Legacy giving: the role of the practitioner

charity jarOn 18 October, my colleague Beatriz Brockhurst (STEP News Editor) and I attended the launch of Legacy Giving and Behavioural Insights – a research report which examined how will writers discussed charitable giving with their clients.

Bridging the gap

The research illustrates the gap between clients expressing an interest in leaving charitable gifts (35 per cent) and those who actually do so (6 per cent). The event considered the ways in which practitioners can encourage greater giving by testators, drawing on evidence gathered from eight law firms and 31 solicitors, as well as 2,600 wills that were analysed during the two-year study.

Having the conversation

As a starting point, professionals should be talking about charitable legacy with their clients as part of the will preparation process.

But are clients comfortable with having this conversation? The study found that 69 per cent of clients generally deemed it acceptable for such a topic to be raised – and 46 per cent regarded it as the duty of the professional to mention it.

Different approaches

The research trialled three different ways of talking to clients about charitable legacies:

  1. Social norm framing – informing the client that charitable bequests was something many people did, and to ask if they would like to do the same. Legacy giving increased by 40 per cent for people making their first will.
  2. Emotional framing – asking the client to think about charities they or their families were passionate about, and/or had benefited from. This type of messaging was found to increase donations from clients both with and without children.
  3. Posthumous benefit framing – highlighting the good work that would result from a charitable bequest. This was regarded as the least acceptable and least effective form of messaging.

Tax incentives

The study also found that, in most cases, the tax advantage of legacy giving due to inheritance tax thresholds was not a motivating factor.

A TEP’s perspective

Jo Summers TEP, a member of STEP’s UK Practice Committee, offered a practitioner’s point of view. She emphasised the need to broach the subject of charitable legacy carefully and sensitively, not least to protect against being regarded as having exercised undue influence. Jo cited the initial client questionnaire as a good way to introduce the topic, with scope for a further conversation, if the client indicated this would be appropriate.

Practitioners also need to be aware that the charity the client would like to leave a donation to could change over time. As a practical solution, Jo suggested the will could contain a clause stating a percentage legacy, or a fixed sum to be split between charities chosen by the executors, with a letter of wishes to indicate where the money should be donated, depending on the client’s family circumstances at the time of their death.


The study concludes that will clients are generally open to having a conversation about charitable legacy. Practitioners can therefore play an important role in raising the level of charitable donations as legacy gifts.

The report offers interesting behavioural insights around legacy giving – I encourage you to read it:


Sean Smith, STEP Policy Manager

Making Tax Digital update

UK mapSTEP attended a meeting held by HMRC on 11 October to obtain feedback on its plan to make tax returns reportable on a quarterly basis, and completely digital.

HMRC’s stated objective is to improve the level of service for the public, reduce the cost to the taxpayer, and increase the revenue’s compliance and accuracy.

It says the new system will be the most digitally advanced in the world, and will enable a user to check their PAYE status, their State Pension forecast and any tax credits or allowances.

Apparently there are already close to seven million UK personal users, and HMRC is streaming webinars for basic users, as well as more complex tax users such as unincorporated businesses and landlords.

However, we learned during the meeting that many users with more convoluted businesses and multiple income streams, such as farmers, may find the new system challenging.

Although it seems unimaginable that someone would want to submit their tax return on their smart phone, HMRC points out the software will be mobile friendly, for those who do not have access to a computer or a laptop.

STEP has already flagged that the new system may not be accessible to less capable users, including elderly, or digitally excluded and vulnerable people.

Many may be unable to afford the extra burden of professional advice, a computer, laptop or smart phone, or indeed, the software required to comply.

HMRC recognises that there may be some transitional costs and potential cyber security risks, but believes customers will be pleased with the ‘real time’ system to keep taxes up to date, and notes there will be fewer inaccurate calculations.

HMRC’s webpage hosts a collection of consultation papers for all individual and business customers, agents, software developers, employers and all other organisations that need to provide tax information.

If you would like to provide feedback, please contact me at emily.deane@step.org by 7 November.


Emily Deane TEP, STEP Technical Counsel

April 2017 changes to the UK’s taxation of long-term resident, non-domiciled individuals

Update on discussions relating to the treatment of trusts

Following the consultation paper issued on 19 August 2016, members of STEP’s UK Technical Committee have been closely involved in discussions with HM Treasury and HM Revenue & Customs in relation to the latest proposals.

The most difficult area is the treatment of offshore trusts set up by non-domiciliaries who become deemed domiciled in the UK as a result of having lived there for 15 years in a 20 year period.

When the changes were announced in the July 2015 budget, much was made of the fact that assets held in trust would be protected from inheritance tax, capital gains tax and income tax (other than in relation to UK source income which would continue to be taxed as it arises). A deemed domiciled settlor would only be taxable on benefits received from the structure or conferred on close family members.

One significant surprise in the August consultation paper therefore was a proposal that a deemed domiciled settlor would be taxed on all of the gains of an offshore trust once the settlor or a close family member has received any benefit from the trust – ie the receipt of the benefit would mean that the capital gains tax protections would be lost for the future.

As part of the consultation discussions, a paper has been prepared by a barrister with input from colleagues from various representative bodies including STEP. The paper is very much in draft form but sets out a potential alternative approach to legislating the trust protections. A copy of the paper can be found below.

We have been asked to make it absolutely clear that the paper was not commissioned by HMRC or HMT. Nor does it represent an approach to trusts preferred either by HMT, HMRC or the government. The paper was prepared to facilitate discussion at a consultation meeting between HMRC/HMT and various representative bodies to consider alternative approaches to how it is best to legislate the protections and it should be read in that context.

Having said this, it is important that STEP members are aware that alternative proposals are being put forward and discussed and that the final proposals may well be different to those made in the 19 August 2016 consultation paper.

We are expecting the government’s position to be announced as part of the Autumn Statement on 23 November 2016 with draft legislation being available by 5 December as part of the draft Finance Bill.


STEP UK Technical Committee

STEP in Brussels to discuss money laundering and terrorist financing risks

bank notes, laundered

STEP was invited by the European Commission to attend a second private sector consultative meeting on Wednesday 5 October to discuss the supranational risk assessment of money laundering and terrorist financing risk in the EU.

We represented the trust sector and legal professionals in the first consultative meeting with the Commission in March 2016.

The Commission presented the preliminary results of its risk analysis relating to the threat and vulnerability of certain sectors to money laundering and terrorist financing across Member States.

The initial results found that some sectors, including the real estate sector, legal professionals and trust company and service providers (TCSPs) are at significant risk to infiltration by money launderers and terrorist finance activities.

STEP was keen to provide feedback on the methodology of the assessment, the inconsistency of regulations by service providers across Members States, and the lack of understanding towards trusts in some jurisdictions. We will continue to provide feedback to the Commission until the end of the year, and a follow up meeting will take place in March.

• STEP would like to remind members that HM Treasury’s consultation paper on the Transposition of the Fourth Money Laundering Directive will be closing on 10 November. You may provide feedback directly to the Treasury or via ourselves, via emily.deane@step.org.

Emily Deane TEP, STEP Technical Counsel

Invitation to members – LPA discretionary investment clauses

Emily DeaneThe England & Wales Office of the Public Guardian (OPG) published an update in September 2015 providing guidance on financial lasting powers of attorney (LPAs) and how attorneys can delegate investment management decisions to a discretionary investment manager.

Under this guidance an attorney can appoint a bank or an IFA to act on their behalf to make investment decisions; however specific wording must be incorporated into the LPA. Since the guidance was issued in 2015, STEP and other professional bodies have contacted the OPG with their concerns.

The primary issue is that if an attorney is currently using a discretionary manager without explicit permission in the LPA, then they need to apply to the Court of Protection to obtain retrospective consent.

The suggested wording within the LPA can be similar to the following, ‘My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees’.

Tell us your views

STEP would like to invite members to provide examples of how the OPG guidance may be difficult to apply in practice, so that we can present a test case to the OPG and underline that the impact of this issue is potentially far-reaching.

Issues that have arisen include:

  • There is no guarantee that your bank or IFA will accept this wording, and you may need to confirm their agreement in writing before the LPA is registered.
  • HSBC has specific wording that it will not stray from, while other fund managers are willing to continue acting without the delegation clause. Other banks and IFAs may switch to the stringent guidelines in future.
  • You can re-do the LPA where the donor still has capacity, but this option may not be well received by the client, and is time consuming and costly.
  • If the LPA has already been registered without the express wording, the attorney can apply to the Court of Protection for the retrospective authority to appoint an investment manager.

This is also time consuming and costly.

If you are currently acting as an attorney and you have already delegated investment making decisions, there are some options available to you:

  • You could change your discretionary manager to an advisory manager so that you are still ultimately making the decisions, although you should check any potential liability issues that may arise.
  • You could speak to your discretionary manager about the firm’s policy and what their requirements are.
  • You could re-do the LPA where the donor still has capacity, or alternatively apply to the Court of Protection when the existing discretionary manager is not willing to continue/or start acting in accordance with the OPG guidance.

However, it might be prudent to wait and see whether the OPG will consider amending its guidance before taking any action. Currently, the OPG feels discretionary investment management accounts for a tiny percentage of registered Powers of Attorney, so the number of Attorneys affected is relatively small.

STEP is hopeful that by providing the OPG with a test case of practical working examples, then it might recognise and review the difficulties that attorneys and their advisors are facing in this connection.

The best case scenario would be the determination that the delegation of investment management by an attorney to a discretionary investment manager is already legally permissible, without the need to retrospectively apply for it through the court.

STEP will provide an update when further information is available.

We would very much value your input. Please send your examples to policy@step.org by 31 October.

Emily Deane TEP, STEP Technical Counsel

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 www.step.org/consultation-tracker/1).

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 31 August 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 31 August 2017 may result in a £3,000 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 crs.consultation@hmrc.gsi.gov.uk

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 www.pcisecuritystandards.org.

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


James Harris is STEP’s Information Technology Manager.