STEP England & Wales Biannual Statement July 2017

Rita BhargavaIt is a pleasure to be writing to you for the first time as Chair of STEP’s England & Wales Regional Committee to let you know about the work we are doing on behalf of members in the region.

We’ve been performing well, with 93% of member renewals for 2017 received and 350 new members in the last six months. We’ve also seen more than 100 enrolments on STEP’s England and Wales Diploma in that time.

From a practice perspective, the recent political turmoil has impacted on our sector in various ways. Two issues of note were the draft legislation on the taxation of non-domiciliaries and offshore trusts and the probate fees debacle – both of which placed enormous strain on practitioners. STEP has been active on both fronts on behalf of members and their clients.

Finance Act 2017
The proposed changes to the UK’s taxation of non-domiciliary rules, which were due to come into force on 6 April 2017, were extremely complex and left a number of areas of uncertainty, which STEP’s UK Technical Committee highlighted to HMRC. The answers received were then collated in a Guidance Note for members’ information. However, the proposed changes were dropped from Finance Bill 2017 (now Finance Act 2017) to enable the bill to get through Parliament ahead of the General Election.

We’ve now heard that the proposed changes will resurface in a new Finance Bill after the Summer Recess, and will be backdated to 6 April 2017. This brings some welcome certainty, but it should not be forgotten that there are further changes on the horizon for non-doms and offshore trusts, which may be brought in later this year or next, so any planning will need to factor these in.

Probate fees
The proposed increase in probate fees announced earlier this year placed a huge strain on both probate registries and practitioners as everyone struggled to be ready for the May deadline. STEP was extremely active on this issue from the outset, expressing concern about the fairness, practicality and legality of the proposed increase, and obtaining a legal opinion from Richard Drabble QC, which stated that an increase in fees on the scale suggested could not be achieved without fresh legislation. You can read an overview of STEP’s activity here.

When the probate fee increase was put aside ahead of the General Election, we all breathed a sigh of relief. But we are not out of the woods yet: rumour has it that this may resurface, and we are keeping a close eye on the situation.

Public awareness
Politics aside, a lot has been happening at STEP in recent months.

It was great to see the launch in May of a new campaign to raise awareness of STEP and TEPs among UK consumers. A key part of this is the launch of www.advisingfamilies.org – a public-facing website providing information on issues relating to the services STEP members provide. It’s backed by a digital campaign – ‘You can talk to a TEP’ – to raise awareness and drive people to the website.

Many members and their firms have got involved, contributing content and engaging with the campaign on social media. If you haven’t yet had a look at the website, I’d recommend you do so. You can read more about the campaign and how to get involved here.

Speaker Register
Work has also been underway to develop a Speaker Register, which branches and central event organisers will be able to use to find speakers for their events. This exciting new development offers members the opportunity to put themselves forward for speaking opportunities. More than 300 members have already registered their interest in speaking via their Online Profile, so if you want to feature on this, make sure you register today.

So – a busy six months; with lots more to come, no doubt, as the year progresses. I look forward to reporting on that in December, but for now I hope you get at least a little respite over the summer to recharge for what’s ahead.

Rita Bhargava TEP
Chair, STEP England & Wales Regional Committee

Are you prepared for the UK’s new corporate criminal offence?

HandcuffsSTEP advised members earlier this year that the Criminal Finances Act 2017 received Royal Assent on 27 April 2017. The Act contains the new corporate criminal offence of ‘failure to prevent the facilitation of tax evasion’, which is anticipated to take effect in September 2017.

Even though tax evasion and facilitation of tax-related crimes are already criminal offences, it has previously been difficult to pin these offences on a corporation or partnership such as a law firm. The new legislation will create a liability on the employer for the actions of its employees and ‘associated persons’ who knowingly facilitate any tax evasion. The definition of ‘associated person’ is very wide in scope and will include employees, partners, consultants and also agents and anyone performing services for or on behalf of the company or partnership.

The Act applies to LLPs and partnerships as well as companies. It does not alter what is criminal but who should be liable for the criminal act.

There are three elements to the new offence:

1. The criminal UK or non-UK tax evasion by a taxpayer under the current law.

2. The criminal facilitation of this offence by an associated person acting on behalf of the company.

3. The company failed to prevent the associated person from committing the criminal act at stage two.

The legislation creates two new offences – a UK offence and an overseas offence. If a UK tax offence is committed then it is irrelevant if the company or associated persons are not UK-based. In accordance with the new legislation, the offence will have been committed and can be tried in the UK courts. This stance reinforces the UK’s position that any individual can be guilty of a UK tax evasion offence, regardless of their location, if they assist someone else to evade UK tax.

If non-UK tax is evaded then the company will be liable for the offence if they have a place of business in the UK, or if any of the facilitation took place in the UK.

Defence

There will be a defence available if the employer put in place reasonable prevention measures, but otherwise the offence is strict liability, and the employer may face criminal prosecution, financial penalties and reputational damage. A reasonable prevention procedure is one that ‘identifies and mitigates its tax evasion facilitation risks’ which will make prosecution more unlikely.

Advice for members

HMRC’s draft guidance dated October 2016 provides six guiding principles that companies should consider when interpreting the new legislation:

Risk assessment

Companies should assess their own risk exposure level in relation to their employees engaging in the facilitation of tax evasion in the course of business. The guidance notes that the bodies most affected by the new offence will be those in financial services, including the legal and accounting sectors. These bodies are advised to review the following additional guidance: The Financial Conduct Authority’s (FCA) guide for firms on preventing Financial Crime, the Law Society’s Anti Money Laundering Guidance, particularly Chapter 2 and the Joint Money Steering Group (JMLSG) guidance.

Proportionality of risk-based prevention procedures

It is anticipated that relying upon existing in house anti-money laundering procedures will not be sufficient to satisfy the defence of having prevention procedures in place. The guidance explores some of the varying common elements that would be considered to be reasonable prevention procedures.

Top level commitment

The top level management of each company should be committed to raising awareness and establishing safeguards intended to prevent the facilitation of tax evasion amongst its employees. Procedures include communication and endorsement of the new legislation within the company, as well as development and review of prevention procedures.

Due diligence

The company should mitigate any risks that it identifies by way of applying advanced due diligence procedures. The guidance notes that bespoke financial or tax related service companies will face the greatest risk, and that merely applying existing procedures will not be an adequate response to mitigating their exposure. New procedures are expected to be applied clearly in conjunction with the new legislation.

Communication (including training)

The company must ensure that its new prevention procedures are widely communicated and understood through internal and external communication with all employees. This communication may vary depending upon the size of the company, however training must be provided, and a zero tolerance policy for facilitation of tax evasion and its consequences must be properly communicated.

Monitoring and review

The company must put in place ongoing monitoring mechanisms and reviews to ensure that the system is effective, and it must make improvements where necessary. The company may choose to have reviews conducted by internal or external parties.

While HMRC’s guidance contains some useful terminology and case studies, it is recognised that further guidance is needed in this area. We understand that HMRC is working with industry bodies to support them in producing more specific guidance and STEP will keep you updated accordingly.

Emily Deane TEP is STEP Technical Counsel

MoJ in special measures on charges?

Businesman blows whistle and shows red card
STEP was one of the bodies most actively engaged in the furore that developed around the Ministry of Justice’s (MoJ) proposal to raise probate fees for some estates from £155/215 to as much as £20,000.

One of the things that enraged many STEP members was not just the scale of the increase, but the fact that overwhelming criticism in response to the consultation on the proposals had been entirely disregarded. Moreover, the mechanism by which the MoJ were looking to introduce the new fee – via a Statutory Instrument with minimal Parliamentary scrutiny – appeared to be a clear abuse of process; a view confirmed by a legal opinion commissioned by STEP.

In the end, the increase in probate fees appears to have been shelved, at least for the time being. It has recently emerged, however, that it is not just probate fees that have been getting the MoJ into a spot of hot water. Fees for Powers of Attorney were also raised to levels that more than covered costs, but the MoJ had again failed to follow the procedures needed in these circumstances. Fees for Powers of Attorney have since, with effect from 1 April 2017, been reduced, and the Office of the Public Guardian is looking at ways to refund those who have paid too much. (See Justice ministry to repay GBP89 million of powers of attorney overcharges.)

Even more intriguingly, the MoJ, in its Annual Report, has let slip that it is ‘undertaking a review of lessons learnt [from the Powers of Attorney fees issue] which has led to the creation of a new income strategy unit which will oversee the standards and controls set for all income streams.’

The Report goes on to say: ‘There have also been a number of improvements to the way in which we forecast and monitor fees to ensure compliance with requirements set by HM Treasury.’

Stripping through the civil service code, this sounds like there has been fairly sharp exchange of views between HM Treasury and the MoJ over fees that begin to look like taxes, with Treasury no doubt highlighting that there are supposed to be rules and procedures when it comes to this sort of thing.

The funding gap left by the failure to get the probate fee increase through before the election still needs to be addressed. How the MoJ will eventually fill that gap remains to be seen. It sounds, however, like we can at least expect the MoJ to pay a bit more attention to due process when this issue next comes up than it was minded to earlier this year.

George Hodgson is Chief Executive of STEP

Happy 25th birthday STEP Jersey!

George HodgsonI had the pleasure of attending STEP Jersey’s AGM and 25th anniversary celebration this week. STEP Jersey is one of our largest branches, with over 1200 members, and is also one of our most active. Not only does it host many well-attended events, but it works closely with government, regulators and others to ensure the jurisdiction maintains its position as a respected international financial centre.

Indeed it is fair to say that STEP Jersey plays an integral and important role in the economic life of the island, with the trust industry one of the largest local employers.

Much of the discussion focused on how to ensure that STEP, both locally and internationally, could maintain the success of its first quarter century well into the next. In conversations over a most enjoyable traditional cream tea (with the welcome, but less traditional, addition of a glass of Prosecco) I was struck by the confident tone of many senior professionals who were present.

They fully acknowledge the challenges that increased transparency and a consequent explosion in compliance costs will bring. Rather as with Brexit in the UK, however, the mood was generally ‘what is done is done – so let’s get on with it.’

I am delighted to see that STEP Jersey is setting up a policy-focused committee to ensure there are effective links with local regulators and others to work through the rapid changes now underway.

The team at STEP Worldwide will continue to give STEP Jersey (and other branches working on these issues) all the support we can in helping develop a coherent and well-informed strategic approach to the trust industry in the new age of transparency.

George Hodgson is Chief Executive of STEP

Embracing a new skills agenda

EPP forumThese days, the world seems to be changing faster than it spins on its axis. While the headlines darken each morning with geo-political and economic tumult, the sense of unease continues reading beyond the front pages. A bleak outlook for the workplace: robots will take over, professions will be rendered obsolete by new technology; a Fourth Industrial Revolution is less than a mouse-click away…

Participants in a global economy, we are available 24:7. How can we thrive in these modern times? Where do we find breathing space? How can organisations find time to develop its staff without taking them from business as usual activities? How can individuals cultivate a work-life balance or reflect on their place in the world?

Such questions were posed by the STEP Employer Partnership Programme’s inaugural Summer Forum last week in London. Hosted by BDO, the evening included high-profile speakers drawn from the trusts and estates industry and the learning and development world to explore these issues. Participants were given a powerful call to action to embrace a new skills agenda and innovate in their practice.

BDO’s Head of Private Client UK, Paul Ayres, opened the programme. Reflecting on the changing role of the tax practitioner, his observations will resonate with contemporaries in the tax world as those in other professional services:

How can your organisation meet changing client requirements? How do you promote yourself in a world that increasingly denigrates the value of professional advice as the internet perpetuates the fallacy that everyone can be an expert? How can you make an agile response to constantly changing governmental and regulatory constraints? How can you keep ahead of legislation, embrace technology, maintain global competitiveness and deliver your services at the right price point? How do you retain your trainees, who are entering the workforce now with very different expectations of work from their supervising partners? How do you give the same quality of training you experienced, when the advent of digitisation has rendered obsolete the opportunities to develop the practical and client-care skills embedded in the training contracts of old?

Leading learning and development specialists Liggy Webb, Jonathan Winter and Jane Hart gave impassioned responses as to how we interpret these challenges. We all wish to be more flexible and confident in the way we approach challenges in life, both at work and at home. Liggy Webb delivered strategies for resilience – emotional sunscreen to help us confront those challenges head on and keep us sane.

Jonathan Winter discussed how careers really work, blowing away the cobwebs on the traditional model of the career trajectory that most have entered the workplace with, debunking myths about how we think about work and leaving us with seven habits crucial to future-proof a career.

Jane Hart, closing the programme, addressed the changing world of work and urged delegates to embrace new technologies, adopt learning tools and strategies that embed a culture of learning within individual, team and organisational outputs. Drawing on examples of pioneering practice from players like Google, she deftly illustrated how this can be done without the onerous burden on budgets human resource training often presents. A lively Q&A offered a stimulating debate on these ideas.

By the close of the evening it was clear that those employers who adopt a proactive approach to change and empower their employees similarly will thrive. Those investing time, as well as financial and intellectual capital into their workforces will reap the land of plenty in the future. Embracing new models of learning and working, and viewing technology as an enabling force, not a threat, will help them withstand the social seismic shifts and lead the new skills agenda for the modern workplace.

Madeleine Jenness, STEP Education Manager