How will the UK budget affect STEP members?

Budget red boxUK Chancellor Philip Hammond delivered the final budget before the UK leaves the EU yesterday. Here are some of the key measures that may affect STEP members.

Individuals

Income tax: the personal allowance threshold, the rate at which people start paying income tax at 20 per cent, is to rise from GBP11,850 to GBP12,500 in April 2019. The higher rate income tax threshold, the point at which people start paying tax at 40 per cent, is to rise from GBP46,350 to GBP50,000 in April. Subsequently, the two rates will rise in line with inflation.

Entrepreneurs’ relief: changes to the qualifying terms. Disposals of shares only qualify where the shares entitle the holder to 5 per cent of any dividends and 5 per cent of assets on a winding up. In addition, for disposals after 6 April 2019, assets will need to have been held for a period of two years (rather than one year).

Principal private residence relief: the period of deemed occupation at the end of a period of ownership is being reduced from 18 months to nine months with a withdrawal of the rental relief element in all circumstances, except where the owner co-occupies with the tenant. The principle that the relief should apply to all properties was reaffirmed.

Capital gains tax: lettings relief is to be limited to where the owner is in shared accommodation.

Charities

Small trading tax exemptions for charities: raising the exemption upper limits from GBP5,000 and GBP50,000 to GBP8,000 and GBP80,000 respectively.

Gift aid donor benefits: simplifying the limits on benefits that charities can give to their donors to acknowledge donations.

Gift aid small donations scheme: increasing the small donations limit using cash or contactless payments from GBP20 to GBP30.

Retail gift aid scheme: relaxing the requirement to issue annual letters.  Charities will now only need to issue letters once every three years, rather than every year where a donor’s total donations in a given year are less than GBP20.

Trusts

The budget Red Book referred to the government’s trusts consultation, but the consultation date has not yet been confirmed:

3.15 Trusts consultation – As announced at Autumn Budget 2017, the government will publish a consultation on the taxation of trusts, to make the taxation of trusts simpler,
fairer and more transparent.

STEP has a trust consultation working group in place to review the consultation document as soon as it is published.

Companies

Individuals providing services via personal companies: the provisions that have applied in the public sector since April 2017 are being extended to private companies from April 2020. These provisions impose a duty on the ’engaging’ company to operate PAYE on amounts paid to the service company. These provisions will only be applied to large and medium-sized businesses.

STEP will continue to monitor the progress of the budget proposals and keep members updated.

Emily Deane TEP is STEP Technical Counsel

Addressing mental health in the workplace

10 oct 18 speakersSTEP marked World Mental Health Day on 10 October with The Capacity Conversation: Best Practice, an event hosted by the Employer Partnership team and the Mental Capacity Special Interest Group in London.

Simon Hardy TEP of Kingsley Napley explained that clients need to plan for loss of capacity, but many have not done so. While the UK has 12 million over-65s, and an estimated 850,000 dementia suffers, little more than 3 million LPAs and EPAs have been registered. When assessing someone’s capacity, the best way is to let them talk, he said, making sure that you find out their wishes, while showing that you care and are compassionate.

Laura Brayston and Claire Tomkins of Freeths, one of STEP’s Platinum Employer Partners, discussed their firm’s holistic approach to mental health at work. Freeths has instigated a top-down approach, with senior managers, who are supplied with e-learning resources, supporting initiatives to care for staff in an open and inclusive environment. The staff feel invested in, and cared about by their employer, they value mental health resources and support groups, and also appreciate treats such as snacks and drinks on Fridays.

Dan Walshe of the charity, Rethink Mental Illness, observed that mental health includes emotional, psychological and social wellbeing. It affects how we think, feel and act, and like physical health, can change over time. With an estimated one in four people affected, mental health costs employers up to GBP42 billion a year. Presenteeism (working while unwell and not fully functioning) costs from GBP18-26 billion a year, with absenteeism and staff turnover each costing GBP8 billion.

Six key recommendations for employers from Rethink Mental Illness:

  1. Produce, implement and communicate a mental health at work plan;
  2. Develop mental health awareness among employees;
  3. Encourage open conversations about mental health and the support available to those struggling;
  4. Provide good working conditions for employees;
  5. Promote effective people management; and
  6. Routinely monitor employee mental health and wellbeing.

Resources from Rethink Mental Illness:

To find out how other organisations are tackling mental health in the workplace read our STEP Journal article, Thriving at Work (pdf).

 

Laura Keith, Programme Manager – Employer Partnerships, STEP

Do UK money laundering regs extend to trusts in other jurisdictions?

departure board europeanSTEP’s Isle of Man branch has flagged potential issues raised by the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (the Regulations) which give effect to the requirement of the EU Fourth Anti-Money Laundering Directive to have a central register of trusts, and reporting obligations on trustees.

The branch has queried whether the Regulations (Part 5, the trusts register) only apply to persons acting in the course of a business carried on by them in the UK (Regulation 8(1)). If this is the case, then Part 5 would not apply to trustees in the Isle of Man and elsewhere outside the UK.

As the Regulations are not part of the domestic law in jurisdictions outside the UK, it is unclear whether trustees in these jurisdictions have a ‘legal obligation’ to comply with Regulation 45. If there is a legal obligation for them to report, then conflicting data-protection issues may be generated under the domestic law.

In addition, the Regulations contain sanctions (fines and imprisonment) for non-compliance that HMRC, which manages the UK’s central register of trusts, may be able to enforce against trustees who do not comply.

STEP has raised these ambiguous points with HM Treasury (HMT), which laid the relevant Regulations, in order to gain some clarity. HMT has confirmed that its interpretation is that the definition of ‘non-UK trust’ within Part 5 of the Regulations extends to all express trusts that receive income from a source in the UK, or have assets in the UK on which they are liable to pay a relevant UK tax, regardless of whether they are established outside of the UK.

In these circumstances, HMT asserts that the trustees will indeed be required to comply with the record-keeping and, where relevant, registration requirements within Part 5 of the Regulations.

STEP will keep members informed on any further developments.

Emily Deane TEP is STEP Technical Counsel

Employer partners gather at STEP Global Congress

STEP Global CongressWe’ve just returned from the STEP Global Congress in Vancouver – what a great event it was, reports Nigel Race.

Congress kicked off with two excellent keynote sessions on the theme of change: ‘Change has changed’, which was focused on change in the individual practitioner; and ‘Serving the New Clientele’, which looked at cultural types and an emerging client-hybrid culture. Two top-ranking speakers, James Grubman TEP and Dennis Jaffe TEP, made the case for developing stronger interpersonal skills and cultural knowledge to better serve clients and emerging client groups. We discussed with Dennis the possibility of bringing that session to a wider audience at some point in the future. Perhaps this might be a special offer for STEP’s Employer Partnership Programme (EPP)!

And on the theme of EPP, it was fantastic to see so many accredited firms present this year. There were no EPP-accredited firms at the first Congress in Miami, only a couple at Amsterdam in the very early days of EPP in 2016, and now, at Vancouver, we had 11 partners*. It is growing into a great community and will only continue to grow. It was nice to bump into Leanne Kaufman TEP, President Royal Trust, RBC, who has done so much to support STEP and EPP. And many congratulations to Borden Ladner Gervais LLP on its award. What a cheeky move to achieve the accreditation just in time to receive it on home soil and at the STEP Global Congress! Nancy Golding TEP, a member of the STEP Worldwide Board, received the award on the Friday morning in front of the whole auditorium. Well done to Nancy and her colleagues at BLG – we were delighted to make the award to you.

With Congress now over, we’ve been taking stock and reviewing the event. Feedback from sponsors and delegates has been outstanding. We had 95 per cent of delegates rating it as excellent or good, 97.5 per cent saying they would attend a similar event in the future, and the sponsors were delighted to have so many high-profile, senior figures in the industry.

STEP has already received bids to hold the next event – watch this space!

*EPP attendees at STEP Congress:

  • Burges Salmon (England and Wales)
  • RBC Estate & Trust Services (Canada)
  • Rawlinson & Hunter (Cayman Is, E&W)
  • BLG (Canada)
  • Farrer (E&W)
  • Wright Johnston & Mackenzie (Scotland)
  • Stonehage Fleming (Switzerland)
  • Mishcon de Reya (E&W)
  • Butterfield Trust (Guernsey)
  • Carey Olsen (Guernsey)
  • Bedell Cristin (Jersey)

 

Nigel Race is Director, Professional Development at 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

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