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