The UK Ministry of Justice (MoJ) has announced a public consultation on increasing selected court fees in line with historical inflation dating from August 2016 to April 2021, or from the year the fee was last amended (capped at August 2016).
The proposal is limited to fees which are under-recovering compared to the estimated cost of the service, and to fees which are enhanced so that they can legally be set above the cost of service. The impacted fees are included in the following fee orders:
Family Proceedings Fees Order 2008 No 1054 (43 impacted fees);
Civil Proceedings Fees Order 2008 No 1053 (67 impacted fees);
Court of Protection Fees Order 2007 No 1745 (3 impacted fees);
Magistrates Courts Fees Order 2008 No 1052 (20 impacted fees).
The proposed fee increases will raise an estimated additional net income of GBP11-17 million a year for HMCTS after fee remissions.
In addition to increasing fees, the government also proposes to widen access to the Help with Fees scheme. This includes raising the income thresholds in line with inflation, including the couple and child premiums, backdated to August 2016. The extended scheme is intended to benefit those who feature disproportionately among low income groups, including women, people from black and minority ethnic backgrounds, disabled people and younger people.
Responses are invited by 17 May. Feedback can be submitted via an online survey using the link below, by email: [email protected], or by post to: Fees Policy Team, Ministry of Justice, 102 Petty France, London SW1H 9AJ.
STEP will continue to keep members apprised of any developments.
The Organisation for Economic Co-operation and Development’s (OECD) Task Force on Tax Crimes and Other Crimes launched its new report, Ending the Shell Game: Cracking down on the Professionals who enable Tax and White Collar Crimes, during the 2021 OECD Global Anti-Corruption & Integrity Forum this week. The report sets out a range of strategies and actions for countries to tackle professional intermediaries who enable tax evasion and other financial crimes on behalf of criminal clients.
The panel for the launch event included Jim Lee, US Internal Revenue Service; Caroline Lee, International Ethics Standards Board for Accountants (IESBA); Grace Perez-Navarro, OECD; and Simon York, HMRC. The webinar was moderated by Will Fitzgibbon of the International Consortium of Investigative Journalists.
The event highlighted the damaging role played by intermediaries who enable financial crimes on behalf of their criminal clients, and their increasingly sophisticated technical methods, such as the use of cryptocurrency. The panel agreed that concerted domestic and international action is needed to clamp down on the enablers of crime. They recommended a closer partnership between public and private sectors to report on non-compliance and prevent such crime. Countries were urged to increase their efforts to better deter, detect and disrupt the activities of professionals who enable tax evasion and other financial crimes.
The report states that the majority of professional service providers are law-abiding, and play an important role in assisting businesses and individuals to understand and comply with the law. However there is a small subset that abuse their specialised skills and knowledge to enable clients to defraud the government and evade their tax obligations, and these need to be tackled.
The report calls on countries to establish or strengthen national strategies to deal with professional enablers more effectively. Such strategies should:
ensure that tax crime investigators are equipped to identify the types of professional enablers operating in their jurisdiction, and understand the risks posed by how they devise, market, implement and conceal tax crime and financial crimes;
ensure the law provides investigators and prosecutors with sufficient authority to identify, prosecute and sanction professional enablers, both to deter and penalise;
implement multi-disciplinary prevention and disruption strategies, notably through engagement with supervisory, industry and professional bodies, to prevent abusive behaviour, incentivise early disclosure and whistle-blowing and take a strong approach to enforcement;
ensure relevant authorities proactively maximise the availability of information, intelligence and investigatory powers held by other domestic and international agencies to tackle sophisticated professional enablers operating across borders;
appoint a lead person and agency in the jurisdiction with responsibility for overseeing the implementation of the professional enablers’ strategy, review its effectiveness, and devise further changes as necessary.
STEP attended a virtual meeting held by the Financial Action Task Force (FATF) on 18 March to discuss potential amendments to FATF Standards Recommendation 24 and its implementation. FATF announced its intention to review this area, which may lead to a comprehensive overhaul of the system of beneficial ownership (BO), at a private sector consultative forum in November 2020.
The meeting aimed to garner additional views on the key proposals for amendment to Recommendation 24 from Designated Non-Financial Business and Professions (DNFBPs) which include lawyers, trust and company service providers, notaries and other independent legal professionals.
The principal issues for discussion included:
The verification of BO information provided to the registry and whether a DNFBP could hold the information instead.
Whether DNFBPs have sufficient access to the BO registries in order to identify and verify the relevant beneficial ownership information.
Whether physical paper bearer shares are still necessary?
How can the sector define and adequately control nominee arrangements?
How could the process of identifying beneficial ownership be improved?
STEP noted the issue that the application of the rules around beneficial ownership is complex, which can create an ambiguous outcome due to confusion around the identification of natural persons. This confusion can lead to the rules not being applied correctly, resulting in inaccurate information being held. Licensed third parties which are obliged to hold information, such as trust companies, have a more rigorous process of identification and this could be beneficial to adopt.
STEP suggested that FATF target the accuracy of the information held, its effectiveness, and how often it is collected. It also suggested it would be preferable for jurisdictions to have multiple options, rather than the current highly prescriptive rules of identification, to ensure the accuracy of the information collected and verified. The overarching objective for review should be to strengthen the measures in place, and mitigate the obstacles to transparency and risks of misuse.
FATF confirms that it will continue to consult with the private sector and will publish a full consultation on written proposals in June. STEP will continue to keep members apprised of these developments in due course.
On 11 February, STEP Europe held a webinar to examine how various jurisdictions have transposed the Fifth Anti-Money Laundering Directive (5AMLD), and particularly how those Member States have chosen to define a business relationship.
The panel included Stéphanie Auferil TEP from France; Dr Petra Camilleri from Malta; Aileen Keogan TEP from Ireland; Filippo Noseda TEP from the UK; Paolo Panico TEP from Luxembourg; and Nicola Saccardo TEP from Italy; with Dr Anthony Cremona TEP moderating. The event was sponsored by IQEQ.
Many trustees based in the EU, and other jurisdictions with regulations similar to the EU’s central Register of Beneficial Ownership (RBO), are familiar with the need to register trusts. The details are sent to the competent authority and disclose information on all persons who fall within the definition of ‘beneficiary’, with respect to trusts in the appropriate RBO form. However, non-EU-based trustees are less likely to be familiar with the new requirement to also have the trust registered when the trustee enters into a business relationship in the EU, whilst in a number of countries EU based trustees have already been required to register (France).
The panel members each explained how their own countries have implemented the following provision from the Official Journal of the European Union regarding article 31, as covered in this discussion document (pdf).
Some of the key updates per jurisdiction were:
Ireland: It still has not implemented 5AMLD as the legislation does not yet fully transpose 5AMLD. It is difficult to see how it would work in the country, due to the number of trusts to be found in many aspects of society (house purchases, pensions and to protect the vulnerable) and how the directive would affect daily life. Ireland has already removed statutory trusts, unit trusts and pension trusts from the definition of an express trust, though further clarification is needed. However as yet there has been no carve-out for trusts known already to be of minimum risk, such as those for the vulnerable and charities.
Italy: The RBO of trusts is not yet operative and the legislation refers to implementing provisions which have been made available in draft for public consultation, but not yet issued. Under the legislation, trusts have an obligation to register non-EU trustees either for a business relationship under the EU directive, or if under Italian law, trusts have tax consequences pursuant to Article 73 of the Income Tax Code. The draft implementing provisions are being considered and will cover both resident trusts and non-resident trusts with Italian source income/gains.
France: The country already had reporting obligations from 2011 for EU or non EU trustees and those with French connections (such as resident settlor or beneficiary or French situs assets). It transposed 5AMLD in February 2020 and extended reporting to non-EU trustees acquiring French real estate or entering into a business relationship in France.
Entries are open for the STEP Private Client Awards 2021/22 from 1 February until 23 April. The Awards are widely acknowledged as being the premier event in the private client industry calendar. Winning an Award is a very clear and recognised hallmark of excellence.
How then, do you go about winning an Award? Mary Duke TEP, Chair of the Presiding Judges, gives us her top tips based on her personal experience as a nominee, winner, judge and Chair of the Judging Panel.
You have to be in it to win it
There can sometimes be a perception that the Awards are only for larger firms or for the usual London suspects. However, the judges have clear instructions to make allowance for smaller entrants and to take cultural differences into account when considering international entries. Last year’s entrants and winners were the most international yet. Entries from all sizes and types of firm are therefore welcome. Strong entries will always attract attention from the judges, regardless of their size or regional origins.
Enter the right category
It is a constant surprise to the judges how many firms enter the wrong category. One submission even began with the bold statement: ‘We are a leading [another category entirely] firm…’. Read the category criteria carefully, and if you think the judges might have difficulty understanding why you are applying for a particular category, help them by explaining your business better.
Put yourself in the mind of the judges
My number-one tip, when writing your submission, is to imagine yourself as one of the judges.
Be aware that most of the judges will not know most of the applicants. If they do, then all the better – judges are encouraged to bring their personal knowledge to the process – but for the most part, judges will be relying heavily on the submission. So even if you think you are the best-known firm in the world, make your submission count.
Understand the judging process
There are three phases to the judging process.
The Shortlist Phase – First, submissions for the legal categories often receive a high number of entrants resulting in the category being split into large and mid-size firm groups. This is why entrants in these categories are asked to submit the number of fee earners in their team and in the firm. The definition of fee earners can be viewed on the FAQs page of the website. Then the categories are assigned to judging groups and each judge will have to review up to 100 submissions, each of up to 1,100 words. Judges have to submit a scorecard against the category’s criteria and write a narrative (minimum 50 words) to support their outcome for each entrant. That is 220,000 words of reading, 1,000 scores to give out, and at least 10,000 words to write. It is an incredible amount of work.
The Panel of Experts – After the shortlist is announced, the entrants for each category are submitted to a panel of experts. These individuals are chosen for their ability to provide independent and knowledgeable insights into the entrants and the field of their work. (But they are not direct competitors in the category.) A list of the panel of experts will be available on the Awards site next month. The reports of the Panel of Experts are considered as recommendations only and do not constitute a formal vote.
The finalist stage – The finalists’ entries and the panel of experts’ recommendations are provided to the full panel of judges for this critical decision phase. Prior to meeting for final deliberations, each judge is required to submit their own report on each individual submission indicating which entrant they believe should win the category. The judges then meet to deliberate and make a final decision for each award.
This is a thoughtful and transparent process involving a good deal of debate and discussion. At times, the discussion results in judges shifting their views. There is no consideration of how many tables a firm might purchase at the awards dinner or the size of the contribution an entrant may have made to the officially supported charity. In fact, there is no way for the judges to know these things based on the timing of the decision process. Likewise, there is no consideration given to whether a firm won in the preceding year. Judges with conflicts or whose firm has entered a submission are recused from related categories.
Answer the questions
It is the first rule of exam-technique we should all have learned at school, but every year I am amazed at submissions that fail to answer the question. There are five criteria for each award. Each of the criteria is weighted equally and we score each on a scale of one to five. So answer each of the questions individually. Don’t allocate too much space to one category to the disadvantage of another.
Further, make sure that you clearly answer each of the criteria in turn. Don’t use jargon or abbreviations that are not in common usage. Remember, the panel of judges is made up of a diverse group of practitioners from differing fields of expertise.
The most important thing to avoid is a long single narrative. Even if it addresses all the criteria, judges aren’t going to thank you for having to read it several times in order to extract and mark each one. Make the judges’ lives easier and they are likely to mark you more highly.
Don’t waste word-count
You have 1,100 words. Make them all count. So many submissions waste words. Précis rigorously. Then do so again.
Clear, succinct language is appreciated.
Avoid the marketing spiel!
You will be judged by fellow senior industry professionals who can spot puffery and hyperbole from a long way off.
Most of the work in our industry is advisory. The ability to communicate clearly with clients is crucial to this. So, demonstrate your ability to give clear advice, with a clear and well-written submission. If your marketing team is superb, then by all means use them. The judges’ experience, though, is that submissions written by those at the coal-face often read more convincingly.
Pay attention to spelling and grammar and beware of unnecessary adverbs and superlatives.
Big numbers (and names) are irrelevant
Many submissions make great play of the financial value of their clients or cases. Others seek reflected glory in acting for big names. Yet these have little effect on the judges. Tell us what makes your case unusual, complex or novel. Don’t simply name-drop celebrity connections.
Provide evidence; don’t merely assert
Most criteria ask you to ‘demonstrate’ or ‘provide evidence’. Yet many submissions assert things – ‘We are the leading firm providing a superlative level of client-service and exceptional satisfaction’ – without any evidence to back this up.
What will go down well is an evidence-based entry that gives clear examples of what the firm has done over the past year to make it stand out from the crowd.
Entries should be particularly careful about unguarded assertions. ‘We are the only firm that can…’ or ‘We are the largest firm which…’ are particularly dangerous assertions – especially where some of the judges might work for a competitor and dispute whether this is true.
Tell us something unusual
A good answer for each of the criteria might get you shortlisted. But if you want to win, you will need to stand out.
Tell the judges something different, something unusual, something genuinely innovative. Think forward to the awards ceremony and the announcement of the winner. When the celebrity-host says: ‘The judges were particularly impressed by…’, what one facet of your submission will the judges have chosen?
The judges are both curious and cynical in equal measure. They will check what you say in your submission against what you say on your website and other sources of information. Glaring inconsistencies tend to result in entries receiving short shrift.
Remember the Awards are ‘ … of the Year’
Your firm will obviously be very good at what it does, but the Awards are intended to highlight those that have achieved particular success over the past year. Make sure you are rigorous in only referring to evidence from May 2020 to 23 April 2021. General statements about historic successes will waste words and not score any marks.
….and finally, good luck!
The judges look forward to having a bigger job this year, with many well-written submissions to choose from!
On 27 January 2021, Paolo Panico TEP, the Chair of STEP Europe, moderated a webinar hosted by Anti-Money Laundering Europe (AME) on the future of the European Union’s policy on preventing money laundering and terrorist financing.
The panel included Steve Ryan, deputy head of the financial crime unit in the Directorate-General (DG) Internal Market and Services of the European Commission (EC); Eero Heinäluoma, Member of the European Parliament (EP); and Roger Kaiser, Senior Policy Advisor, European Banking Federation.
The EC stated that it planned to unveil its consultation feedback and a new legislative package in the near future following the May 2020 action plan.
The consultation feedback had reportedly showed support for EU action in this area as well as significant support for further harmonisation in all areas, particularly for obliged entities and beneficial ownership registers.
The proposed legislative package will focus on only three out of the six pillars of the action plan, which are a harmonised rulebook; EU level supervision; and a coordination and support mechanism for financial intelligence units (FIUs). The plan is for the package to be adopted in spring 2021.
The main proposals of the package for each pillar are:
to put in place a more integrated framework;
to establish a new AML authority at the centre of an EU AML supervisory system. This should have direct supervisory powers over financial institutions and oversight/coordination powers in the non-financial sector;
to set up a mechanism to coordinate and support FIU work, fully integrated in the new AML authority. It will provide technical support and assistance to analysis produced by FIUs, including joint work.
The EP representative called for an updated rulebook to keep up with new developments like crypto-assets, and noted that supervisors should be supported with appropriate tools and resources. It stressed that reform is needed and was looking forward to receive the EC proposal.
Industry representatives called for a single EU rulebook and supervisory convergence and stressed the need to avoid a ‘tick the box’ approach, or any regulatory or supervisory fragmentation. It also called for guidance to help balance out GDPR and AML requirements.
HM Revenue & Customs (HMRC) invited some of the UK’s financial industry experts, including STEP, to join an overview of the OECD’s current review of the Common Reporting Standard (CRS).
The OECD will launch a consultation later this year, but has requested early input from industry experts on the improvements and changes that they would like to see. The purpose of the review is to enhance the general efficiency and operation of the CRS, and especially the quality and usability of its data.
In recent years there has been increasing use of innovative financial products that were not envisaged when the CRS was originally implemented. Some gaps and ambiguities in the legislation have been identified, and the OECD believes the time is now right to review and consolidate it. HMRC intends to consult the crypto-asset industry on technical changes and improvements and e-money industry experts, an area which was previously excluded, but some countries have called for it to be included in order to reach a single and consistent view.
HMRC also discussed some trust related issues for consultation, including:
Rules on reporting of joint accounts
While each joint account holder is required to report specific information, the schema does not recognise the number of account holders. HMRC suggests developing an indicator or flag to identify each individual account holder.
Controlling persons of passive non-financial entities (NFEs)
The schema is currently unable to assess the identity of the controlling person (ie settlor, protector) making the data less useful for tax risk purposes. HMRC suggests introducing a mandatory field to specify the role of the controlling person.
Account holder where a trust is a financial institution (FI)
HMRC suggests the schema should be able to identify the type of equity interest the account holder has for risk assessment purposes.
Other trust-related issues that will be addressed in more detail include:
the treatment of reporting in relation to trustees, protectors and controllers;
inconsistent value reporting on the value of trust accounts;
reporting of trust loans as payments and potential avoidance issues;
consistency over reporting of issues on protectors and other ‘controllers’ who have no financial interests in the trust;
cross-over issues on reporting controllers – AML principles and FATF guidance;
reporting on ownership of corporate trustees in the context of controlling persons/equity interest holders;
relevance of cash as an asset in the context of classifying entities, particularly in the financial institution/passive NFE distinction.
HMRC has confirmed that it will form a focus group to look at the CRS and specific trust aspects, and we will keep members updated as the consultation progresses. In the meantime if members have any additional trust-related feedback please email the policy team at [email protected] by 1 February 2021.
The disclosure of cross-border tax planning arrangements under Council Directive (EU) 2018/822 (DAC6) came into force on 1 July 2020 and requires reporting of any persons involved in cross-border arrangements, including loan agreements, payments from a resident of one country to a resident of another, or putting funds in an offshore trust, if one of the hallmarks apply.
Following the conclusion of negotiations between the UK and the EU on a Free Trade Agreement (FTA), HMRC confirms that only arrangements that meet hallmarks under category D of DAC6 need to be reported in the UK, in accordance with the OECD’s Mandatory Disclosure Rules (MDR).
The regulations have been amended and laid before Parliament to ensure the rules work correctly post-Brexit, including ensuring that references to EU member States refer to the UK or an EU member State after the end of the transition period. The rules will now only apply to two types of arrangements captured within the category D hallmarks:
Hallmark D1 is any ‘arrangement which may have the effect of undermining the reporting obligation under the laws implementing Union legislation or any equivalent agreements on the automatic exchange of Financial Account information, including agreements with third countries, or which takes advantage of the absence of such legislation or agreements’.
Hallmark D2 applies to an arrangement involving a ‘non-transparent legal or beneficial ownership chain’ with the use of persons, legal arrangements or structures:
that do not carry on a substantive economic activity supported by adequate staff, equipment, assets and premises; and
are incorporated, managed, resident, controlled or established in any jurisdiction other than the jurisdiction of residence of one or more of the beneficial owners of the assets held by such persons, legal arrangements or structures;
where the beneficial owners of such persons, legal arrangements or structures, as defined in Directive (EU) 2015/849, are made unidentifiable.
The replacement of DAC6 will significantly reduce reporting requirements although the disclosure of tax avoidance schemes (DOTAS) will continue to apply in the UK. It is also clear that under the terms of the FTA, the UK must not reduce the level of protection in its legislation below the level of protection afforded by the OECD’s MDR. While the UK has not implemented MDR in its domestic legislation the rules provide a ‘level of protection’ which in certain respects is equivalent to that in the OECD’s MDR, and in other respects goes beyond it.
The government will begin to repeal the legislation implementing DAC6 in the UK and will implement the OECD’s MDR as soon as practicable, in order to replace DAC6 and transition from European to international standards on tax transparency. The government intends to consult on draft legislation to introduce MDR, and STEP will keep members apprised of the situation accordingly.
Update 6 January 2021: HMRC has confirmed to STEP that only arrangements which meet the hallmarks under Category D will now need to be reported, therefore historic reporting (for arrangements up to 31 December 2020) in respect of the other hallmarks will no longer be required.
It’s no secret that 2020 has been an unprecedented year; and just about everyone writing a commentary on the last twelve months would probably say the same. But how has STEP fared during this turbulent time?
I wrote in June of how lucky we were to be part of an organisation that strove to keep its members informed and engaged throughout the turbulent early months of the pandemic. I have continued to be impressed at the ingenuity of both STEP head office staff and the resilience of branches which have worked tirelessly to keep the STEP show on the road.
CPD and examinations went virtual; branches met by Zoom; the Spring Conference, Tax Conference and the recent Branch Chairs’ Assembly had the highest number of attendees ever – online, of course. The members of the events team have surpassed themselves and have more than earned our gratitude.
In the background STEP continued to contribute and influence policy; work with the All Party Parliamentary Group on Inheritance Tax and Intergenerational Fairness generated STEP positive publicity and greater visibility amongst key audiences. Thanks to Emma Chamberlain OBE TEP and Emily Deane TEP for their input into the report that was published earlier this year.
STEP’s work with the government around the 5th Anti Money Laundering directive saw a change in definition of ‘business relationship’. This is a key outcome for the industry and shows how respected STEP is within government departments.
STEP’s work with the UK Ministry of Justice on video witnessing of wills has also been a highlight, showing that our pragmatic and practical advice is being listened to in vital areas.
HMRC’s consultation on raising standards in the tax advice market is ongoing and STEP has been encouraged to contribute further. Many thanks to Sarah Manuel for her work in this area.
Whatever 2021 brings us I am confident that STEP will emerge stronger and better. The recent Branch Chairs’ Assembly proved to me just how passionate and motivated our membership is, and I very much look forward to working with you all in the year to come.
On 24 November, the Financial Action Task Force (FATF) held its private sector consultative forum on beneficial ownership of legal persons, which focused on Recommendation 24 Transparency and beneficial ownership of legal persons of the FATF Recommendations. FATF stated that it is undergoing a major review of this area, which may lead to a comprehensive overhaul of the system of beneficial ownership to address issues such as inconsistencies across many countries, privacy concerns, centralised registries, legitimate purposes for access, and how information should be verified.
The forum was divided into two sessions with the first being chaired by Jennie Haslett and featuring Maira Martini, Transparency International; Jason Sharman, University of Cambridge; and John Cusack, the Global Coalition to Fight Financial Crime. The panel gave a third-party view with the aim of defining and understanding the nature and scale of problem. The following challenges were identified by the panel:
the quality of the information and how it is being verified;
the importance of flexibility and adapting requirements to the risk of the jurisdiction (as it was stated that a one-size-fits-all approach does not work);
that rather than implementing new laws, existing ones should be properly enforced; and
the need for increased collaboration between all players.
The second panel was chaired by Alexandra Kadet and featured Young Led, Department of Treasury, USA; Michela Maggi, European Commission; and Mariano Garcia Fresno, Ministry of Justice, Spain. The panel shared its views on the effectiveness of the measures being implemented and the potential problems and solutions. The discussion focused on who should have access to beneficial ownership information, the balance between what needs to stay private and what can be made available, the challenge faced when involving legal entities outside of the EU, and the need to have it centralised.
The overarching consensus from the forum was that this is a very challenging issue with no perfect solutions. FATF confirmed that a number of significant challenges were identified that needed to be addressed, such as complacency among some gatekeepers, the need for discrepancy reporting to make sure registers don’t work in isolation, consequences for non-compliance, and the need for consistency of global standards and practice.