GDPR Roundtable

Emily Deane TEPSTEP’s GDPR working group recently hosted a roundtable event that enabled representatives from professional bodies, including the Law Society, ICAEW and CIOT, to update each other on their progress in relation to GDPR implementation. It is widely felt by the private client industry that when the legislation was drafted it was not designed with trust and estate practitioners in mind and there are some significant grey areas in practice.

Key issues that continue to be an industry concern discussed were:

  • How the GDPR applies to lay trustees and personal representatives.
  • How non-legal advisors process special category data.
  • How the GDPR impacts upon international transfers.
  • Queries in relation to joint data controllers and confidentiality.
  • GDPR and its impact upon engagement letters.
  • GDPR and its impact upon attorneys and deputies.
  • Erasure of files and filing system requirements.

STEP’s working group is in the process of preparing a joint paper that it will submit to the Information Commissioner’s Office (ICO) identifying the practical issues that have arisen for trust and estate practitioners. We hope that the ICO will be able to address some of the gaps in the guidance and legislation.

STEP has scheduled another roundtable in February 2019 to further discuss these issues and aims, to provide STEP members with a best practice position and guidance in due course. In the meantime, STEP has published an update to its briefing note on the GDPR, listed below.

Please note that STEP will be publishing a webinar in January 2019, recorded by the chair of STEP’s GDPR working group, Edward Hayes TEP of Burges Salmon, that will offer some interim guidance on the application of the GDPR to trust and estate practitioners.

Emily Deane TEP is STEP Technical Counsel

What’s happening in England and Wales?

Rita Bhargava TEPAs I come to the end of my term as Chair of STEP’s England and Wales Regional Committee, I wanted to reflect on some of the developments since I took on the role in January 2017.

Raising our profile

Internally at STEP, much of the emphasis over my time as Chair has been on raising STEP’s profile. From the ‘Talk to a TEP’ public-awareness campaign and accompanying website, advisingfamilies.org, which has seen 130,000 visits and 15,000 ‘Find a TEP’ searches since its launch 18 months ago, to the ‘Grow with STEP’ member recruitment campaign launched earlier this year, which has led to a 250 per cent increase in visits to the ‘Join’ section of the STEP website. It’s great that resource is being put into these important projects, which should help build greater awareness of STEP – ultimately benefiting all members.

Battling probate fees

Externally, my time as Chair has been dominated by political turmoil, the Trust Registration Service and of course, probate fees. The latter has once again reared its head in recent months, and like many of you, I am disappointed the government is again threatening to increase probate fees to extortionate levels that are wholly disproportionate to the costs involved. It has failed to take into account any of the concerns raised last year when this was first mooted. Ironically, it comes at a time when the government is introducing online application processes for probate, and removing the need to swear papers, making the cost of an application cheaper and more efficient. STEP has once again been active in highlighting concerns around the proposed measures, and we are pleased to see our arguments echoed by the House of Lords committees that review Statutory Instruments, which have both stated that the proposals amount to a ’stealth tax‘ and a ’misuse of the fee-levying power’. We hope these concerns are enough to stop the measure being approved as it is debated by parliament in the coming weeks.

Looking ahead

So what’s coming up over the next few months?

Last month, branch chairs from all over the region gathered for the England and Wales Branch Chairs’ Assembly. Over 20 branches were represented, and it was wonderful to meet so many branch chairs. It was a great opportunity to discuss how to increase engagement with members, how to support branches, and to ask branches what they expect from STEP. It was also the perfect time to hear about work being done by STEP, in particular the Member Journey project, which involves examining the experience of a member from their first contact with STEP and throughout their membership to see where improvements can be made. This is an important and far-reaching project, which will be worked on throughout 2019.

Another big project that will be launched shortly is the all-new STEP Directory. 2018 saw the last hard-copy STEP Directory and Yearbook, and in January 2019 STEP will launch the new online-only Directory. The new Directory will build on the existing online member-search facility, with upgraded functionality and new features, such as a Firm Search. Members will have access to an extensive and up-to-date network of firms and practitioners for referral and business development, and clients will be able to search for qualified professionals and firms. As the new Directory will be extensively promoted throughout 2019, you will want to make sure your contact information is current, and your profile properly showcases your expertise and experience. Log on now to update your details.

Separately, work is also underway to upgrade the STEP website to make it more user-friendly; to continue to build on the success of STEP’s Employer Partnership Programme; and to develop STEP’s qualifications so that students can tailor elements of the STEP Diploma so that it is more relevant to their specific areas of practice.

Sadly, I will be stepping down as Chair at the end of December and take this opportunity to welcome Denese Molyneux TEP as Chair from 2019 and wish her every success. I would like to thank all the staff at STEP for their hard work, dedication and continued support.

Finally, may I wish you all a merry holiday season and a peaceful New Year.

 

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

UK Labour party tables motion against probate fees rise

Houses of Parliament, LondonThe UK government’s plan to increase probate fees has been criticised by the opposition in the House of Lords.

Labour’s Justice Spokesperson, Lord Beecham, has tabled the following motion of regret in relation to The Non-Contentious Probate (Fees) Order 2018:

‘Lord Beecham to move that this House regrets that the draft Non-Contentious Probate (Fees) Order 2018 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 Antisocial 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.’ 6th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A).

As statutory instruments cannot be amended, this type of measure can put parliamentarians’ disapproval on record, if passed. Motions to regret are usually voted on at the same time as the legislation.

The probate fees order is currently awaiting scrutiny by the Joint Committee on Statutory Instruments. As noted by Lord Beecham’s motion, the House of Lords Secondary Legislation Scrutiny Committee has already voiced its concern [PDF] about the proposals.

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

Daniel Nesbitt, Policy Executive, STEP 

GDPR – Invitation to Members

Emily Deane TEP

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

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

Tell us your views

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

Issues that have been identified include:

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

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

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

Emily Deane TEP is STEP Technical Counsel

The Gift Aid tax gap

Emily Deane TEPSTEP is working with HMRC on a Gift Aid working group set up to explore options to maximise the amount of Gift Aid that charities can claim on donations, together with ways of increasing customer understanding of the system and how it works. HMRC is also investigating opportunities to improve the way that Higher Rate Relief is claimed; and whether it works as intended, is future-proof and provides the relief in the best way possible.

HMRC began the process by instructing an external research company to look into charitable giving and the use of Gift Aid. Its specific objectives were to estimate the value of the Gift Aid tax gap and unclaimed Gift Aid, and develop an understanding of correct and incorrect behaviours among donors.

The report has found that 25 per cent of the value of donations made in the 12 months prior to interview did not have Gift Aid added to them where the donor was eligible, contributing up to GBP560 million to the value of unclaimed Gift Aid. This represents potential missed income for charities and is generated by eligible donors who only sometimes (30 per cent), or never (18 per cent), add Gift Aid to their donations. It is mostly driven by a lack of opportunity for donors to add Gift Aid, and to a lesser degree, by failing to understand what Gift Aid is, or where they are eligible to add it.

The report also finds that 8 per cent of the value of donations had Gift Aid incorrectly added to them by ineligible donors, generating a Gift Aid tax gap of up to GBP180 million. This is caused by ineligible donors who always (5 per cent) or sometimes (10 per cent) add Gift Aid, partly where they do not understand the relief, and partly where they misunderstand what it means to be a taxpayer. This has resulted in donors who are not taxpayers attempting to add Gift Aid, where they are not eligible to do so.

Better understanding of these issues would lead to a drop in Gift Aid claims among ineligible donors, and a rise in claims among eligible donors. It was recommended to provide information about (1) Gift Aid eligibility criteria (ie clarifying what it means to be a UK taxpayer, and that the donor must be one to add Gift Aid to their donation) at every opportunity, and (2) the benefits of Gift Aid at the point of donation; to help effect the change.

The report, Charitable giving and Gift Aid research, is published today, accompanied by a press release issued by HM Treasury and HMRC.

If you have any questions or suggestions please email STEP’s Technical Counsel – Emily.Deane@step.org.

Emily Deane TEP is STEP Technical Counsel

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

Improving HMRC guidance on Gift Aid donor benefits

Emily Deane TEP

STEP has been invited to join an HMRC Working Group which will review the guidance on Gift Aid donor benefits. The Working Group will review the interpretation of the rules that apply to donor benefits within the HMRC guidance covered by Chapters 3.18 to 3.25.

Objectives

Representatives have been selected from the charity sector, HMRC and HMT and the group held its first meeting hosted by HMRC last week. The group has initially identified the need to include the valuation of certain benefits for application of the relevant value test; the meaning of the ‘in consequence’ rule; and the correct application of the split payment rule.

The objective of the working group is not to amend the legislation or policy but simply to clarify and improve the guidance. HMRC has confirmed that proposed changes to the guidance cannot extend, override or supplement any statutory provisions.

HMRC is keen to mitigate the confusion and litigation that can ensue when the guidance is misinterpreted by charities and donors, for example, when gift aid contributions are misunderstood from the donor’s perspective which can lead to HMRC demanding large refunds. The overriding objective of the working group is to enhance the guidance to make it work as efficiently as possible and promote best practice within the sector.

Tell us your views

We would like to invite STEP members to provide examples of how the guidance could be improved in order to clarify interpretation of the existing legislation. You may wish to provide examples of how the guidance can be misinterpreted or, alternatively, mark up the guidance to show suggested changes.

Outcome

Once HMRC has collected the proposed changes from the working group representatives they will refer the guidance to HMRC’s solicitors for review prior to publication. The estimated date for publication is early 2019.

We would very much value your input. Please send your feedback to  policy@step.org by 15 November 2017.

Emily Deane TEP is STEP Technical Counsel

Foreign domiciliaries – what next?

UK passport

Early in July, the UK government offered some clarity about what will happen to its proposed changes to foreign domiciliaries, which were dropped from the Finance (No.2) Bill 2017 in the rush to pass legislation prior to this year’s general election.

Following the election and the Queen’s Speech, a Ministerial Statement announced that, after the summer recess, everything that did not make it into the eventual Finance Act 2017 would be reintroduced in a second Finance Bill 2017.

Briefly, the main changes are:

  • If a person is born in the UK with a UK domicile of origin, and is resident in the UK during a tax year, he or she will be considered to be domiciled in the UK for all tax purposes.
  • Anyone who has been resident in the UK for at least 15 of the previous 20 tax years will be judged to be a long-term resident and domiciled in the UK for all of his/her tax purposes.
  • Inheritance tax will be extended to cover:
    • any UK residential property owned by foreign domiciliaries via a non-UK company or partnership;
    • any UK trust settled by foreign domiciliaries via a non-UK company or partnership; and
    • a loan, if the funds are used for the acquisition, maintenance or enhancement of an interest in UK residential property, as well as the collateral on such a loan.

Reliefs and protections

In addition, the government plans to introduce several accompanying reliefs and protections, including:

  • Capital gains tax (CGT) rebasing relief on assets held directly by individuals applying to income gains from non-reporting funds, as well as on capital gains on foreign assets.
  • A cleansing relief for individuals who have been remittance basis users in at least one tax year between 2008/2009 and 2016/2017 with mixed-fund bank accounts. This measure excludes formerly domiciled residents.
  • The protection of settlor-interested trusts, as long as the settlor is a long-term resident of the UK, through the continued disapplication of the capital gains tax anti-avoidance provision that would otherwise have levied a charge on the trust’s foreign income.
  • A small number of relaxations to Business Investment Relief.

The government has stated that there are no plans to alter the implementation dates of any of the measures. If they are passed, they will represent the most significant set of changes to the rules regarding foreign domiciliaries since 2008.

Time scales

Given that Parliament does not return until 5 September, rising on 14 September for the party conference season, it is unlikely that MPs will be able to properly debate the second Finance Bill 2017 before October. If so, the legislation would likely receive Royal Assent in late November – at the earliest.

Given the limited time MPs will have to debate and pass the Bill, and the important changes it will bring, STEP will carefully monitor developments as they happen, and provide updates on the legislation’s progress.

Daniel Nesbitt, Policy Executive, STEP 

STEP UK News Digest wrap-up – fourth quarter 2015 top stories

A_very_small_house

Will disputes and tax matters, often involving property, were at the forefront of our readers’ minds, according to the top ten news items from the UK. Here they are again:

Lost challenge to will costs litigant dearly: A Berkshire woman who lost her legal challenge to her natural father’s will may have to pay legal costs far higher than the amount she was left in the will.

Charities defeat family’s claim for probate of home-made will: Four charities named as Dorothy Whelen’s residuary beneficiaries have defeated a claim that she executed a second home-made will leaving her entire estate to a friend.

UK Autumn Statement may target tax reliefs: Most tax specialists predict it will be harsher than previously expected, for two reasons. First, the Chancellor has failed to push through legislation cutting tax credits for the low-paid, so that the public sector borrowing requirement will be larger than planned at the time that Finance Bill (no.2) 2015 was drafted.

Cash extracted from wound-up firms to be taxed as income: Next year’s Finance Bill will impose an income tax charge on owners of close companies who liquidate the company in order to share out its assets. At the moment, distributions on liquidation and similar events are taxed as capital gains rather than income.

Inheritance tax (‘IHT’) and trusts – tips and traps: Discretionary trusts, whenever created, and most other forms of lifetime trusts (other than bare trusts and qualifying trusts for disabled persons) established on or after 22 March 2006 are subject to what is known as the ‘relevant property’ regime which imposes a charge to IHT on the capital value of the trust assets on each 10 year anniversary of the creation of the trust and ‘exit’ charges when capital is distributed or property otherwise ceases to be relevant property.

Survey says competition leads to lower price of basic wills and estate administration: A survey of 60 will-writers has found that the average price of a standard single will in the UK fell to GBP83 this year, with the average price quoted by law firms and solicitors at GBP118 (falling from GBP124 in the last year).

Judge bars ex-wife from further litigation: An English family court judge has imposed an extended civil restraint order on an ex-wife to stop her bringing further ‘bitter and intense’ litigation against her former spouse.

HMRC waives ‘correct and complete’ declaration for agents’ online IHT returns: Practitioners who submit an online inheritance tax (IHT) return on behalf of a client no longer need to provide a declaration that the information is ‘correct and complete to the best of their knowledge and belief’.

Second home buyers hit with stamp duty surcharge: Yesterday’s Autumn Statement announced that buyers of ‘additional properties’ will be charged an extra 3 per cent rate of stamp duty land tax (SDLT) from next April. The phrase ‘additional properties’ explicitly includes second homes as well as residential lets. The 3 per cent surcharge will be added to the usual SDLT rate for the property’s price band.

Inheritance Tax: main residence nil-rate band and the existing nil-rate band: Individuals with direct descendants who have an estate (including a main residence) with total assets above the Inheritance Tax (IHT) threshold (or nil-rate band) of £325,000 and personal representatives of deceased persons.
 

The STEP Industry News Digests provide a round-up of relevant industry news for trust and estate practitioners and other professionals in the wealth management sector. They provide brief summaries of topical news stories gathered from news providers internationally, providing a quick reference for busy practitioners to all the relevant news and issues. The News Digests also feature job listings from our recruitment site and list local STEP branch events and conferences. STEP’s digest services include twice weekly UK and Wealth Structuring (international) editions as well as a bi-weekly North America Digest focusing on the US, Canada and Mexico, and a Latin America Digest.

To subscribe to STEP’s digest services you will need to first register here: www.step.org/register.

Follow @STEPSociety for regular updates.

STEP International News Digest wrap-up – fourth quarter 2015 top stories

transparency
Readers of our STEP International News Digests showed a marked interest in the OECD’s Common Reporting Standard (CRS) during the fourth quarter of 2015. In case you missed them, here are the top ten items:

Barclays fined heavily for due diligence failure: The UK’s Financial Conduct Authority (FCA) has fined Barclays Bank GBP72 million for failing to conduct proper due diligence checks on a group of ultra-high-net-worth clients who used the bank to move GBP1.88 billion of funds in 2011 –2012.

UK sets out beneficial ownership register demands on territories: The UK Foreign and Commonwealth Office (FCO) has set out exactly what it requires of its Overseas Territories regarding transparency of company beneficial ownership. The demands stop short of a public central register, but do require that companies or their beneficial owners must not be alerted to the fact that an investigation is under way.

UK professional bodies challenge new benefits charges on non-doms: A group of professional associations have questioned the UK government’s plans for significant reform of the taxation of non-domiciled residents, in particular the ‘dry benefits’ charge to be imposed on settlors of offshore trusts.

CRS by jurisdiction: A jurisdiction-specific overview of the steps taken and choices made by jurisdictions in the context of implementing the Standard. The overview table below will show the current state of implementation of all committed jurisdictions in a single table. In case you would like to have more detailed information about the current state of implementation of the Standard in a particular jurisdiction, you will be able to access jurisdiction-specific legislation by clicking on the green tick relating to that jurisdiction.

BVI to require compulsory register of directors: British Virgin Islands premier Orlando Smith has announced some legislative amendments to improve the BVI authorities’ access to company beneficial ownership information. In a speech to the Assembly on Monday, Smith noted that the BVI, as well as other British Overseas Territories and Crown Dependencies, are under pressure from London to introduce publicly available central registries of the beneficial owners of companies.

Overseas Territories head off UK’s demand for central registers: Britain’s Overseas Territories appear to have successfully resisted the UK’s demands that they set up central registers of company beneficial ownership, directly accessible by the UK authorities.

Have you sorted your LEIs?: The Financial Stability Board is probably the most powerful body nobody has heard of. It was set up by the G20 after the financial crisis and is drawn largely from central bankers. One of the issues it has focused on is effective monitoring of counterparty risk in financial markets.

CRS-related FAQs (pdf): The OECD has published a summary of 41 jurisdictions’ position regarding the Common Reporting Standard (CRS) for automatic exchange of financial information. It has also issued an updated list of CRS-related frequently asked questions, including one concerning the time allowed to verify a self-certification.

Automatic Exchange: The Automatic Exchange of Information (AEOI) portal provides a comprehensive overview of the work the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes in the area of the automatic exchange of information, in particular with respect to the Common Reporting Standard.

Russian Federal Tax Service publishes draft blacklist of states that do not exchange information with Russia (pdf): On October 23, 2015 the Russian Federal Tax Service published on the official web-site for information disclosure (regulation.gov.ru/) the first list of states and territories that do not exchange information for tax purposes with Russia or information exchange with which did not meet Russia’s expectations (the “blacklist”). The blacklist may become effective from January 1, 2016.

 

The STEP Industry News Digests provide a round-up of relevant industry news for trust and estate practitioners and other professionals in the wealth management sector. They provide brief summaries of topical news stories gathered from news providers internationally, providing a quick reference for busy practitioners to all the relevant news and issues. The News Digests also feature job listings from our recruitment site and list local STEP branch events and conferences. STEP’s digest services include twice weekly UK and Wealth Structuring (international) editions as well as a bi-weekly North America Digest focusing on the US, Canada and Mexico, and a Latin America Digest.

To subscribe to STEP’s digest services you will need to first register here: www.step.org/register.

Follow @STEPSociety for regular updates.