The death tax returns

George HodgsonUpdate 13 Nov: Please see the Statutory Instrument timeframe below.

Original blog: The UK government has re-introduced proposals to fund the courts service via charging higher probate fees. The proposals emerged late yesterday (5 Nov 18), 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.

Update re Statutory Instrument timeframe

For members wishing to know the next stages of the statutory instrument the process in the House of Lords is as follows:

The instrument is laid before Parliament and is subsequently considered by the Joint Committee on Statutory Instruments and the House of Lords Secondary Legislation Scrutiny Committee:

  • The Joint Committee on Statutory Instruments usually considers an instrument after two sitting weeks have elapsed. This process involves looking at the legal content of statutory instruments, for example whether the drafting follows the correct process and if the relevant powers have been interpreted correctly. The Committee meets on Wednesdays.
  • The Secondary Legislation Scrutiny Committee usually considers instruments within 12-16 days of them being laid in Parliament. The Committee examines the policy in each instrument. It draws the House of Lord’s attention to interesting, flawed or inadequately explained measures. The Committee meets on Tuesdays and publishes its reports on Thursdays.

Once both committees have considered the instrument and given their advice a debate can take place in the House of Lords.  Peers can either approve the instrument, decline to approve it (which would stop the measure) or regret a part of it (which doesn’t stop it, but may influence how it is implemented). The timing of this debate will depend on the other items in front of the House of Lords.

This process can be accelerated under certain circumstances but there is also a large amount of Brexit-related secondary legislation both awaiting consideration by the Joint Committee as well as quite a few other instruments listed as awaiting an Affirmative Resolution.

The process in the House of Commons is as follows:

At the same time as the above process for the Joint Committee on Statutory Instruments an instrument is referred to a Delegated Legislation Committee:

  • Delegated Legislation Committee: Made up of between 16 and 18 members it is tasked with ensuring an instrument is legal and within scope of its enabling powers. MPs not serving on the Committee can attend to speak on the issue, but only those on the Committee can vote.

After the Committee has met, the instrument is debated in the House of Commons.

If approved by both Houses of Parliament it is signed into law by the relevant Minister.

It is estimated that the average time for the process to be completed in the House of Commons is 6 to 7 weeks.

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. We do not know nor can we speculate why the business ceased trading.

Clients contacted STEP after they experienced great difficulties in contacting Universal, with no responses to emails, letters or phone calls.

We have been advised by clients that they 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.

We understand from media reports that Steven Long was sentenced to a prison term for contempt of court for refusing to disclose the whereabouts of client assets. This is a civil matter and is not related to the investigation by the Eastern Region Special Operations unit. We understand that criminal investigations are still underway.

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’
  • 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
  • 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.

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

The future of the Trust Registration Service

Emily Deane TEPUpdate: 4 September 2018

HMRC would like to notify members regarding a mismatch problem with the SA950 Trust and Estates Tax Return Guide and the SA900 2017/18. The original guidance notes indicated that untaxed interest could be declared at boxes 9.2 to 9.4 when in fact, if box 9.3 is populated with ‘0’, automatic capture of the return will fail. This has caused a backlog of rejected returns requiring manual capture and, therefore, significant delays. The correct action is that all untaxed interest should be declared at box 9.1 instead. The SA950 guidance notes were updated on 24th August to reflect this. HMRC’s Software Developers Support Team has been in touch with commercial software suppliers to alert them of the change.

The next issue of HMRC’s Agent Update due for publication 17 October 2018 will also highlight this issue.

Original blog:

STEP attended a meeting with HM Revenue & Customs (HMRC) and HM Treasury (HMT) last month to discuss the operation of the Trust Registration Service (TRS) and its progress, and the implementation of the EU’s Fifth Anti-Money Laundering Directive (5MLD). The following feedback was provided.

Operation of TRS

The TRS GOV.UK guidance should be published by the end of June 2018. The 22 November FAQs (hosted on STEP’s website) will not be updated in the meantime.

HMRC has allocated a 15-month timeframe to enhance the online functionality and make it more efficient for future service. It will be seeking volunteers to assist with piloting the new system shortly.

In situations where non-resident trustees have bought a UK property (and paid Stamp Duty Land Tax – SDLT), but have no UK income tax or capital gains, they should not be receiving demands for four years’ tax returns from HMRC. This will be addressed.

Named beneficiaries must be identified on the TRS, which is part of the EU Directive, and HMRC is constrained on this point.

HMRC is aware of the issue where the system requires the Unique Tax Reference (UTR), trust name or postcode to be matched to HMRC’s records, and access is being denied.

Delays to UTRs being received following registration of trusts and complex estates are being investigated.

HMRC will endeavour to produce more guidance on complex estates in the GOV.UK guidance.

The paper and online system will be amalgamated as soon as is practical.

HMRC is aware of the widespread dissatisfaction around the penalties, and has confirmed that it will take a soft approach this year.

HMRC introduced dummy variables to enable registration to proceed on the TRS, but will no longer accept them.

There will be no more trust registration deadline extensions in 2018.

HMRC is considering changing the March deadline to align with the Self-Assessment deadline, 31 March or 5 April.

The 28-day period to save and return data will be reviewed, and possibly extended.

The functionality is still not available to complete Q20 on the SA900, which should be left blank.

EU 5MLD

The EU’s 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’ – the latter term will be defined in full in due course. STEP is liaising with HMT on this.

HMT is planning to publish a policy consultation in winter 2018/19* that will last for eight weeks, followed by a consultation on draft legislation in spring 2019* that will last for four weeks.

5MLD is expected to come into law at EU level later in June 2018, with a transposition deadline of around December 2019, and an implementation deadline of around February 2020.

STEP will keep members apprised of any further developments.

*corrected date

Emily Deane TEP is STEP Technical Counsel

UK agrees company public registers for Overseas Territories

Daniel NesbittThe UK government has accepted an amendment to the Sanctions and Anti-Money Laundering Bill which requires the Overseas Territories to establish public registers showing the beneficial ownership of companies.

The amendment, introduced by Labour’s Margaret Hodge and backed by MPs from all the major parties, commits the government to assisting the Overseas Territories in setting up registers by 31 December 2020. If registers have not been established by the deadline, the UK will be required to legislate to impose them.

An amendment which would have extended similar provisions to the Crown Dependencies was not backed by the government and was subsequently withdrawn.

The developments come after a government amendment which would have only required public registers if the Financial Action Task Force recommended them, was not selected for debate by the Speaker.

Debates on the Bill are scheduled to finish on 1 May 2018, and following Royal Assent, it will become law.

STEP will continue to monitor the impact this amendment will have, and will provide further updates where necessary.

Daniel Nesbitt, Policy Executive, STEP 

STEP Bahamas reports to the FATF Forum in Vienna

Vienna united nationsSTEP was invited to attend the Financial Action Task Force (FATF) Private Sector Consultative Forum in Vienna on 23-24 April.

The event consisted of several breakout sessions relating to FATF’s global priorities for Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) in 2018.

As part of the Forum, Cecil Ferguson TEP, Chair of STEP Bahamas and Bank Examiner of the Central Bank of the Bahamas, which is responsible for licensing, regulating and supervising financial institutions, was invited to report to attendees on the progress of the National Risk Assessment (NRA) in the Bahamas.

Cecil reported that the NRA process in the Bahamas had been very collaborative in nature, with participation from the public, private and NGO sectors. The country had embarked on a course to implement FATF’s Recommendation 1, with all sectors identifying key risk areas and resources allocated to the highly-exposed areas. A national co-ordinator was appointed to take responsibility for the process.

There were two elements to the money laundering and terrorist financing risk assessment at the country level, as well as at the financial institution and Designated Non-Financial Businesses and Professions (DNFP) level. The Bahamas engaged with the World Bank’s technical risk-assessment expert to assist in the initial process.

The process served to enhance and deepen the understanding of the Bahamas’ money laundering and terrorist financing threats and vulnerabilities, and focus its resources to address gaps in its AML/CFT regime. This included amending primary laws, regulations and guidelines as well as supervisory enforcement and frameworks.

Cecil concluded that the Bahamas’ NRA was adopted by the Cabinet in December 2017 and it has established a working group meeting weekly to ensure that the outcomes continue to be addressed.

STEP representatives also attended a closed session drafting group for lawyers, accountants and trust and corporate service providers (TCSPs) to discuss FATF’s Risk-Based Approach guidance. The review included discussions around the sectoral guidance of 2008 and potential areas of improvement focusing on beneficial ownership, suspicious transaction reporting obligations, terrorist financing risk indicators, and ongoing customer due diligence measures.

STEP will continue to engage on these issues with FATF and report back accordingly.

Emily Deane TEP is STEP Technical Counsel

EU finance ministers approve changes to blacklist

Daniel NesbittWhen the European Union announced its blacklist of jurisdictions judged not to be cooperative on tax in December 2017 it granted several nations in the Caribbean extra time to change their tax systems to meet EU standards. That revised deadline has now passed and the EU’s finance ministers have approved a number of changes.

The following jurisdictions have been added to the blacklist:

• The Bahamas.
• The US Virgin Islands.
• Saint Kitts and Nevis.

As well as approving the additions ministers have removed Bahrain, the Marshall Islands and Saint Lucia from the list.

American Samoa, Guam, Namibia, Palau, Samoa and Trinidad and Tobago will remain on the blacklist.

A further four Caribbean jurisdictions have been placed on the grey-list of countries that have pledged to alter their practices:

• Anguilla.
• The British Virgin Islands.
• Dominica.
• Antigua and Barbuda.

One further jurisdiction, the Turks and Caicos Islands, has been given until 31 March 2018 to respond to the EU’s concerns.

STEP will continue to monitor the development of both the blacklist and the grey-list and will provide further updates when appropriate.

Daniel Nesbitt, Policy Executive, STEP 

EU tax haven blacklist confirmed

Daniel NesbittAfter much debate and scrutiny, an EU blacklist of jurisdictions deemed not to be cooperative on tax matters has been agreed. The announcement came following a meeting of the EU’s Economic and Financial Affairs Council, attended by the finance ministers of each Member State.

The list, officially called the Common EU List of Non-Cooperative Jurisdictions, includes the following 17 territories:

• American Samoa
• Bahrain
• Barbados
• Grenada
• Guam
• Macau
• The Marshall Islands
• Mongolia
• Namibia
• Palau
• Panama
• Samoa
• South Korea
• St. Lucia
• Trinidad and Tobago
• Tunisia
• The United Arab Emirates.

Work on the list began in 2015. Originally 92 countries were screened for compliance with the EU’s transparency criteria, and earlier this year, 53 were warned that unless they changed their tax rules, they risked being included on the blacklist.

The full consequences for jurisdictions on the blacklist will be decided in the coming weeks, although the document outlining the blacklist suggest a number of defensive measures Member States could take against non-cooperative jurisdictions. States such as Luxembourg have been reported to favour not implementing any sanctions whilst others, including France, are thought to be advocating tough measures.

The list will be reviewed annually, with a report on the progress of jurisdictions expected before summer 2018. The EU has also announced that in the future the assessment criteria will be expanded to include the transparency of beneficial ownership information.

In addition to the blacklist, a so-called grey list of a further 47 territories has been drawn up. These jurisdictions have fallen short of the EU’s criteria but have also committed to raising their standards. If they fail to abide by their commitments they will face being placed on the blacklist.

STEP will continue to monitor the situation closely, particular in regards to what happens to those on the grey-list and any further sanctions, and will provide further updates when necessary.

Daniel Nesbitt, Policy Executive, STEP 

The UK Budget and donor benefit rules for charities

Emily Deane TEPThree years ago, the UK government’s Autumn Statement 2014 announced a review of the Gift Aid donor benefit rules with the intention of simplifying them. Following a call for evidence, it launched a consultation on 18 February 2016 setting out a range of options.

The responses helped develop specific proposals for reform, which were set out in a second consultation that ended on 3 February 2017. We have been informed that a summary of responses to the second consultation will be published on 1 December 2017.

This week the government announced that it would replace the current three-tier thresholds with two tiers. Under this reform, donors will be no worse off in terms of the value of benefits that charities can offer them, as the new limits will be, for every eligible donation, at least as generous as the current limit.

Current system

The current donor benefit limits (the relevant value test) is a set of monetary thresholds that determines the value of benefits that charities may give to donors as a consequence of a donation and still claim Gift Aid on that donation. These are:

• For donations up to £100, the value of the benefit can equate to a total of 25% of the donation.
• For donations between £100 and £1,000, the value of benefits is capped at £25.
• For donations over £1,000, the value of the benefit can equate to a total of 5% of the donation, up to a maximum annual benefit value of £2,500.

New system to be introduced

Under the new limits, the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation. For larger donations, charities can offer an additional benefit to donors, up to 5% of the amount of the donation that exceeds £100. Some examples are provided in the table below. The total value of the benefit that a donor can receive remains at £2,500.

Extra statutory concessions

The government also announced that it will bring into legislation the four extra statutory concessions that currently operate in relation to the donor benefit rules.

Time-frame

Legislation to make all the changes will be introduced in Finance Bill 2018-2019 and will come into effect from 6 April 2019. Draft legislation will be published in 2018.

Examples of how the new benefit thresholds will work:

Size of donation (£) Existing relevant value test  – size of donation
determines level of benefit (£)
Planned relevant value test from April 2019 (£)
70 17.50 17.50
100 25 25
400 25 40 (25% of 100 (25) plus 5% of 400-100(15))
1,000 25 70 (25% of 100 (25) plus 5% of 1,000-100(45))
1,500 75 95 (25% of 100 (25) plus 5% of 1,500-100 (70))

STEP will continue to liaise with HMRC’s Charities Tax Team in this connection.

Emily Deane TEP is STEP Technical Counsel