The Informed Trustee – one year on

Julie HutchisonIt’s difficult to believe that it’s been a whole year since the launch of The Informed Trustee, STEP’s innovative course designed to equip current and aspiring trustees with the knowledge needed to be successful charity board members, reflects editor in chief Julie Hutchison TEP.

As we hoped at the outset, the course has supported a greater proportion of women and younger people to take on a trustee role. Our figures* show that 59 per cent of The Informed Trustee intake are women, and the students over the last year had an average age of 49-50. Both of these figures show a significant difference to those in the 2017 Taken on Trust report, published by the Charity Commission and others, which records trustees as 64 per cent male, with an average age of 60-62. This shows the course is supporting positive change in charity boardrooms. As well as individual registrations, a number of charities seeking to support groups of trustees have made enquiries for block bookings . One year on, and almost 100 students later, it’s good to see this happening.

The move to greater inclusivity is significant. Board diversity is not just a box-ticking exercise. The goal is to improve the nature and quality of charity board decision-making. A diverse board is better able to minimise ‘group think,’ and a range of voices is more likely to challenge established norms.

Another factor that marks out the course from others is the multi-jurisdiction choice. This is not just a course for those from one part of the United Kingdom. We have a writing team of 17 charity specialists from Scotland, Northern Ireland, England and Wales, so that charity trustees, and those aspiring to be trustees, can find relevant course content wherever they’re based. It also reflects the cross-border reality of life in the UK, something I personally experience as a Scot who is on the finance committee of a charity in the north of England. Students can choose content based on their chosen jurisdiction; or view all for a complete picture across the jurisdictions if they prefer. The multiple-choice test at the end only shows questions from the jurisdiction selected.

With chapters covering communications and data, and a personal development pathway for trustees, the course offers a modern take on information needed by trustees in the 21st century, as well as core components on trustee responsibilities, accounts, risk management and fundraising rules, among others.

The decision to run the course online is also very significant. Students are free to dip in and out, or view course content on different devices, within the 12 month access period.

We have received some positive feedback from students. One wrote:

‘I feel it’s a valuable course for new trustees to gain knowledge, and for more experienced trustees as a refresh to ensure they are up-to-date. I would also say it is helpful for charity CEOs to access the course, so they too have an understanding of charity governance.’

Menai Owen-Jones, Trustee of ACEVO and CEO of The Pituitary Foundation.

On a personal note, launching The Informed Trustee has marked the moment in my working life when I moved from five to four days with Aberdeen Standard Capital, whose flexibility has been an enormous help as I created time for my ‘Friday life’ with The Informed Trustee and other projects. I’d also like to thank the writers from the various firms involved, for their support in creating the course content: BDO, Brodies, Chiene & Tait, Crowe, Edwards & Co, Finegan Gibson, Geldards, Hewitsons, Lindsays, Mills & Reeve, Moore Stephens, Shepherd + Wedderburn, Turcan Connell and Wrigleys.

Looking ahead, the course content is about to go through its 2019 refresh and update.  Public expectations of charities remain high; those trustees with The Informed Trustee under their belt will be better prepared for what lies ahead.

*Statistics taken from 88 per cent of students in year one of the course, who made a disclosure.

Julie Hutchison TEP is Founding Editor, The Informed Trustee

OTS inheritance tax review, second report: A welcome start, but could go further

The UK Office of Tax Simplification (OTS) has published a second report following its ‘Inheritance Tax Review: Call for Evidence’ published in April 2018.

The first part of the review focused on inheritance tax (IHT) forms, administration and guidance and the OTS published their response in November 2018.

The second part of the review focuses on various areas of the IHT regime and how they interact with one another. The report, published on 5 July 2019, contains three areas of recommendations for the simplification of inheritance tax: lifetime gifts; interactions with capital gains tax (CGT); and businesses and farms in relation to agricultural property relief (APR) and business property relief (BPR).

STEP is very keen to see the inheritance tax regime simplified due to complexities in the current system, so any proposed simplification is to be welcomed. However, we are disappointed to note that there are no recommendations in relation to the nil-rate band, the residence nil-rate band or the treatment of trusts. We believe that the government could expand upon these recommendations and look at a wholesale change in policy towards IHT.

The summary of recommendations on page 13-14 are as follows.

Key area 1: Lifetime gifts

Gift exemptions package

1. The government should, as a package:

  • replace the annual gift exemption and the exemption for gifts in consideration of marriage or civil partnership with an overall personal gifts allowance
  • consider the level of this allowance and reconsider the level of the small gifts exemption
  • reform the exemption for normal expenditure out of income or replace it with a higher personal gift allowance

Gifting period and taper package

2. The government should, as a package:

  • reduce the 7 year period to 5 years, so that gifts to individuals made more than 5 years before death are exempt from Inheritance Tax, and
  • abolish taper relief 

3. The government should remove the need to take account of gifts made outside of the 7 year period when calculating the Inheritance Tax due (under what is known as the ’14 year rule’).

Liability for payment and the nil-rate band

4. The government should explore options for simplifying and clarifying the rules on liability for the payment of tax on lifetime gifts to individuals and the allocation of the nil-rate band.

Key area 2: Interactions with Capital Gains Tax

5. Where a relief or exemption from Inheritance Tax applies, the government should consider removing the capital gains uplift and instead provide that the recipient is treated as acquiring the assets at the historic base cost of the person who has died.

Key area 3: Businesses and Farms APR/BPR

6. The government should, as a package:

  • consider whether it continues to be appropriate for the level of trading activity for BPR to be set at a lower level than that for gift holdover relief or entrepreneurs’ relief
  • review the treatment of indirect non-controlling holdings in trading companies, and
  • consider whether to align the Inheritance Tax treatment of furnished holiday lets with that of Income Tax and Capital Gains Tax, where they are treated as trading providing that certain conditions are met

7. The government should review the treatment of limited liability partnerships to ensure that they are treated appropriately for the purposes of the BPR trading requirement.

8. HMRC should review their current approach around the eligibility of farmhouses for APR in sensitive cases, such as where a famer needs to leave the farmhouse for medical treatment or go into care.

9. HMRC should be clearer in their guidance as to when a valuation of a business or farm is required and, if it is required, whether this needs to be a formal valuation or an estimate. Other areas of Inheritance Tax.

10. The government should consider ensuring that death benefit payments from term life insurance are Inheritance Tax free on the death of the life assured without the need for them to be written in trust. 

11. The government should review the POAT rules and their interaction with other Inheritance Tax anti-avoidance legislation to consider whether they function as intended and whether they are still necessary.

Useful links

Emily Deane TEP, STEP Technical Counsel

EW to extend online probate service

Daniel NesbittThe online system for England and Wales probate applications is to be extended further, after a Statutory Instrument was laid before the House of Lords last week.

The Non-Contentious Probate (Amendment) Rules 2019 updates previous legislation to allow solicitors and probate practitioners to apply for grants of probate without an invitation from a registry. It also modernises certain definitions, and corrects minor errors, in the Non-Contentious Probate Rules 1987.

As the legislation is a negative instrument, no vote has been scheduled to take place in parliament, so unless a motion to stop it is tabled within 40 days, it will automatically become law, and is due to come into force on 1 October 2019.

The full text of the Statutory Instrument, along with further explanatory information, can be found here: The Non-Contentious Probate (Amendment) Rules 2019 (PDF) .

The changes are unrelated to the government’s Non-Contentious Probate (Fees) Order 2018, which has still not been scheduled for a final vote in the House of Commons.

 

Daniel Nesbitt, Policy Executive, STEP

EW probate delays and disruption: an update

Emily Deane TEPSTEP met HM Courts & Tribunals Service (HMCTS) this week, together with The Law Society and Solicitors for the Elderly, to obtain an update on the delays and disruption to the Probate Service in England and Wales.

HMCTS gave us the following update on work undertaken since our last meeting on 14 May:

  • It has taken on 30 new staff since the transfer to the new system.
  • It currently has 180 employees working across the Probate Service.
  • It has recruited additional legal advisors with probate experience.
  • The registry with the most significant backlog is Winchester, which is sharing its work with other registries.
  • HMCTS is issuing approximately 20,000 grants a month, of which 12-13,000 are from practitioners
  • It is dealing with grants in date order, oldest first.
  • It does not prioritise grants according to urgency, and will not deal with applications more quickly by request.
  • It is entering caveats into the system on the day of receipt.
  • It will not refund probate fees due to delay.
  • It will issue grants of probate in approximately six to eight weeks.

STEP’s request for waived interest, or longer timeframe

STEP is aware that the delays are making it difficult for members to pay IHT on estates, since they cannot gain access to funds until the grants have been issued.

STEP has asked HMCTS to consult with HMRC on this issue, to see if it will waive the interest accrued on outstanding IHT, or permit a longer timeframe for paying by instalments. We stressed that this would help ease some of the time pressure and negligence concerns of our members, and generate some much-needed goodwill.

HMCTS anticipates that once its new digital system is up and running, there will be less scope for administrative and human error. Users will be able to track applications and make corrections online.

It will continue to accept paper applications for those less able to deal with applying online.

  • HMCTS is holding a webinar to demonstrate the new online system for professional users on 4 July.

STEP will be meeting HMCTS again in August for a further briefing.

Emily Deane TEP, STEP Technical Counsel

STEP meets HMCTS to discuss EW probate delays

Emily Deane TEPSTEP met HM Courts & Tribunals Service (HMCTS) this week to discuss the backlog of applications and continued disruption to the Probate Service.

HMCTS representatives explained its old database needed to be upgraded, which had prompted the decision to move to digital software. The new system was scheduled to go live in January but was delayed until 25 March following technical glitches. HMCTS explained that it had not anticipated this level of issues with the technology, in conjunction with such a high spike in probate applications.

The following points were raised:

  • HMCTS has brought in 15-20 more people for the national office; a 10-15 per cent increase in those working on the backlogged applications.
  • The remaining probate registries will be closed over the next 12 months. Staff will be given six months’ notice and HMCTS expects to help them all find other roles in the civil service.
  • The new digital system is being delivered from the Courts and Tribunals Service centre based in Birmingham. HMCTS is keen to get more solicitors using the digital pilot, and will be looking for volunteers shortly. This pilot will enable solicitors to issue up to 250 applications per week.
  • Cases are taking up to 30 working days to be processed at the moment.
  • The Probate Registry will publish regular bulletins to improve communication with the public.
  • HMCTS assures users its existing Registry staff are working hard to get through the applications, and issued 960 grants on a single day this week.
  • HMCTS requests users not to chase applications, as they are being dealt with by date order.
  • HMCTS is currently up to date with caveats.

STEP expressed its disappointment that the court service was not better equipped to deal with the spike in applications. The Ministry of Justice had issued reassurances earlier this year that the court service was prepared for an increase due to the proposed increase in probate fees. STEP noted HMCTS was ill prepared to merge the new online system, change the format of the certificate, close registries and cut staff all at once. 

STEP repeated its suggestion that HMCTS should change the fee implementation date to the date of death for applications, to relieve the pressure and generate some goodwill amongst the industry and the public. The idea should be seriously considered, given pressure on practitioners and members of the public is considerable, and is causing a great deal of anxiety. 

STEP has also provided feedback to HMCTS on errors in the new-style grants that members have received, together with feedback on how they could be improved. We have explained why the will should continue to be annexed to the grant of probate, and the difficulties caused if it is not.

The Statutory Instrument to increase probate fees is still waiting to be scheduled for approval in parliament, and we will continue to monitor and report any developments (latest update).

Emily Deane TEP, STEP Technical Counsel

England & Wales probate fees: an update

flowersThis Blog will be updated with developments on the Non-Contentious Probate Fees Order 2018 as they occur.

Background and details on the proposals, including the fee structure, can be found here.

10 May 2019: What’s happening with the Probate Fees order?

7 February 2019:

A House of Commons Delegated Legislation Committee has voted 9 to 8 in favour of progressing the draft Non-Contentious Probate (Fees) Order 2018 to the Commons for approval.

Lucy Frazer MP, the Minister responsible for the legislation, confirmed during her speech that the changes will be introduced in April (date yet to be confirmed) and that guidance on how to pay fees will be published before the changes take effect.

The next stage is for the Order to go to the House of Commons for approval. The date for this has not yet been announced.

31 January 2019:

Probate fees due to go before House of Commons Delegated Legislation Committee on 7 February at 11.30am (more information).

Background notes

The Committee’s role is to debate the merits of the statutory instrument, instead of an extended debate in the House of Commons itself.

The proceeding will effectively be like a miniature session of the House of Commons (Lucy Frazer MP will speak as the minister responsible and then the Opposition spokesperson, followed by backbenchers). The Committee cannot block the measure from proceeding to a vote in the House of Commons, but at the end of the debate it will vote on whether the Committee has considered the Instrument. Other MPs can speak, but only those on the Committee will be able to vote at the end.

Once it has cleared this stage the instrument goes to the House of Commons for a vote soon afterwards, in this case, probably the following week.

9 January 2019:

STEP received a reply to a letter to Lucy Frazer QC MP, the Parliamentary Under-Secretary for Justice and Minister responsible for the Non-Contentious Probate Fees Order 2018, which set out our concerns with the proposed changes. The reply restated the government’s rationale for introducing the measure and refuted the assertion that it represented a tax rather than a fee covering the cost of a service. You can read the full reply here.

18 December 2018:

The Non-Contentious Probate Fees Order 2018 was debated in the House of Lords on 18 December 2018. As an affirmative measure it required a majority to pass. The House stopped short of rejecting the Order, but put on record its concerns, with the following Motion to Regret moved by Lord Beecham:

‘This House regrets that the draft Order will introduce a revised non-contentious probate fee structure considered by the Secondary Legislation Scrutiny Committee to be “so far above the actual cost of the service [it] arguably amounts to a stealth tax and, therefore, a misuse of the fee-levying power” under section 180 of the Anti-social Behaviour, Crime and Policing Act 2014; and that this Order represents a significant move away from the principle that fees for a public service should recover the cost of providing it and no more.’

The next stage for the Non-Contentious Probate Fees Order 2018 is to be scrutinised by a House of Commons Delegated Legislation Committee. No date has been set for this and it will depend on other business in front of MPs. STEP will continue to monitor the situation and provide updates where appropriate.

6 December 2018:

The Joint Committee on Statutory Instruments scrutinised the Non-Contentious Probate (Fees) Order 2018 (see the Fortieth Report of Session 2017–19 (PDF)) and drew it to parliament’s special attention:

The Committee draws the special attention of both Houses to this draft Order on the grounds that, if it is approved and made, there will be a doubt whether it is intra vires, and that it would in any event make an unexpected use of the power conferred by the enabling Act’

The other committee tasked with examining secondary legislation, the House of Lords Secondary Legislation Scrutiny Committee, in the 6th Report of Session 2017–19 (PDF) also drew parliament’s attention to the measure, calling it a ‘stealth tax’.

More detail on these developments can be found here.

Daniel Nesbitt, Policy Executive, STEP 

Cross-border protection of vulnerable adults in Europe under discussion

Emily Deane TEPSTEP took part in the EC-HCCH Joint Conference on the Cross-Border Protection of Vulnerable Adults last week in Brussels, to discuss the ratification of the Hague Convention of 13 January 2000 on the International Protection of Adults (the Hague Convention) at EU and global level and the possible future EU legislative initiatives in this field.

The event, organised jointly by the European Commission and The Hague Conference on Private International Law, brought together legal practitioners, judges, academics and government officials who deal practically with the challenges associated with the cross-border protection of vulnerable adults in Europe and beyond.

STEP’s EU cross-border expert Richard Frimston TEP joined panellists to discuss the need for an international and regional legal framework for the cross-border protection of vulnerable adults from the perspective of organisations providing services and/or protection. Richard was accompanied by representatives from Dementia Alliance and Alzheimer’s Disease International, AGE Platform Europe, CEOs in global banking and the President of the International Union of Notaries (UINL).

Richard is the coordinator of the Protection of Adults in International Situations Project Team and spoke on behalf of STEP as a member of the Board and Co-Chair of the Public Policy Committee. He delivered some pertinent points on the need for a protective framework for our increasingly aged society and those living with disabilities, and their supportive loved ones, including family members and guardians, in accordance with their human rights.

He expressed concern with powers of representation which are generally not measures of protection, unless confirmed with sufficient legal process, and the manner of exercise of such powers of representation being governed by the law of the state in which they are exercised. He argued for more balance between the protection and autonomy of individuals, and called for improved methods of powers of representation to be accepted cross-border.

The conference emphasised that this work is invaluable since the Hague Convention determines which courts have the jurisdiction to take protection measures, and which law is to be applied in circumstances when a vulnerable person requires it.

Importantly it establishes a system of central authorities to cooperate with one another and locate vulnerable adults, as well as providing information on the status of vulnerable persons to other authorities. Although much work has been carried out already, more could be done to improve the quality of European law, increase practical guidance in the European legal field and enhance European legal integration.

STEP is asking members for any practical examples of when they have encountered difficulties in practice in relation to England and Wales not having ratified the Hague Convention. Please email STEP’s policy team if you have any feedback on this issue, at step@policy.org.

STEP will keep you updated on the outcome of these discussions.

Emily Deane TEP is STEP Technical Counsel

Committee draws probate fees legislation to UK parliament’s special attention

Daniel NesbittUPDATE 07/12/2018

The Joint Committee on Statutory Instruments’ full report (PDF) has now been published and includes the following conclusion:

The Committee draws the special attention of both Houses to this draft Order on the grounds that, if it is approved and made, there will be a doubt whether it is intra vires, and that it would in any event make an unexpected use of the power conferred by the enabling Act.

The Committee reached the same view regarding the government’s attempt to raise probate fees in 2017. Underlining this position, the report notes that the Ministry of Justice’s arguments did not ‘dispel the Committee’s doubts about vires expressed in its report on the 2017 Order’.

The depiction of the changes as a ‘fee’ was also challenged by the Committee, which felt the new banded system bore the characteristics of a tax. The report noted that the higher payments were disproportionate to the actual cost of the service and that the measure represented what was in effect a type of stamp duty on probate applications.

The views expressed by the Committee match the legal opinion STEP obtained from Richard Drabble QC in response to the 2017 proposals.

ORIGINAL BLOG 6/12/2018

The Joint Committee on Statutory Instruments has scrutinised the Non-Contentious Probate (Fees) Order 2018, and drawn it to parliament’s special attention.

The committee is responsible for examining the technical aspects of secondary legislation; ensuring that the drafting is correct, clear and within the powers granted by the act under which they are being made. Although it can highlight measures it believes to be of concern, the Joint Committee cannot block or amend legislation itself.

The other committee tasked with examining secondary legislation, the House of Lords Secondary Legislation Scrutiny Committee, in the 6th Report of Session 2017–19 (PDF) has also drawn parliament’s attention to the measure, calling it a ‘stealth tax’.

The next stage for the order in the House of Lords is for it to be voted on; and as an affirmative measure it will require a majority to pass. In the House of Commons a delegated legislation committee will be convened to scrutinise the legislation.

The Joint Committee’s full report on the order, setting out its detailed views, is yet to be published but it is expected to be released tomorrow (Fri 7 Dec 2018).

STEP will continue to monitor the situation and will provide updates where appropriate.

Daniel Nesbitt, Policy Executive, STEP 

House of Lords report criticises HMRC’s treatment of taxpayers

HMRCThe House of Lords Economic Affairs Committee has found that HMRC is failing to guarantee fairness for taxpayers by failing to differentiate between users of sophisticated tax avoidance schemes and ordinary citizens who break the law through uninformed or naive actions.

In its report, The Powers of HMRC: Treating Taxpayers Fairly (PDF), the committee found that declining resources had left HMRC unable to tackle tax avoidance and evasion whilst ensuring taxpayers are treated fairly. Highlighting a number of areas where the HMRC’s conduct appeared disproportionate, the committee recommended further work take place to ensure there is sufficient oversight of the department.

The report heavily criticised the process HMRC uses to introduce new powers, noting that too often specific solutions were identified by the department before any consultation on the wider objectives. The committee recommended that HMRC listen more carefully to the views of tax and business experts during future consultations, to ensure new legislation is properly targeted.

The committee said new measures on offshore time limits should be withdrawn, pending further discussions between HMRC and tax professionals. The plans would require those with offshore elements to their tax affairs to keep records for up to 12 years to deal with HMRC questions. Any new legislation should be more proportionate and targeted than the current plans allow.

There was heavy criticism for proposed new civil information powers, which would allow HMRC to seek information from third parties without the agreement of the tax tribunal, or the relevant taxpayer. The committee said HMRC had failed to offer a convincing rationale for the change, and recommended it be withdrawn ahead of further consultation.

The committee also noted that the government has a responsibility to give HMRC sufficient funding to be fair to taxpayers. The Treasury is recommended to assess whether the department is adequately resourced as part of the 2019 Spending Review.

The next stage in the process is for the government to respond to the committee’s findings. STEP will monitor the situation and provide updates on any further developments.

Daniel Nesbitt, Policy Executive, STEP 

OTS report supports STEP’s calls for simplification

Simon HodgesThe UK Office of Tax Simplification (OTS) has published its first report of its review into inheritance tax (IHT).  The report, in which STEP is widely quoted, finds that the process for completing IHT forms is too complex and old fashioned, and that too many people are having to fill them in unnecessarily.

The OTS is undertaking this two-part review of IHT in response to the request from the Chancellor of the Exchequer in January 2018. Since the review was announced, STEP has been in regular contact with the OTS. STEP’s response to the consultation was one of more than 3,500 to be submitted to the OTS, with the overwhelming majority seemingly negative about the IHT process.

The report concentrates on the concerns and administrative issues facing the public and professional advisors when confronted with the IHT process and related forms. It includes a number of positive recommendations, such as potentially reducing or removing the requirement to submit forms for smaller or simpler estates, especially where there is no tax to pay; having standardised requirements; and automating the system by bringing it online.

STEP has long argued that the IHT system is too complex, and that any moves to simplify the process, particularly through the implementation of a digital system, will be beneficial for bereaved families.

The Chancellor will now review the OTS recommendations before deciding whether to implement or ignore them. The key recommendation from the OTS, that ‘The government should implement a fully integrated digital system for inheritance tax, ideally including the ability to complete and submit a probate application,’ will be the mostly keenly watched, not least by STEP members.

As the report notes, inheritance tax and probate are closely linked, so it is timely that the OTS recommends that HMRC and HM Courts and Tribunals Service (HMCTS) liaise on streamlining the payment and probate process. As has been widely reported, legislation currently before the UK parliament would see a radical change to the probate fee system in England and Wales, and will mean an increase in fees for the vast majority of families. This approach has already been criticised in the House of Lords, and this latest OTS report further highlights the need to simplify the tax system surrounding death, rather than complicate it further.

We will keep members updated.

Simon Hodges is Director of Policy at STEP