tax Compliance (Client Notification) Regulations have been amended and will come into force on 30 September 2016.

The regulations create an obligation on financial institutions (banks, building societies, insurers, fund managers, wealth managers and professionals that offer tax or financial advice or services) to notify their clients about the tax information that HMRC will receive about their offshore affairs under international agreements.

Financial institutions are defined in the same way as in the Common Reporting Standard (CRS) and capture trusts that are financial institutions, however all charities are specifically excluded and will not have to notify their grant recipients.

Clients must be notified that:

  • Tax information must be shared with HMRC regarding their overseas assets under the Common Reporting Standard (CRS),
  • There are opportunities for clients to voluntarily disclose information about their overseas tax affairs if they need to; and
  • There are likely to be sanctions for those who do not come forward.

The notifications are targeted at practitioners who provide advice about offshore assets or income which is not disclosed in their clients’ tax returns. The affected clients are UK tax residents for whom the practitioner has provided offshore advice or services for a period of up to one year, or up to three years ending on 6 April 2016 (depending on the nature of the advice given).

While the wording of HMRC’s notifications has not been finalised yet, the notifications must be sent to clients by 30 April 2017 with a covering letter from the practitioner using set wording provided by HMRC.

HMRC has no objection to notifications being sent out to every client in the firm’s database if identifying individuals is too time-consuming or onerous. Failure to do so by 30 April 2017 may result in a £300 fine.

STEP will provide an update once further guidance from HMRC is available.


Emily Deane TEP, STEP Technical Counsel

How will Brexit affect the third sector?

Brexit Puzzle Pieces STEP’s Charities UK and Philanthropy Advisors Special Interest Groups hosted a seminar on Charities and Brexit on 6 September presented by STEP members Ed Powles TEP and Tom Dumont TEP and chaired by Suzanne Reisman TEP, writes Emily Deane.

According to those in the charity sector there was an immediate drop in charitable donations after Brexit, but this proved only temporary before it stabilised. However politicians and economists are struggling to gauge what will be different following Brexit. Ed Powles pointed out: ‘If we invoke Article 50 it will be biggest de-merger in history.’

So what are the main points of concern for those who work in the third sector?

Tax reliefs – UK law is vulnerable to significant legislative change following Brexit. EU law currently makes it possible for British citizens to donate to EU charities and claim tax relief. Likewise EU members can donate to the UK and obtain tax relief. European charities can also use UK tax relief in the form of Gift Aid. It seems very unlikely that this regime will continue and that the EU will extend charitable exemptions to the UK after we leave.

EU funding – UK charities receive up to GBP300 million in donations directly from the EU every year, representing a significant contribution towards vulnerable beneficiaries and vital research. It seems highly unlikely that this will continue. There will inevitably be a decrease in grants available through the European Social Fund (ESF) and the European Regional Development Fund (ERDF).

Economic instability – the uncertainty that people are facing in their jobs and personal investments means that they are far less likely to make donations from their disposable income. In addition, charities that depend upon profit from their investments may have major concerns about how the economy will affect them. Having said that, we have survived recessions before and charities have managed to endure.

Legislative change – it is unclear how Brexit will affect charity law. The UK may be compelled to repeal laws that we were obliged to adopt from the EU. Will we modify the European Union Act, and if so, what will we keep and what will we discard? There could be a serious impact on the UK if we re-visit employment, regulatory and data protection laws. Will there be further, onerous due diligence and money laundering requirements imposed upon charities? It seems almost inevitable.

In these pre-Brexit days it is proving very difficult for tax practitioners to advise their clients regarding charitable gifts, cross border gifts and property across Europe. The future seems precarious for the third sector at this stage and the impact over the next few years is relatively uncertain.

John Low CEO of Charities Aid Foundation comments on the future of charities following Brexit, ‘Britain’s culture of charitable giving and the important work of our international charities are hugely significant to how we are viewed by other nations. As Britain starts a new chapter in our approach to international relations, charities must be given the chance to play a leading role.’

STEP is hosting two relevant Special Interest Group events in the next few weeks, with discounted rates of attendance for SIG Members at both:


Emily Deane TEP, STEP Technical Counsel

CRS and charities continued…

Emily DeaneOn 18 August, I attended the latest Charities CRS Working Group meeting, hosted by HMRC. The main issues discussed were as follows:

  • HMRC confirmed that CIOs (charitable incorporated organisations) will be treated in the same way under CRS as other corporate bodies and this will be incorporated into the new guidance.
  • HMRC confirmed that collection of Taxpayer Identification Number (TIN) and date of birth information is on a best-efforts basis if the charity does not already hold the information. A charity should also make best efforts to get a self-certification prior to issuing a grant, however they are not compelled to refuse to give a grant without a self-certification.
  • Charities have an obligation to tell their beneficiaries that their data may be shared, as per Regulation 6. There is no requirement under Data Protection to seek consent from the beneficiaries, since the data is being shared under a legal requirement.
  • HMRC are still reviewing the anti-avoidance measures and they will provide an update when compliance colleagues have been consulted further.
  • HMRC will add further examples to the guidance regarding the definition of ‘indirect beneficiaries’ to help illustrate cases around identifying who is the beneficiary of a grant.

Potential human rights abuses are still a major concern among the charity sector. HMRC are taking into consideration some instances where the exchange of data may not be warranted and could be tantamount to a breach of human rights. HMRC have been collecting examples from the working group in order to increase transparency around this issue and to take on board potential activities of jurisdictions where there are existing concerns around human rights.

The new guidance manual has been published on HMRC’s website and can be viewed via this link:

HMRC also published this Guidance Note for charities in relation to automatic exchange of information.

HMRC intend to host some CRS charity-specific seminars around the country and STEP will flag these events as they arise.

On a broader CRS basis, the HMRC AEOI team is running an educational event aimed at businesses and agents in the small and medium sectors who are affected by AEOI and would like more information. The event will include speakers from agents, industry and HMRC as well as the opportunity for 1‐2‐1 ‘surgeries’ plus small group discussions on due diligence best practice. The event will take place on 7 October 2016 in London. To register an interest in the event please email

STEP will continue to attend the periodic working group to discuss ongoing technical issues with HMRC in this connection.

Emily Deane TEP, STEP Technical Counsel

STEP and PCI Compliance

Credit cards

As part of our ongoing work to ensure the safety and security of our members, STEP is currently working towards becoming fully compliant with the latest Payment Card Industry (PCI) Security Standards. This means that we will be making changes to the way we accept payments and handle sensitive information.

What is PCI Compliance?

PCI Compliance is an information security standard for organizations that handle credit card details from the major card schemes including Visa, MasterCard, American Express, Discover, and JCB. It’s designed to ensure that companies have all the correct measures in place to ensure the ongoing security of the card information they handle.

How will the changes affect you?

Whilst the vast majority of changes will affect internal systems and procedures, STEP will be making some changes to the way we accept card payments:

We will now be automatically rejecting any emails sent to us that contain sensitive card information (that includes the card number, expiry date and CVV) please note that direct debit information can still be accepted.

This information is currently being rejected by way of an email reply, however rejecting it before it arrives with us will increase the safety of your card information.

We will no longer be accepting or sending faxes in any form.

Faxes are fast becoming an outdated method of communication. STEP currently receives such a low volume of faxes that the decision has been taken to discontinue this service.

We will no longer be accepting payment over the phone.

STEP have been evaluating PCI compliant telephone payment options, however given the low volume of telephone payments we currently process, we have come to the decision that the most effective way we can ensure your safety is to remove this option.

The Future:

All the changes we are making to our payment procedures are intended to make your experience with STEP fully compliant with the latest PCI Security Standards. We have recently upgraded our online payments to accept payments in GBP, USD, EUR and CHF.

We will continue to review our payment options to ensure we are providing you with the best service possible.

For any further information on PCI Compliance, you can find it here

For any questions relating to payments, please do get in touch, you can reach us by telephone on +44 (0) 203 752 3700, and


James Harris is STEP’s Information Technology Manager.

Why the Private Client Awards stands out – a judge’s perspective

Sally EdwardsThere are many awards in the financial services sector these days – barely a fortnight goes by that I do not see an article or press release about an award being given to some deserving individual, firm or jurisdiction.

However, the STEP Private Client Awards stands out for two reasons: firstly, the fact that STEP itself represents a recognised quality watermark in our field; and secondly, because the industry understands the rigour of the assessment and judging process for the awards.

It’s worth considering for a moment the first point, being the strength of the STEP brand. STEP membership is an important benchmark for practitioners, and STEP provides quality training sessions and conferences for members, as well as a respected and effective lobbying voice for the industry.

STEP’s reputation is based on rigour and expertise, so the second point about the judging process is hardly surprising, but bears underlining – the STEP awards are meticulously judged through a practitioner-led process, and a serious amount of effort goes into even preparing a shortlist.

So, when asked to be a part of the judging panel for this year’s awards, I was delighted to accept. Having been on the Panel of Experts for a few years, I had an idea of how much work would be required, but even with that experience I was genuinely impressed at how much effort is involved, and how seriously the judging process is taken.

The judges were given a significant amount of ‘homework’ to get through, over and above the meetings at which the shortlists and winners were selected, some after lengthy debate – with real efforts made on the parts of all of the judges to be scrupulously fair.

Having been a part of the judging process and seen it from the other side, I am even more proud of Ogier’s Awards last year, and I am now looking forward even more to next month’s event.

It’s not just a fun evening with a great host, it’s also a good networking event, and from the point of view of a team based in Jersey, a great opportunity to meet face-to-face with some of those who we deal with mainly by phone or email.


Sally Edwards TEP is Head of the Private Client and Trusts Team at Ogier, which won the International Legal Team of the Year in both 2015 and 2012. This year, she is a member of the judging panel for the STEP Private Client Awards.

Why do people go offshore?

George HodgsonTaking a global view, the period since 2008 has been marked by unprecedented activity aimed at improving tax transparency. First of all we had tax information exchange on request. More recently the move has begun to automatic exchange of tax information. The same period has also seen enormous emphasis internationally on improving the availability of beneficial ownership information.

All this activity focused on improving transparency ought, logically, to have been bad news for the so-called ‘secrecy jurisdictions’. It is perhaps surprising, therefore, that the reality looks somewhat different.

Researchers at the European Parliament have dug out some rather curious statistics from the Bank of International Settlements. Over the period 2008-2015 cross-border deposits have grown on average by 2.81 per cent. Over the same period, cross-border deposits in the rest of the world have grown by 1.24 per cent. In other words, during a period of unprecedented activity regarding building transparency, the share of the offshore centres in the cross-border deposit market has actually gone up.

What does that imply? Some will undoubtedly represent this as clear proof that current transparency measures aren’t working. Indeed the same EU Parliament report that presents the statistics goes on to request ‘a study on the feasibility of a global register of all financial assets held by individuals, companies and all entities such as trusts and foundations’. This just goes to show that Big Brother still has his supporters!

Others might see the continued growth in offshore in an age of transparency as demonstrating that the appeal of offshore in reality has little to do with ‘secrecy’. It is hard to imagine that any client moving funds to one of the major offshore centres does not expect those funds to be reported at some point to their domestic tax authority. It is impossible to believe that any of their advisors do not know that at some point their client’s position is likely to be reported to their domestic tax authority.

The conclusion therefore has to be that most of the funds going offshore are there not for secrecy but for other reasons, for example geographic diversification; strong financial infrastructure; or tax neutrality. But it is clear that regardless of the move to transparency, offshore centres still have strong client appeal.

George Hodgson is Interim Chief Executive of STEP

STEP England & Wales Biannual Statement – July 2016

Alex ElphinstonWhatever may have happened over the last six months has no doubt been dwarfed by the EU referendum result and the seismic political fallout and current uncertainty on so many fronts – political, economic and financial – before we begin to consider the outcome of the Brexit negotiations.

STEP is monitoring the situation closely and is in discussions with other relevant professional bodies as well as maintaining lines of communication with civil servants and the like to do all we can to ensure our and our clients’ interests are taken into account. On this last point I hope you have seen the weekly digest of 30 June asking for comments as to concerns and opportunities. Please do respond to this.

While Brexit may be uppermost in our minds at the moment (closely followed perhaps for some by the perennial debate about the ability or otherwise of our sports players to perform), much else has been happening.

More than 300 attendees assembled for STEP’s second Global Congress in Amsterdam at the end of June. It was tremendous that the event was a sell out. Delegates came from 44 countries – a true sign of the global nature of the issues we currently face in our industry.

The focus of this Global Congress was ‘advising families across generations’ with sessions offered on private international law, conflicts, and the changing definition of ‘family’ on the first day, with the second day focusing on transparency, and looking especially at how members – as experts in their fields – can use their knowledge and skills to become part of the solution, informing the process and helping governments, the OECD and others to understand how trust and other structures work, and encouraging dialogue on issues that are critical to our world.All in all, the event was a great success.

And back in March we held the Branch Chairs’ Assembly (BCA), which was well supported with members of the Scottish regional committee in attendance as well recognising the many areas of mutual interest and common concerns at branch level. Members of the committee in Northern Ireland were also invited but unable to attend.

Particular themes coming out were:

  • The benefits of a central resource of the names of speakers and topics that branches have held to assist other branches in compiling their programme. STEP is looking at how best to provide such a resource.
  • Creating a higher public profile for STEP. This second point was consistent with feedback from the Leaders’ Forum last December and will be picked up in the ‘Your STEP’ initiative by STEP Worldwide before filtering back to the regional level for practical outworking.

We were fortunate to have Senior Judge Lush of the Court of Protection as our guest speaker who gave a potted history of some of the important court decisions relating to damages awards before suggesting that STEP provide qualifications for Deputies and case workers as there is no other body of which he is aware that is providing this on a holistic basis. We are looking into this possibility in conjunction with the Mental Capacity special interest group.

As it transpired, this was David Harvey’s last BCA and we wish him well for his future and thank him for his significant input to STEP over his 15 years as Chief Executive.

As always there have been numerous consultations and other issues over the last six months where STEP and the various committees have been actively involved – including the proposed hike in Probate Court fees, the Mossack Fonseca data leak, contributing to the revised code of Professional Conduct in Relation to Taxation (PCRT) and discussions with the Office of the Public Guardian (OPG) on some of their proposed changes. And this is before acknowledging the various different courses, webinars and other training and education events that have been organised across a wide range of subjects.

This will be my last report as chair of the regional committee and I want to thank all the staff at the STEP office for their tremendous support and enthusiasm over such a wide range of issues without which we would all be much the poorer and my role would have been impossible. I have also appreciated the dedication of members and others who give of their time and expertise on the various committees to help keep us up to speed on all the legislative changes (who can forget FATCA?!) as well as forging links with government departments and other influential organisations here and further afield. As a result STEP has often ensured a better understanding of the practical issues and seen changes made.

Finally my congratulations to all those who have been shortlisted as Private Client Awards finalists and the students who recently passed exams as well as those who won awards in the inaugural Worldwide Excellence Awards. The future of STEP should be in safe hands!


Alex Elphinston TEP is Chair of STEP’s England and Wales Regional Committee

HMRC takes aim at inheritance tax planning

Robin VosImagine a client comes to you looking to reduce the inheritance tax bill on his death. He cannot afford to make outright gifts, and so instead you suggest he sets up a trust for his grandchildren and makes an interest free loan to the trust. The trust will invest in a UK authorised investment fund. The client is therefore just giving away the growth in value so that, over time, as the loan is repaid and the money spent, the client’s estate will reduce. Not an uncommon situation.

Under regulations proposed by HMRC, you may well be required to report this sort of planning to HMRC under the ‘Disclosure of Tax Avoidance Schemes’ (DOTAS) rules.

This is a serious matter. Failure to report when required to do so can lead to significant penalties for the ‘promoter’ as well as a range of other possible sanctions for both the promoter and the client.

The DOTAS regime was originally introduced in 2004 to ferret out information about marketed tax avoidance schemes. Arrangements only have to be notified if they fall within certain ‘hallmarks’. These include indicators such as whether the promoter is charging a premium fee or whether they ask clients to sign up to some sort of confidentiality agreement.

The DOTAS rules were first applied to inheritance tax in 2011. Currently they only apply to arrangements designed to get assets into a trust without paying the upfront 20 per cent lifetime inheritance tax charge.

In relation to other taxes, specific hallmarks were introduced to combat schemes in particular areas such as the use of losses, tax avoidance using financial products and attempts to get round the disguised remuneration rules for employment income.

However the proposed new regulations which will apply to inheritance tax are much wider. The starting point is that any planning which gives rise to an inheritance tax advantage will have to be notified if it contains steps which are ‘contrived or abnormal’.

The problem with inheritance tax planning is that much of what is done could be described as contrived or abnormal – ie the steps which are taken are not ones which somebody would normally take, unless they were trying to reduce their inheritance tax bill.

Targeting an entire tax with a filter based only on whether the arrangements are contrived or abnormal is a novel approach.

Whilst HMRC has promised guidance as to what it considers to be acceptable and what is not, the risk is that practitioners will be left not knowing whether what they are doing has to be notified. Many will make notifications just to be on the safe side. HMRC may well be overwhelmed with a deluge of notifications as a result.

The proposals are contained in a consultation paper issued on 20 April 2016. Anybody is free to respond to the consultation. Responses have to be submitted by 13 July 2016.

STEP will be submitting a response suggesting that the same approach should be taken for inheritance tax as with other taxes. This would mean that HMRC should identify specific areas where it sees abuse, and create hallmarks relating to those areas rather than attacking all planning which gives rise to any inheritance tax advantage.

The existing hallmark relating to attempts to get assets into trust, without paying the upfront inheritance tax charge, may not be the only area targeted. Others might include avoiding the reservation of benefit rules without incurring pre-owned assets tax, acquiring interests in excluded property settlements without falling foul of the existing anti-avoidance rules, abuse of agricultural property relief or business property relief and schemes to avoid inheritance tax ten year charges in relation to relevant property trusts.

As demonstrated by the example at the beginning of this article, the proposed regulations have the potential to affect much of the inheritance tax planning which practitioners will be dealing with on a daily basis. It certainly goes much wider than catching only abusive, marketed schemes.

The more responses HMRC receives, the more likely it is that it will understand that the regulations, as currently proposed, go too far.


Robin Vos TEP, a solicitor at Macfarlanes LLP in London, is chair of STEP’s UK Technical Committee

STEP Israel Annual Conference hosts Moshe Asher

Meir LinzenMoshe Asher, Director General, Israel Tax Authority (ITA) told the recent STEP Israel Annual Conference, how the ITA reached out to tax payers in Israel, encouraging them to come forward and regulate their tax affairs.

Last year the ITA sent more than 100,000 letters to those suspected of evading taxes. Mr Asher said, ‘In Israel there is no obligation to file an annual report, however, at the same time, regarding people that have income but have not reported it, including income from real estate and rental related to it, we have continued our campaign with sending 5,000 additional letters to people who are being asked to report their undeclared income.’

A new initiative was to go into schools to educate the next generation on the importance of paying taxes. ‘We explain to them how tax is collected, and what do we do with the money. We are pleased to learn that the young generation does not oppose paying taxes and understands its importance.’

Mr Asher used the conference to announce the extension of the deadline for voluntary disclosure of undeclared funds in overseas bank accounts until the end of the year. The voluntary disclosure programme, which started last September, has prompted 5,000 applications to the ITA. While most were submitted anonymously, applicants’ names are to be disclosed when the tax arrangements are concluded.

Held from June 15-16 in Tel Aviv, the eighth STEP Israel Annual Conference attracted more than 250 delegates, including lawyers, accountants, trust professionals, bankers and managers of family offices.

The conference continued its tradition of hosting the top officials from the ITA. Many of this year’s attendees, many of whom came from overseas including the UK, Switzerland, Germany, France, Unites States and Canada, were eager to listen to Mr Asher’s presentation.

This year’s topics included cross border succession, exchange of information, recent legislation of AML, lawyers’ compliance regulations and cross- border taxation between Israel, the UK, the USA and Canada.

The conference was organized and moderated by the STEP Israel committee, consisting of Meir Linzen TEP, Chairman; Daniel Paserman, Secretary and Alon Kaplan TEP, President of STEP Israel.


Meir Linzen TEP is Chairman of STEP Israel