HMCTS announces interim operational arrangements

emily-deane-tep-2018-v2Update 1 May 2020: HM Courts & Tribunal Service (HMCTS) met with STEP, the Law Society, SFE and ICAEW this week for its regular Probate Service meeting. The following updates were provided:

  • The combined form is timetabled for approximately two weeks’ time and a formal notification will be provided.
  • Partners who are Executors are now able to make online applications.
  • Trust corporations and others which are currently unable to apply online will be added to the process over the next couple of months.
  • HMRC intends to start sending IHT421 forms directly to the Probate Registry within 15 days of issue. A formal notification will follow when this has been implemented.

We have requested an additional meeting in the next ten days to discuss specific form issues with HMCTS and the Probate Registrar. Please contact us at policy@step.org if you have issues that you would like to be reported.

HMCTS has also enquired whether firms are struggling to get the original wills to the Probate Registry during remote working. Please do let us know if this is the case.

Original blog: HMCTS has announced some interim operational arrangements that it will be making in light of the COVID-19 restrictions. The key changes will relate to the following areas:

  • acceptance of statements of truth in place of affidavits,
  • guidance on the signing/witnessing of renunciations and powers of attorney,
  • Statutory Instrument 2020 No 33: The Administration of Estates Act 1925 (Fixed Net Sum) Order,
  • probate practitioner forms and electronic signatures.

Acceptance of statements of truth in place of affidavits 

Statements of truth can be accepted in place of affidavits in the following circumstances:

  • identity of executor,
  • misrecital of date of will in codicil (if rectification not required under S20 Administration of Justice Act 1982),
  • Rule 41 – amendment of grant,
  • Rule 41 – revocation of grant,
  • Rules 30(1) (a),(b) and (c),
  • Rule 35(4),
  • Rule 13 (knowledge of content of will),
  • Rule 14 (alterations in will),
  • Rule 15 (attempted revocation of will).

HMCTS is awaiting further advice in relation to the acceptance of statements of truth for use in applications that specify evidence must be submitted by affidavit.

Guidance on the signing/witnessing of renunciations and powers of attorney 

Documents including renunciations and powers of attorney that are required to be signed as a deed before a disinterested witness may be effected in the usual way using any method of signing/witnessing that can be achieved under the safe distancing measures currently specified by the government. HMCTS will not look beyond any document that is submitted that is signed and witnessed in the usual way, including the use of electronic signatures.

Statutory Instrument 2020 No 33: The Administration of Estates Act 1925 (Fixed Net Sum) Order 

With effect from 6 February 2020 the fixed net sum for spouses and civil partners of persons who have died after that date without leaving a will has been increased to GBP270,000. If you have been issued with a grant of Letters of Administration since 6 February 2020 and you believe the entitlement to the estate may have been affected by this, you are advised not to administer the estate and, if you are a personal applicant, to seek legal advice.

Probate practitioner forms and electronic signatures 

HMCTS has received queries from practitioners in respect of whether the new forms are for use by practitioners and personal applicants. These forms will become a combined form for use by both at the end of the transitional period and will be uploaded as a combined form on the gov.uk website.

For clarity, the links to all the relevant paper forms for probate professional practitioners only to use are:

You can find where to send your forms at the Directory of probate registries and appointment venues (PA4SOT).

Please note: All forms for practitioner use contain the following statement in the title for probate professional practitioners only. If this statement is not included, the application is only for the use of personal applicants at this stage.

‘HMCTS advises that any new work which is undertaken should now be completed by either using the new paper application forms (electronic signatures including typed signatures will be accepted) or you could alternatively apply online. HMCTS is actively encouraging the use of online applications as this enables us to maintain the service whilst many of our staff are also remote working.’

For further information on how to apply online, please use HMCTS online services for legal professionals.

STEP will continue to keep you apprised of any changes to the service made by HMCTS.

Emily Deane TEP, STEP Technical Counsel

PCRT: Continuing to raise professional standards

Business people discussion advisor conceptThis week we publish a short report reflecting on the use of PCRT (Professional Conduct in Relation to Taxation) by the professional bodies since the Standards for Tax Planning were added in March 2017.

STEP became a signatory to PCRT in 2011 following its inception 25 years ago by the other UK tax bodies. PCRT is reviewed annually and updated by representatives of each of the seven bodies (along with STEP, these are AAT, ACCA, ATT, CIOT, ICAEW and ICAS).

In its present form, PCRT sets outs the Fundamental Principles and Standards for Tax Planning behaviours required by all our full, associate, affiliate and student members when they are advising on UK tax (regardless of the jurisdiction in which they may be based).

While 2017 saw the Standards introduced, the version issued on 1 March 2019 was the first major restructuring in 25 years to take account of feedback from our members. The updated help sheets provide guidance on how members can apply PCRT to their day to day professional activities, exercise their professional judgement and resist any undue pressure they may receive from clients or employers to act in an unethical manner. The help sheets focus on

  • submission of tax information and tax filings,
  • tax advice,
  • dealing with errors,
  • request for data by HMRC,
  • members personal tax affairs.

Application of PCRT

STEP’s Code of Professional Conduct sets out our core standards, and PCRT supplements this. It does not stand in isolation, and any member who is found to be in breach of PCRT will likely have breached our core Code, other membership requirements, plus any regulatory requirements that members may have to abide by.

PCRT does not only affect members in professional practice. Its Fundamental Principles and Standards of Tax Planning apply to all members who practise in tax, including employees attending to the tax affairs of an employer or client, those dealing with their own tax or that of their family, friends, charities, etc, whether or not for payment, and those working in HMRC or other public sector bodies or government departments.

Tax agents who are not members of any of the signatory bodies are not ‘off the hook’ either. All agents, including those with no professional qualifications at all, are covered by HMRC’s own Standards for Tax Agents published on 4 January 2018, which incorporates the principles of PCRT.

The eagle-eyed among you will have noticed HMRC’s current call for evidence on ‘Raising standards in the tax advice market’. STEP will be responding to this call for evidence by its closing date of 28 May 2020.

How do members use PCRT?

At its simplest level, PCRT is intended to guide and assist members, enabling them to ensure that they undertake work effectively and appropriately. In practice it is being used as a reference point for professional standards, helping members make informed choices.

PCRT helps members demonstrate the required standards to clients and employers, and assist with explaining why some planning arrangements are not suitable and cannot be undertaken, helping members to support their colleagues and fellow professionals in making correct decisions, and showing a commitment to ethical practice.

As professionals, members serve their clients’ interests, but also uphold the reputation of the tax profession, and the reputation of STEP as a society, all of which take account of the wider public interest. PCRT is a powerful tool in helping us retain public confidence in the work of members.

In these various ways, PCRT appears to be working successfully in supporting members, their clients and the wider community by describing the standards of behaviour that clients can expect when seeking advice on their tax affairs.

How do the professional bodies use PCRT?

PCRT has been widely promoted and debated by the professional bodies across our member communications, and its Fundamental Principles and Standards for Tax Planning play an essential role in promoting ethical conduct among our members.

STEP, along with each of the professional bodies, has entered into a memorandum of understanding with HMRC, allowing HMRC to report to us any alleged misconduct by any of our members. Where such a report is received, we will use the PCRT Fundamental Principles and Standards of Tax Planning to assess whether an appropriate professional approach has been adopted to determine whether we need to commence an investigation under our own Disciplinary Rules.

Finally, HMRC’s report, ‘Measuring tax gaps 2019’ shows a significant reduction in the tax gap attributable to tax avoidance. While there is no direct evidence, each body is of the firm belief that the changes to PCRT have helped to support this reduction. Any questions should be sent to Sarah Manuel, STEP’s Professional Standards Manager at standards@step.org.

The above has been adapted with agreement from Tax: Raising professional standards, first published by ICAS, April 2020.

Update on HMRC’s Capital Gains Tax Manual

Robin_Vos 100Following a query raised on the Trusts Discussion Forum, STEP’s UK Technical Committee has been considering the capital gains tax consequences of a deed of variation of a will in circumstances where the asset which is the subject of the variation has already been disposed of by the original beneficiary.

The specific issue raised was whether the original beneficiary should be taxed on the disposal of the asset or whether the capital gains tax deeming provisions relating to deeds of variation have the effect that the donee under the deed of variation should be treated as having disposed of the asset.

Part of the uncertainty had been caused by the apparent inconsistency of two paragraphs in HMRC’s Capital Gains Tax Manual: CG31600 and CG31630.

The committee has been in correspondence with HMRC in order to clarify this point. HMRC has confirmed that:

  1. It is possible to have a valid deed of variation in relation to an asset which has already been disposed of by the original beneficiary.
  2. The effect of the deeming in s.62(6) TCGA is that the donee under the deed of variation is treated as having acquired the asset from the personal representatives and must therefore also be deemed to be the person who disposed of the asset.
  3. If the original beneficiary and/or the donee have already filed tax returns for the relevant tax year they will be able to amend their tax returns and/or make a claim for relief from overpaid tax.

HMRC has amended paragraph CG31600 of its CGT Manual to reflect its view.

Robin Vos TEP, Chair of STEP’s UK Technical Committee.

 

UK government raises statutory legacy in England and Wales

Father and daughter at a beachThe UK government laid a statutory instrument on 15 January 2020, which increases the net sum that a surviving spouse or civil partner is entitled to receive in England and Wales where a person dies intestate leaving issue (children).

The new legacy has been increased from GBP250,000 to GBP270,000, and will come into force on 6 February. The formal title is the Administration of Estates Act 1925 (Fixed Net Sum) Order 2020.

Under the rules of intestacy, if there are no children, then the spouse or civil partner will inherit the whole estate. However, if there are children, then the spouse or civil partner will be entitled to all of the deceased’s personal property, the first GBP270,000 of the estate and 50 per cent of the remainder, leaving 50 per cent to be divided equally between the children.

How was the calculation made?

The government reviews the amount of the statutory legacy every five years and increases it in line with the Consumer Price Index.

When calculating the increase, the Lord Chancellor followed the standard methodology in Schedule 1A to the 1925 Act (following the amendments brought in by the Inheritance and Trustees’ Powers Act 2014). This involved calculating and then applying the change in the Consumer Price Index (CPI) from the ‘base month’ (October 2014) to the ‘current month’ – the most recent CPI figure available at the time of fixing the sum (November 2019, published by the Office for National Statistics on 18 December 2019). This equated to an increase of 8.1 per cent of the GBP250,000 sum, with the figure then rounded to the nearest thousand (as required by the Act), which resulted in the increase of GBP20,000.

STEP welcomes the increase to the fixed legacy, although we would caution that it is prudent not to rely on the rules of intestacy, and to make and review a will regularly.

Emily Deane TEP, STEP Technical Counsel

GDPR and trusts and estates: new guidance coming

STEP is aware that many members are looking for clarification as to how GDPR should be interpreted in the context of trusts and estates.

STEP’s Data Protection Working Group has made submissions to, and had discussions with, the Information Commissioner’s Office on this topic, and intends to publish guidance early next year (most likely in January or February 2020).

The topics covered by the guidance will include:

  • how to apply tests such as ‘number of staff’ and ‘turnover’ in the trusts and estates context;
  • the distinction between data processors and data controllers;
  • the extent to which GDPR applies to trustees and personal representatives acting in a non-professional capacity;
  • the legal basis on which trustees and personal representatives can process special category data;
  • the circumstances in which trustees and personal representatives should issue privacy notices to beneficiaries; and
  • the obligations on trustees and personal representatives when responding to subject access requests.

The Data Protection Working Group intends to add to this guidance in due course, including setting out views on matters such as the treatment of bare trusts and of attorneys and deputies.

Edward Hayes, Chair of STEP Data Protection Working Group

Progress on UK probate delays

Emily Deane TEP

Updated 24 March 2020: HM Courts & Tribunals Service (HMCTS) has launched new standard application forms for professional practitioners.

Three of the grant of representation forms have been redesigned for the professional sector. These are the PA1A (applying for grant of letters of administration), PA1P (applying for a grant of probate) and PA8A (applying for a caveat). These forms need to be completed in place of the Statement of Truth, and can be accessed from Probate forms and guidance.

If you want to apply for a grant of representation or caveat online, please visit HMCTS online services for legal professionals.

HMCTS is encouraging everyone to apply online so that HMCTS can continue to work remotely on the applications.

Updated 10 March 2020: It is now possible to make an online application for a Welsh grant via: A oes gennych chi dystysgrif marwolaeth?

Updated 14 February 2020: HM Courts & Tribunals Service (HMCTS) is now issuing new grants within two weeks of all professional online or paper applications for England and Wales.

HMCTS has requested feedback from professionals who have used the new online system. It has registered approximately 1,000 online applications since the launch and is urging other professionals to sign up.

STEP has relayed the message to HMCTS that some emails and calls are still going unanswered.

Updated 2 December 2019: STEP met HMCTS this week, together with The Law Society, and the Institute of Chartered Accountants in England and Wales.

HMTCS provided the following update on the Probate Service:

Timeframe

For personal applications HMCTS is now issuing grants in less than four weeks.

For professional applications grants are being issued within two to three weeks.

HMCTS issued 11,390 grants in the first two weeks of November.

HMCTS has identified that 16 per cent of stops are caused by a pending IHT421 and 11 per cent of stops are due to a missing death certificate.

The new online system will help to identify the reasons for other stops in due course.

Online system

HMCTS is promoting the use of its online system and is keen to see increased professional uptake. It is also looking at introducing a new paper form in the new year. Once introduced there will a transitional period to enable firms to implement.

The online service for Welsh applications will be implemented in the new year.

Customer Service

From 2 December 2019 the CTSC customer service centre will be open from 8am-8pm Monday-Friday and from 8am-2pm on Saturday.

If you continue to have issues with a probate application please contact HMCTS by email: probatefeedback@justice.gov.uk

Alternatively, contact STEP’s Policy Team and we will direct you to someone at CTSC who can assist.

STEP will continue to meet with HMCTS regularly next year to discuss future changes to the service and feedback from the industry.

Emily Deane TEP, STEP Technical Counsel

Meeting new friends and old at the STEP LatAm Conference in Sao Paulo

Enrique Martinez Guzman (right) I passed a busy few days in Sao Paulo last week at the STEP LatAm Conference, where I was representing STEP, together with our Chair, Simon Morgan TEP. The regional committee meeting and first networking reception set the tone for meeting many of our professional members, and it was a great pleasure to meet so many new faces.

The conference agenda ranged from the thought leadership of basketball legend Rick Fox on engaging with the new high net worths, and author and journalist Carlos A Montaner on populism in the new world order, through to practical case-study break-out sessions.

Among the highlights was the presentation of our second annual STEP LatAm Thesis Writing Competition to Enrique Martinez Guzman (pictured above, right) for his entry under the topic, ‘Tax consequences of transferring domestic and foreign property to a foreign structure’. Enrique will surely be a name to watch in the years ahead.

I was delighted to join Dayra Berbey de Rojas TEP to present the STEP Founder’s Award to two treasured members of the STEP family, John Lawrence TEP of the Bahamas, and Rosa Restrepo TEP of Panama.

In a show of support for the Bahamas during its recovery from Hurricane Dorian, members of the STEP LatAm Conference Committee presented a donation for relief efforts to Bahamas Minister of Financial Services Elsworth Johnson, raised from speakers who had generously waived their fees.

The final gala dinner was the perfect end to the knowledge exchange and networking, and made me reflect what a fabulous event this is and how well it supports the aims and mission of STEP in the region. It is also one that goes from strength to strength as membership in the region grows.

Our thanks to co-Chairs Ana Claudia Utumi TEP and Norberto Martins TEP, our sponsors, and the whole organising committee. I hope to see many of you again in Argentina next year. Will there be even more than this year’s 430 delegates next time? I would not be surprised.

Mark Walley is CEO of STEP

 

Trust Registration Service: clarification on reporting requirements

HMRCIt has come to STEP’s attention that in HMRC’s GOV.UK guidance on how to register a trust, the guidance about which beneficiaries need to be registered on the Trust Registration Service (TRS) differed in certain important respects from the HMRC guidance that was published on 22 November 2017.

For example, the GOV.UK guidance said: ‘When a member of a class becomes known they must be named, even if they have not benefited yet’, whereas HMRC’s 22 November 2017 guidance said: ‘…But where a beneficiary is un-named, being only part of a class of beneficiaries, a trustee will only need to disclose the identities of the beneficiary when they receive a financial or non-financial benefit…’.

STEP contacted HMRC about this discrepancy and it confirmed that the 22 November 2017 HMRC guidance ‘is still current and correctly reflects the requirement for trustees to disclose details of the identity of all named/known beneficiaries.’ HMRC has since made amendments to the GOV.UK guidance with regard to which beneficiaries must be disclosed.

HMRC also confirmed that although the GOV.UK guidance states that trusts that have registered for FATCA/CRS do not need to be registered on TRS, this is not accurate. The inaccuracy reportedly results from an incorrect transposition of guidance that was in the August 2018 Trusts and Estates Newsletter, which referred to trusts that need to report under FATCA or CRS that don’t have a Unique Taxpayer Reference (UTR). To date, however, HMRC has not amended the GOV.UK guidance in this regard and STEP will be taking up this issue with HMRC.

Imogen Davies TEP, STEP UK Technical Committee

UK government drops probate fee increase

Daniel NesbittSTEP is delighted and relieved by the news that the proposed increase in probate fees in England and Wales has been dropped.

News reports emerged early on Saturday morning (12 October 2019), to the relief of practitioners and others in the industry.

‘STEP welcomes the news that the government has decided to scrap the proposed increase in probate fees,’ STEP Technical Counsel Emily Deane TEP said. ‘This follows many months of work by STEP and many others to highlight the unfairness of the proposed increase, which amounted to a stealth tax on the bereaved. This at last brings an end to the uncertainty and worry that these proposals have caused to grieving families.’

The controversial proposals to charge higher fees emerged in November 2018. An estate of GBP300,001 – 500,000 would have had to pay GBP750, a 249 per cent increase from the current GBP215 flat fee, while the largest estates of GBP2 million and over, would have been charged as much as GBP6,000; an extraordinary 2,691 per cent rise.

The government’s reasoning behind the increase was that the probate system should fund improvements to the courts service.

The increase mooted in November 2018 was essentially a re-hash of a proposal first put forward in February 2016, which had suggested even higher fees. The Ministry of Justice (MoJ) had issued a consultation paper increasing fees for estates of over GBP50,000 with a banded fee structure depending on the estate value. Larger estates faced a 13,000 per cent rise to GBP20,000.

STEP strongly opposed the proposed fees on the basis that they would be completely disproportionate to the service provided by the probate court, and would effectively be a new tax on bereaved families (consultation paper pdf).

STEP raised concerns on the grounds of fairness, practicality and legality, in particular that the measures being introduced via the Draft Non-Contentious Probate Fees Order 2017 might be ultra vires, i.e. beyond the power of the order. We obtained a legal opinion from leading expert in public law, Richard Drabble QC, who confirmed that ‘the proposed Order would be outside the powers of the enabling Act’ (read blog).

Many other responses echoed STEP’s views, with over 97 per cent of respondents opposing the proposals.

The House of Commons Joint Committee on Statutory Instruments (SI) also questioned the legality of the proposals, given that the new ‘fees’ looked very like taxes.

Despite the opposition, the Probate Fees Order was pushed forward, and was only dropped when the then Prime Minister Theresa May called a snap election in April 2017. The proposals then re-emerged in November 2018 and while the headline charges were less extortionate than were previously proposed, the same concerns about process and fairness remained.  It remains to be seen whether these proposals will re-emerge, for a third time, at some future point. If probate fee reform does rear its head again, we hope it will be done in a fairer and more transparent way, with greater consideration for bereaved families.

Daniel Nesbitt, Policy Executive, STEP

STEP attends Global Tax Advisers Platform conference in Turin

Emily Deane TEPSTEP attended the Global Tax Advisers Platform (GTAP)’s inaugural conference ‘Tax & the Future’ in Turin, Italy last week, alongside many leading European tax advisors. The event was hosted by the foundation of Confédération Fiscale Européenne (CFE) Tax Advisers Europe, which was celebrating its 60th anniversary (press release).

The GTAP was set up by the founding organisations, CFE, Asia Oceania Tax Consultants’ Association (AOTCA) and West African Union of Tax Institutes (WAUTI) in 2014 to facilitate networking links and enhanced dialogue between tax advisors throughout the world. Panel experts, including STEP’s Deputy Chair, David Russell QC TEP discussed a variety of prominent global issues including the future of global tax policy, the longevity of the global tax profession and business models and tax sustainability.

During the conference, the founding bodies of the GTAP signed the Torino-Busan Declaration, a binding document in which they define their main purposes: shaping the contemporaneous developments in the field of global taxation and ensuring the fair and efficient operations of national and international tax systems. GTAP sets out four key short-term priorities in the Declaration which include a focus on tax for growth, sustainable tax policies, tax and digitalisation and taxpayers’ rights and certainty in a fast-paced world.

The objective of the Declaration is to regroup the joint efforts of the GTAP members around these priorities, in order to draw attention on the need for recognition of the rights and interests of taxpayers, and the role of tax professionals.

STEP was a signatory to the Declaration and continues to promote the fair and efficient operation of national and international tax systems. A copy of the Declaration will be available on the CFE website in due course.

Emily Deane TEP, STEP Technical Counsel