Government changes E&W probate procedure without consultation

Emily Deane TEPThe government has announced amendments to the procedure for applying for probate in England and Wales, with less than a month’s notice. The Statutory Instrument (The Non-Contentious Probate (Amendment) Rules 2018) will come into force on 27 November 2018.

The Rules were laid as a negative instrument, meaning they don’t need the approval of Parliament and have already been signed into law by the relevant Minister. The instrument can be annulled by Parliament before implementation, but this is rare.

In brief the amended rules:

  1. allow personal online applications for probate to be made by an unrepresented applicant;
  1. enable all applications for probate to be verified by a statement of truth (instead of an oath) and without the will having to be marked (by the applicant, solicitor or probate practitioner);
  1. extend time limits in the caveat process, which give the person registering the caveat notice of any application for probate;
  1. allow caveat applications and standing searches (which give notice of grants being issued) to be made electronically;
  1. extend the powers of district probate registrars equivalent to those of district judges; and
  1. make further provision for the issue of directions (instructions to the parties) in relation to hearings.

The Probate Service has accepted online applications from personal applicants (individuals not represented by probate specialists) since earlier this year, with a view to making the system simpler and ‘easier to understand’.

There are concerns that the introduction of the online service may discourage individuals from using a probate specialist where it may be advisable to do so, for example where the estate is taxable, has foreign or complex components, or may be disputed.

The announcement comes at the same time as the Ministry of Justice’s proposal to increase the probate application fee with a banded fee structure depending on the value of the estate.

STEP strongly opposed this new system when it was proposed in 2016, on the basis that it is disproportionate to the service provided by the probate court. It is effectively a new tax on bereaved families. The government intends to introduce this measure without any proper debate via Statutory Instrument (see STEP blog: The death tax returns).

STEP will continue to follow developments in this area.

 

Emily Deane TEP is STEP Technical Counsel

The death tax returns

George HodgsonThe UK government has re-introduced proposals to fund the courts service via charging higher probate fees. The proposals emerged late yesterday, a week after the budget.

While the headline charges are less extortionate than were proposed last year, for an estate of GBP300,001 – GBP500,000 the fee will rise 249 per cent to GBP750, and for a GBP1 million estate, the fee will rise to GBP4,000, an increase of 1,760 per cent (see table below).

According to 2014/15 figures, 261,500 estates went to probate, of which only 35,000 were under GBP50,000. This indicates that 85 per cent of estates, where probate applies, will therefore see an increase in fees.

Value of Estate New Fee % Change (from £215)
Up to £5,000 £0   0%
£5,000 – £50,000 £0 -100%
£50,001 – £300,000 £250 +16%
£300,001 – £500,000 £750 +249%
£500,001 – £1m £2,500 +1,063%
£1m – £1.6m £4,000 +1,760%
£1.6m – £2m £5,000 +2,226%
Over £2m £6,000 +2,691%

The new charges bear no relation to the cost of probate, and are simply another form of taxation, sneaked in through the back door.

The government has failed to explain why it is choosing to place this burden on bereaved families, many of whom will have spent months or years paying expensive care fees for their elderly relatives. It is this group which has been singled out to shoulder the cost of the courts service via this additional tax, to be paid on top of IHT and legal expenses.

The government still plans to try and introduce this measure without any proper debate via statutory instrument. STEP has obtained a legal opinion which confirms that, given the tax nature of this measure, this is an abuse of the parliamentary process, a view shared by the House of Commons Joint Committee on Statutory Instruments (link below).

We will continue to press for a fairer and more transparent approach to probate fees reform.

 

George Hodgson is Chief Executive of STEP.

The new gatekeepers of the financial system

Houses of Parliament, London

Update: STEP News 1 Nov: UK revises anti-organised crime strategy to target professional ‘facilitators’

Original blog:

Ben Wallace MP, UK Minister of State for Security at the Home Office, has called for more to be done to make lawyers and accountants who facilitate money laundering recognise their responsibilities.

As part of a House of Commons Treasury Committee evidence session (pdf) on Economic Crime, Simon Clarke MP asked whether lawyers and accountants were failing to appreciate the seriousness of money laundering. He noted that this may be because they haven’t been faced with the same level of fines as the banking sector has been.

In response Wallace said: ‘I absolutely agree with the point that the facilitators have not had the same focus on them as they should have done. They have a responsibility that they need to live up to and I would like to see them being put under more pressure to comply.’

These words mirror recent moves from the international community towards viewing practitioners such as lawyers and accountants as the new gatekeepers of the financial sector and an integral part of combatting money laundering. Publications such as the OECD’s Model Mandatory Disclosure Rules place a responsibility on advisors to report schemes that may have the effect of circumventing the Common Reporting Standard. The EU’s DAC6 (pdf) put similar requirements on intermediaries who design or promote tax-planning schemes.

Underlining the discussion in the same Treasury Committee session, Robert Buckland MP, the Solicitor General, called the creation of a new corporate criminal offence of failing to prevent economic crime a ‘very important priority’ for him.

Perhaps summing up the changing approach towards lawyers and accountants, Wallace said the following after he was asked if there should be more of a focus on the accountancy world when it came to enabling economic crime: ‘In this half of the year, my message to the facilitators is this: we have had a lot of focus on banks; my investigators are going to be focusing on you.’

STEP will continue to monitor relevant developments both in jurisdictions and with international bodies, as well as providing updates where appropriate.

Daniel Nesbitt, Policy Executive, STEP 

 

How will the UK budget affect STEP members?

Budget red boxUK Chancellor Philip Hammond delivered the final budget before the UK leaves the EU yesterday. Here are some of the key measures that may affect STEP members.

Individuals

Income tax: the personal allowance threshold, the rate at which people start paying income tax at 20 per cent, is to rise from GBP11,850 to GBP12,500 in April 2019. The higher rate income tax threshold, the point at which people start paying tax at 40 per cent, is to rise from GBP46,350 to GBP50,000 in April. Subsequently, the two rates will rise in line with inflation.

Entrepreneurs’ relief: changes to the qualifying terms. Disposals of shares only qualify where the shares entitle the holder to 5 per cent of any dividends and 5 per cent of assets on a winding up. In addition, for disposals after 6 April 2019, assets will need to have been held for a period of two years (rather than one year).

Principal private residence relief: the period of deemed occupation at the end of a period of ownership is being reduced from 18 months to nine months with a withdrawal of the rental relief element in all circumstances, except where the owner co-occupies with the tenant. The principle that the relief should apply to all properties was reaffirmed.

Capital gains tax: lettings relief is to be limited to where the owner is in shared accommodation.

Charities

Small trading tax exemptions for charities: raising the exemption upper limits from GBP5,000 and GBP50,000 to GBP8,000 and GBP80,000 respectively.

Gift aid donor benefits: simplifying the limits on benefits that charities can give to their donors to acknowledge donations.

Gift aid small donations scheme: increasing the small donations limit using cash or contactless payments from GBP20 to GBP30.

Retail gift aid scheme: relaxing the requirement to issue annual letters.  Charities will now only need to issue letters once every three years, rather than every year where a donor’s total donations in a given year are less than GBP20.

Trusts

The budget Red Book referred to the government’s trusts consultation, but the consultation date has not yet been confirmed:

3.15 Trusts consultation – As announced at Autumn Budget 2017, the government will publish a consultation on the taxation of trusts, to make the taxation of trusts simpler,
fairer and more transparent.

STEP has a trust consultation working group in place to review the consultation document as soon as it is published.

Companies

Individuals providing services via personal companies: the provisions that have applied in the public sector since April 2017 are being extended to private companies from April 2020. These provisions impose a duty on the ’engaging’ company to operate PAYE on amounts paid to the service company. These provisions will only be applied to large and medium-sized businesses.

STEP will continue to monitor the progress of the budget proposals and keep members updated.

Emily Deane TEP is STEP Technical Counsel

Addressing mental health in the workplace

10 oct 18 speakersSTEP marked World Mental Health Day on 10 October with The Capacity Conversation: Best Practice, an event hosted by the Employer Partnership team and the Mental Capacity Special Interest Group in London.

Simon Hardy TEP of Kingsley Napley explained that clients need to plan for loss of capacity, but many have not done so. While the UK has 12 million over-65s, and an estimated 850,000 dementia suffers, little more than 3 million LPAs and EPAs have been registered. When assessing someone’s capacity, the best way is to let them talk, he said, making sure that you find out their wishes, while showing that you care and are compassionate.

Laura Brayston and Claire Tomkins of Freeths, one of STEP’s Platinum Employer Partners, discussed their firm’s holistic approach to mental health at work. Freeths has instigated a top-down approach, with senior managers, who are supplied with e-learning resources, supporting initiatives to care for staff in an open and inclusive environment. The staff feel invested in, and cared about by their employer, they value mental health resources and support groups, and also appreciate treats such as snacks and drinks on Fridays.

Dan Walshe of the charity, Rethink Mental Illness, observed that mental health includes emotional, psychological and social wellbeing. It affects how we think, feel and act, and like physical health, can change over time. With an estimated one in four people affected, mental health costs employers up to GBP42 billion a year. Presenteeism (working while unwell and not fully functioning) costs from GBP18-26 billion a year, with absenteeism and staff turnover each costing GBP8 billion.

Six key recommendations for employers from Rethink Mental Illness:

  1. Produce, implement and communicate a mental health at work plan;
  2. Develop mental health awareness among employees;
  3. Encourage open conversations about mental health and the support available to those struggling;
  4. Provide good working conditions for employees;
  5. Promote effective people management; and
  6. Routinely monitor employee mental health and wellbeing.

Resources from Rethink Mental Illness:

To find out how other organisations are tackling mental health in the workplace read our STEP Journal article, Thriving at Work (pdf).

 

Laura Keith, Programme Manager – Employer Partnerships, STEP

Do UK money laundering regs extend to trusts in other jurisdictions?

departure board europeanSTEP’s Isle of Man branch has flagged potential issues raised by the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (the Regulations) which give effect to the requirement of the EU Fourth Anti-Money Laundering Directive to have a central register of trusts, and reporting obligations on trustees.

The branch has queried whether the Regulations (Part 5, the trusts register) only apply to persons acting in the course of a business carried on by them in the UK (Regulation 8(1)). If this is the case, then Part 5 would not apply to trustees in the Isle of Man and elsewhere outside the UK.

As the Regulations are not part of the domestic law in jurisdictions outside the UK, it is unclear whether trustees in these jurisdictions have a ‘legal obligation’ to comply with Regulation 45. If there is a legal obligation for them to report, then conflicting data-protection issues may be generated under the domestic law.

In addition, the Regulations contain sanctions (fines and imprisonment) for non-compliance that HMRC, which manages the UK’s central register of trusts, may be able to enforce against trustees who do not comply.

STEP has raised these ambiguous points with HM Treasury (HMT), which laid the relevant Regulations, in order to gain some clarity. HMT has confirmed that its interpretation is that the definition of ‘non-UK trust’ within Part 5 of the Regulations extends to all express trusts that receive income from a source in the UK, or have assets in the UK on which they are liable to pay a relevant UK tax, regardless of whether they are established outside of the UK.

In these circumstances, HMT asserts that the trustees will indeed be required to comply with the record-keeping and, where relevant, registration requirements within Part 5 of the Regulations.

STEP will keep members informed on any further developments.

Emily Deane TEP is STEP Technical Counsel

Employer partners gather at STEP Global Congress

STEP Global CongressWe’ve just returned from the STEP Global Congress in Vancouver – what a great event it was, reports Nigel Race.

Congress kicked off with two excellent keynote sessions on the theme of change: ‘Change has changed’, which was focused on change in the individual practitioner; and ‘Serving the New Clientele’, which looked at cultural types and an emerging client-hybrid culture. Two top-ranking speakers, James Grubman TEP and Dennis Jaffe TEP, made the case for developing stronger interpersonal skills and cultural knowledge to better serve clients and emerging client groups. We discussed with Dennis the possibility of bringing that session to a wider audience at some point in the future. Perhaps this might be a special offer for STEP’s Employer Partnership Programme (EPP)!

And on the theme of EPP, it was fantastic to see so many accredited firms present this year. There were no EPP-accredited firms at the first Congress in Miami, only a couple at Amsterdam in the very early days of EPP in 2016, and now, at Vancouver, we had 11 partners*. It is growing into a great community and will only continue to grow. It was nice to bump into Leanne Kaufman TEP, President Royal Trust, RBC, who has done so much to support STEP and EPP. And many congratulations to Borden Ladner Gervais LLP on its award. What a cheeky move to achieve the accreditation just in time to receive it on home soil and at the STEP Global Congress! Nancy Golding TEP, a member of the STEP Worldwide Board, received the award on the Friday morning in front of the whole auditorium. Well done to Nancy and her colleagues at BLG – we were delighted to make the award to you.

With Congress now over, we’ve been taking stock and reviewing the event. Feedback from sponsors and delegates has been outstanding. We had 95 per cent of delegates rating it as excellent or good, 97.5 per cent saying they would attend a similar event in the future, and the sponsors were delighted to have so many high-profile, senior figures in the industry.

STEP has already received bids to hold the next event – watch this space!

*EPP attendees at STEP Congress:

  • Burges Salmon (England and Wales)
  • RBC Estate & Trust Services (Canada)
  • Rawlinson & Hunter (Cayman Is, E&W)
  • BLG (Canada)
  • Farrer (E&W)
  • Wright Johnston & Mackenzie (Scotland)
  • Stonehage Fleming (Switzerland)
  • Mishcon de Reya (E&W)
  • Butterfield Trust (Guernsey)
  • Carey Olsen (Guernsey)
  • Bedell Cristin (Jersey)

 

Nigel Race is Director, Professional Development at STEP

GDPR – Invitation to Members

Emily Deane TEP

Even though the European General Data Protection Regulation (GDPR) came into force on 25 May this year in the UK there is still widespread confusion around its application to the private client industry.

STEP has formed a Data Protection Impact Group with the objective of reviewing the GDPR’s impact in relation to the trust and estate industry. The group would like to collate some of the practical issues that have arisen and submit them to the Information Commissioner’s Office (ICO) with the intention of the ICO addressing some of the gaps in the guidance and legislation.

Tell us your views

STEP would like to invite members to provide examples of how the ICO guidance/legislation may be difficult to apply in practice, so that we can present these issues to the ICO and underline that the impact is potentially far-reaching.

Issues that have been identified include:

  • Firms will be holding large amounts of personal data on clients and non-clients relating to their wills, family trusts and estates. Information (‘special category data’) on individuals other than clients is generally required in order to carry out the client’s instructions, for example a will. However as it stands a firm will have to obtain consent from third parties for this information because there are no express exemptions that apply in Article 9(2). Unlike the express exemption for ‘legal advice’ in the DPA 1998.
  • Subject access requests have become a first port of call now for potential beneficiaries who are seeking further information about a will or trust. It is currently very difficult for an advisor to gauge how much information they can provide or restrict and what the applicable justifications are for doing so.
  • The majority of private client firms in the UK will also undertake international work. File notes and legal documents containing personal data will need to be sent to third countries. If this data applies to a client it is possible to reply upon their consent to the transfer, however when the data relates to non-client data subjects then their consent is required. There does not appear to be an exemption in the GDPR that deals with this common occurrence.
  • Firms are currently uncertain as to whether they should destroy/delete some of the personal data that they hold, for example, some personal information that is held on a family member could be more pertinent to one person than another. The firm may be exposing itself to risk by destroying data that become relevant at a later date.
  • There is uncertainty as to whether all potential beneficiaries of a trust or estate should be provided with a copy of the trust’s privacy policy, even when the settlor or testator was adamant that they did not want the individual, who may be vulnerable, to know that they may benefit at some stage.

STEP is hopeful that by providing the ICO with some working examples then it might recognise and review the difficulties that advisors are facing in this connection. We aim to provide members with a best practice position when further information is available.

We would very much value your input. Please send your examples to standards@step.org.

Emily Deane TEP is STEP Technical Counsel

Are you a client of Universal Wealth Preservation?

STEP has received an unprecedented number of enquiries regarding Mr Steven Long and the companies of which he is a Director, namely Universal Tax Solutions of Dencora House, 34 White House Road, Ipswich, Suffolk, IP1 5LT, which traded as Universal Wealth Preservation. Associated companies include Universal Asset Protection Ltd and Universal Trustees Ltd.

Mr Steven Long, Mrs Melanie Long and Universal Trustees Ltd act as Professional Trustees. Universal assisted clients with drafting and managing trusts, wills and lasting powers of attorney (LPAs), as well as providing secure storage of original documents.

STEP suspended Mr Long’s membership on 1 November 2017, and he was permanently excluded on 5 October 2018, following the completion of the disciplinary investigation into a number of the complaints received (updated 5 November 2018).

Universal Asset Protection entered into compulsory liquidation in May 2018, with the business premises of Universal Wealth Preservation having closed several months previously. The company website has since been taken down. We understand that clients have experienced great difficulties in contacting Universal, with no responses to emails, letters or phone calls.

We have been advised that some clients have been concerned about the management of their trusts, with delays in estate administration and payments from the trusts being made, in addition to being unable to ascertain the whereabouts of their assets, or retrieve original wills and LPAs held in secure storage.

Universal clients now face the realistic prospect that they are unlikely to retrieve original documents or to recover cash assets.

STEP is aware that Suffolk Constabulary is now investigating, and it has seized all documents that were held at Dencora House.

What should you do now?

STEP is advising Universal clients to:

  • Seek independent legal advice from an experienced trust and estate practitioner on your options, which may include how to make an application to the courts to replace Mr and Mrs Long/Universal Asset Protection Ltd as trustees, making new wills and LPAs
  • Check whether Lasting or Enduring Powers of Attorney have been registered with the Office of the Public Guardian – call the OPG on 0300 456 0300
  • If not in possession of an original will, make a new one without delay. In situations where someone has already passed away, we understand that Probate Registries are aware of the situation with Universal and registrars will accept a Rule 54 application for a copy of the will to be used. In circumstances where the Universal directors are appointed as executors, registrars will accept a Section 116 application to appoint new executors.
  • Contact the Land Registry to ascertain in whose name your property is registered. Call the Land Registry on 0300 006 0411. We understand that the Land Registry is aware of the issues with Universal.
  • If appropriate, consider whether to make a report to Action Fraud quoting ‘Operation Ardent’
  • If concerned by marketing information received or direct approaches from other firms advising you to use their services, consider taking advice from Trading Standards/Citizens Advice Bureau.
  • Many clients will require Universal Trustees Ltd to sign forms that release them as trustees. In such circumstances, clients’ legal representatives (solicitors and barristers) only can submit a written request for up-to-date contact details to be released to them. Such requests should be made through the data protection team at Suffolk Constabulary. Contact address is dataprotection@suffolk.pnn.police.uk

You can find a full Q&A on Universal here.

Please also see our article on what to look for when choosing a trustee.

If you have any queries, please contact standards@step.org

Sarah Manuel is Professional Standards Manager at STEP

What’s been happening at STEP in England and Wales?

Rita Bhargava TEPIt’s been a busy few months at STEP.

Our public-facing website advisingfamilies.org marked its first birthday on 22 May. Launched as part of a wider campaign to raise public awareness of STEP and TEPs, the site has clocked up over 130,000 visits, and over 700 followers on social media. Members and their firms have done much to contribute to the 74 articles posted, and we are always looking for more.

In recent months we launched a new global member recruitment campaign, Grow with STEP. It focuses on the benefits of STEP membership for your career and your business. The campaign follows the introduction in February of three globally consistent routes to membership: exam, essay and expertise. If you help spread the word and grow STEP’s network by referring a colleague, you will be entered into a draw to win an iPad.

GDPR had been on many people’s minds long before its 25 May introduction, and you’ll have received an email from STEP about your own data. STEP is working hard to ensure its systems and processes are robust and fully compliant.

GDPR has thrown up some interesting and complex question for practitioners, in particular regarding firms’ responsibilities to notify beneficiaries of trusts and wills about the information held on file. The Data Protection Act 2018, which recently passed through parliament, is also in the spotlight, as unlike its predecessors, it removes the legal advice exemption. STEP is looking to assemble a working group that can examine this and other issues in this area. If you are interested in being involved, please let us know at standards@step.org.

Many members have voiced their concern over HMRC’s online Trust Registration Service (TRS), which was introduced in late 2017 to implement the requirements of the EU Fourth Anti-Money Laundering Directive. All trusts and complex estates which generate a UK tax consequence are required to register, and then update information on an annual basis. Following initial teething problems, HMRC has confirmed it will take a ‘pragmatic and risk based approach to charging penalties’ for trust registrations made after the 5 March 2018 deadline, particularly where trustees or their agents have made reasonable efforts to meet their obligations under the regulations.

The European Council formally adopted the Fifth Anti-Money Laundering Directive in May, bringing in further changes to trust registration. 5MLD will extend the TRS to all UK express trusts and non-EU trusts that own UK real estate or have a business relationship with a UK Obliged Entity. The new Directive will require HMRC to share the trust data with Obliged Entities and anyone with a ‘legitimate interest’ – a term yet to be defined in full. You can read more about the latest developments with the TRS in an earlier STEP Blog post. STEP is liaising with HM Treasury on this, so watch out for further updates in the UK News Digest.

Finally we have a packed autumn ahead. The UK Tax, Trusts and Estates Conference series starts in Manchester on 4 September, moving to London on 21 September, York on 2 October and finishing in Bristol on 16 October. And for those of you looking to network with members from across the world, our third Global Congress is in Vancouver on 13-14 September.

Back in London, the Private Client Awards are being held later than usual on 7 November at the Park Plaza Westminster Bridge. We were delighted to receive more than 250 entries from 23 countries, and the finalists were announced on 6 August. Good luck to all of you who have entered, and don’t forget to book your place at the event before it sells out.

Rita Bhargava TEP, Chair, STEP England & Wales Regional Committee