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

Making Tax Digital update

UK mapSTEP attended a meeting held by HMRC on 11 October to obtain feedback on its plan to make tax returns reportable on a quarterly basis, and completely digital.

HMRC’s stated objective is to improve the level of service for the public, reduce the cost to the taxpayer, and increase the revenue’s compliance and accuracy.

It says the new system will be the most digitally advanced in the world, and will enable a user to check their PAYE status, their State Pension forecast and any tax credits or allowances.

Apparently there are already close to seven million UK personal users, and HMRC is streaming webinars for basic users, as well as more complex tax users such as unincorporated businesses and landlords.

However, we learned during the meeting that many users with more convoluted businesses and multiple income streams, such as farmers, may find the new system challenging.

Although it seems unimaginable that someone would want to submit their tax return on their smart phone, HMRC points out the software will be mobile friendly, for those who do not have access to a computer or a laptop.

STEP has already flagged that the new system may not be accessible to less capable users, including elderly, or digitally excluded and vulnerable people.

Many may be unable to afford the extra burden of professional advice, a computer, laptop or smart phone, or indeed, the software required to comply.

HMRC recognises that there may be some transitional costs and potential cyber security risks, but believes customers will be pleased with the ‘real time’ system to keep taxes up to date, and notes there will be fewer inaccurate calculations.

HMRC’s webpage hosts a collection of consultation papers for all individual and business customers, agents, software developers, employers and all other organisations that need to provide tax information.

If you would like to provide feedback, please contact me at emily.deane@step.org by 3 November.

 

Emily Deane TEP, STEP Technical Counsel

STEP and PCI Compliance

Credit cards

As part of our ongoing work to ensure the safety and security of our members, STEP is currently working towards becoming fully compliant with the latest Payment Card Industry (PCI) Security Standards. This means that we will be making changes to the way we accept payments and handle sensitive information.

What is PCI Compliance?

PCI Compliance is an information security standard for organizations that handle credit card details from the major card schemes including Visa, MasterCard, American Express, Discover, and JCB. It’s designed to ensure that companies have all the correct measures in place to ensure the ongoing security of the card information they handle.

How will the changes affect you?

Whilst the vast majority of changes will affect internal systems and procedures, STEP will be making some changes to the way we accept card payments:

Change:
We will now be automatically rejecting any emails sent to us that contain sensitive card information (that includes the card number, expiry date and CVV) please note that direct debit information can still be accepted.

Reason:
This information is currently being rejected by way of an email reply, however rejecting it before it arrives with us will increase the safety of your card information.

Change:
We will no longer be accepting or sending faxes in any form.

Reason:
Faxes are fast becoming an outdated method of communication. STEP currently receives such a low volume of faxes that the decision has been taken to discontinue this service.

Change:
We will no longer be accepting payment over the phone.

Reason:
STEP have been evaluating PCI compliant telephone payment options, however given the low volume of telephone payments we currently process, we have come to the decision that the most effective way we can ensure your safety is to remove this option.

The Future:

All the changes we are making to our payment procedures are intended to make your experience with STEP fully compliant with the latest PCI Security Standards. We have recently upgraded our online payments to accept payments in GBP, USD, EUR and CHF.

We will continue to review our payment options to ensure we are providing you with the best service possible.

For any further information on PCI Compliance, you can find it here www.pcisecuritystandards.org.

For any questions relating to payments, please do get in touch, you can reach us by telephone on +44 (0) 203 752 3700, step@step.org and finance@step.org.

 

James Harris is STEP’s Information Technology Manager.

What’s happening to dormant assets?

Post Office Savings Book

The UK government has recently formed the Independent Commission on Dormant Assets which is investigating a revised scheme in order to identify new pools of dormant or unclaimed assets.

The existing scheme was formed in 2008, after the Dormant Bank and Building Society Accounts Act 2008 was passed, which deems bank and building society accounts to be dormant after a lack of customer-initiated contact for 15 years. The intention of HMRC is to locate these abandoned assets and use them to benefit good causes.

The commission is pooling its resources from various finance and industry experts and intends to report its final analysis to the prime minster and the cabinet office by the end of 2016. It will analyse the following:

  1. Which dormant assets can be brought into an expanded dormant asset scheme, and how they can be identified by industry
  2. The projected size of the funding pot this could produce for good causes
  3. Whether with the potential increase of dormant assets being released by industry the current system is able to manage the burden; and
  4. Whether any new legislation should include a requirement for improved transparency from industry on disclosing the level of assets within their sector.

The government estimates indicate there could be more than GBP1 billion of untapped sources of dormant assets which may include stocks, shares, bonds and pensions. Since the Dormant Assets Scheme was initiated in 2008, approximately GBP750 million has been released from banks and building societies and most of the recipients have been charities across the UK.

The new scheme is intended to provide further momentum to pass the dormant funds onto those who really need them in the charity sector. Rob Wilson, the Minister for Civil Society states, ‘More than a billion pounds of assets, that might otherwise sit gathering dust, will go into funding for charities that make a real difference to people’s lives across the country. To build an even more caring and compassionate country we need to transform dormant resources and give the funds to those who need it.’

It is easy to understand how these assets are overlooked in the first instance, considering how common it is for people to manage their assets digitally (see below). Family members may be completely unaware of the existence of bank accounts or stocks or shares, let alone having access to the data and passwords.

Other possible scenarios might be moving home and not redirecting the post, changing names after marriage, mergers between banks and building societies or a general lack of paperwork. These accounts may be unintentionally abandoned for 15 years and later released to an obliging local charity, to the detriment of the unknowing beneficiaries.

However, there are common scenarios which do not give rise to dormant assets such as intestate estates. The rules of intestacy are activated when someone dies without making a will and they determine which surviving relatives will inherit the estate. In the event that there are no surviving relatives, after investigation, then the estate automatically passes to the Crown and will not be subject to the dormant asset rules.

In the event of a testate estate, and a missing beneficiary, the process becomes more arduous due to the fact that personal representatives and trustees (in the case of trusts) have clear fiduciary responsibilities to carry out the deceased’s wishes for their estate or trust. They are under a duty to protect the interest of the beneficiaries. Therefore, if adequate measures have been taken to locate a beneficiary unsuccessfully, it is deemed reasonable to assume they have died, and distribute the funds to other beneficiaries in accordance with the will.

The personal representative or trustee may seek an indemnity from the other beneficiaries to cover the funds, should the missing beneficiaries reappear. Alternatively they may seek a similar indemnity from an insurance company. Where significant funds are involved they may instead seek a ‘Benjamin Order’ from the court, allowing the trustees to assume that the missing beneficiary is dead. In any event, the funds will be distributed, rather than being held awaiting any contact from the missing person. Therefore, the assets will not linger, or be overlooked, and the estate can be promptly wound up, unless they have passed completely under the radar in the first instance.

  • STEP has recently set up a Digital Assets Working Group to address the emerging issues for practitioners in this field. Its purpose is to educate members and providing guidance and resources; and to campaign for greater clarity and uniformity in international laws and the T&Cs of internet service providers.

 

Emily Deane TEP is Technical Counsel at STEP

HMRC’s digital tax plans under fire

An elderly woman sitting in front of her laptop looking stressed and worried

STEP attended a meeting held by HMRC yesterday (3 March 2016) to obtain feedback from tax related governing bodies regarding its imminent – and mandatory – proposals to make tax returns completely digital.

We were informed that the objective is to modernise the tax system, improve the level of service for the public and reduce cost to the taxpayer.

The synopsis of the meeting was:

  • Tax returns will become completely digital – this will be compulsory
  • There will not be quarterly returns but ‘updates’ to HMRC on a quarterly basis
  • There will be a formal update announced at the Budget on 16 March 2016
  • The objective is to reduce time and costs for businesses and individuals
  • HMRC is aware that digital tools are not accessible to everyone and it is currently researching ways to deal with this sector
  • There will be four more consultations post Budget and the deadline is end of May.

David Gauke MP, Financial Secretary to the Treasury, stated in his December 2015 HMRC paper Making Tax Digital, ‘Individual and business taxpayers will no longer have to wait until the end of each tax year before knowing how much tax they should pay, avoiding any surprises and helping them to plan their financial affairs with more certainty. And taxpayers will be presented with a complete financial picture of their tax affairs in their digital account, [and will be] able to see and manage all of their liabilities and entitlements together for the first time.’

However, many of those present raised concerns over how the less capable sector, for example the elderly or disabled people, will be able to manage their records digitally, especially if they cannot afford a computer or smart phone, or are unable to use one. Many of these people will also be unlikely to be able to afford an accountant four times a year to assist them. HMRC confirmed that it is currently undergoing research in order to provide provisions for this sector to enable them to go digital; however they could not provide any examples of solutions.

The HMRC was also asked what information will be required to be provided four times a year, since the general suspicion is that it will amount to the same information that is required for a tax return. This would therefore amount to the same time and cost as a tax return, but four times a year. Once again, HMRC was unable to answer the question specifically, and promised information would follow ‘in due course’.

There may be an option to ‘pay as you go’ if people would rather make regular contributions to their annual tax return on a monthly or quarterly basis, to minimise the liability at the end of the year. We understand that this option, if available, will not be compulsory.

We will keep you updated on developments in due course.

 

Emily Deane TEP is Technical Counsel at STEP.