STEP LatAm Conference 2017 in Colombia

CartagenaA sell-out audience of over 370 delegates has been attending the 2017 STEP LatAm Conference in Cartagena, Colombia this week. The fact that they managed to get here in spite of a local transport strike made me feel, as a Brit, rather at home, but it also shows what a strong following the annual STEP Latam Conference now has.

Looking at STEP in the Americas, we now have a network of well over 40 branches with, between them, almost 5,500 members. This makes our major conferences a major meeting place for practitioners across both North and South America.

STEP Colombia is one of our newer STEP branches, but has a group of committed volunteers working hard to establish STEP in the jurisdiction as a way of enhancing professional knowledge and building international links in the fast-developing country. Cartagena was an inspired choice of venue for the event; as a major UN World Heritage site with an immaculately preserved historic centre, it proved highly appealing for delegates from further afield.

The twin issues of the European pressures for public registers of beneficial ownership and the implications of the US’ non-participation in the Common Reporting Standard (CRS) were just two of the key themes explored in the conference, which Patricia Wass TEP, Chair of STEP Worldwide and Luz Alfonso TEP, Conference Chair and one of the founder members of STEP Colombia, jointly opened.

After this year’s enormous success, many are already looking forward to next year’s STEP LatAm Conference in Mexico.

George Hodgson is Chief Executive of STEP

MoJ in special measures on charges?

Businesman blows whistle and shows red card
STEP was one of the bodies most actively engaged in the furore that developed around the Ministry of Justice’s (MoJ) proposal to raise probate fees for some estates from £155/215 to as much as £20,000.

One of the things that enraged many STEP members was not just the scale of the increase, but the fact that overwhelming criticism in response to the consultation on the proposals had been entirely disregarded. Moreover, the mechanism by which the MoJ were looking to introduce the new fee – via a Statutory Instrument with minimal Parliamentary scrutiny – appeared to be a clear abuse of process; a view confirmed by a legal opinion commissioned by STEP.

In the end, the increase in probate fees appears to have been shelved, at least for the time being. It has recently emerged, however, that it is not just probate fees that have been getting the MoJ into a spot of hot water. Fees for Powers of Attorney were also raised to levels that more than covered costs, but the MoJ had again failed to follow the procedures needed in these circumstances. Fees for Powers of Attorney have since, with effect from 1 April 2017, been reduced, and the Office of the Public Guardian is looking at ways to refund those who have paid too much. (See Justice ministry to repay GBP89 million of powers of attorney overcharges.)

Even more intriguingly, the MoJ, in its Annual Report, has let slip that it is ‘undertaking a review of lessons learnt [from the Powers of Attorney fees issue] which has led to the creation of a new income strategy unit which will oversee the standards and controls set for all income streams.’

The Report goes on to say: ‘There have also been a number of improvements to the way in which we forecast and monitor fees to ensure compliance with requirements set by HM Treasury.’

Stripping through the civil service code, this sounds like there has been fairly sharp exchange of views between HM Treasury and the MoJ over fees that begin to look like taxes, with Treasury no doubt highlighting that there are supposed to be rules and procedures when it comes to this sort of thing.

The funding gap left by the failure to get the probate fee increase through before the election still needs to be addressed. How the MoJ will eventually fill that gap remains to be seen. It sounds, however, like we can at least expect the MoJ to pay a bit more attention to due process when this issue next comes up than it was minded to earlier this year.

George Hodgson is Chief Executive of STEP

Happy 25th birthday STEP Jersey!

George HodgsonI had the pleasure of attending STEP Jersey’s AGM and 25th anniversary celebration this week. STEP Jersey is one of our largest branches, with over 1200 members, and is also one of our most active. Not only does it host many well-attended events, but it works closely with government, regulators and others to ensure the jurisdiction maintains its position as a respected international financial centre.

Indeed it is fair to say that STEP Jersey plays an integral and important role in the economic life of the island, with the trust industry one of the largest local employers.

Much of the discussion focused on how to ensure that STEP, both locally and internationally, could maintain the success of its first quarter century well into the next. In conversations over a most enjoyable traditional cream tea (with the welcome, but less traditional, addition of a glass of Prosecco) I was struck by the confident tone of many senior professionals who were present.

They fully acknowledge the challenges that increased transparency and a consequent explosion in compliance costs will bring. Rather as with Brexit in the UK, however, the mood was generally ‘what is done is done – so let’s get on with it.’

I am delighted to see that STEP Jersey is setting up a policy-focused committee to ensure there are effective links with local regulators and others to work through the rapid changes now underway.

The team at STEP Worldwide will continue to give STEP Jersey (and other branches working on these issues) all the support we can in helping develop a coherent and well-informed strategic approach to the trust industry in the new age of transparency.

George Hodgson is Chief Executive of STEP

Probate fees – will common sense prevail?

George HodgsonThe government’s threat to radically increase probate fees next month (Probate fee rise ‘a new tax on bereaved families’) may be receding, following a meeting of the House of Commons Joint Committee on Statutory Instruments on 29 March.

Using some very welcome common sense, the committee raises the issue (para 1.12) that it is a constitutional principle that there should be ‘no taxation without the consent of Parliament’. This is something I suspect 99% of people will agree with.

It finds that the proposal from the Ministry of Justice (MoJ) is clearly a tax, not a fee, in every normal definition of the term, and should therefore be subject to full parliamentary scrutiny, rather than brought in via the back door through a Statutory Instrument.

The committee also finds (para 1.13) that ‘charges’ of the magnitude proposed by the MoJ were probably never envisaged when the original legislation the government was attempting to use here was approved. In other words, using this process is an abuse.

We would hope that this will provide an opportunity for the government to re-think its approach, which was criticised by over 90% of those responding to the consultation, and submit re-worked proposals for proper scrutiny by Parliament.

• Joint Committee on Statutory Instruments: Non-Contentious Probate Fees Order 2017

 

George Hodgson is Chief Executive of STEP

New probate fees: a guide for the public

flowers

UPDATE 21/04/2017: the Ministry of Justice has abandoned the new fee regime due to lack of parliamentary time prior to the 2017 General Election. See more information.

What is probate?
When someone dies, you need to get the legal right to deal with their property, money and possessions, and to do so you need a grant of representation, which is known as ‘probate’.

When is probate not needed?
Usually you won’t need to apply for probate if the estate does not include land, property or shares; if it is passing to a surviving spouse or civil partner because it was held in joint names (e.g. a joint bank account, or a home owned as ‘joint tenants’); or if the estate is valued at less than £15,000.

Each financial institution has its own rules, however, and may still require you to apply for a grant even if the value is under this threshold.

What is happening to probate fees?
In February 2017, the government announced that probate fees in England and Wales will change in May 2017 to a banded system, where fees increase with the value of the estate, replacing the current flat fees of £155 if you apply through a solicitor, or £215 for a personal application.

The proposal to link probate fees to the value of the estate was published in February 2016 and attracted overwhelming opposition. Nonetheless, the new system has been brought in, and was confirmed in the March 2017 Budget.

The fee structure as of May will therefore be as follows:

Value of Estate New Fee % Change (from £215)
Up to £5,000 £0 0%
£5,000 – £50,000 £0 -100%
£50,001 – £300,000 £300 +40%
£300,001 – £500,000 £1,000 +365%
£500,001 – £1m £4,000 +1,760%
£1m – £1.6m £8,000 +3,621%
£1.6m – £2m £12,000 +5,481%
Over £2m £20,000 +9,202%

When in May does the change kick in?
The government has not yet confirmed the exact date in May from which these changes will apply. The new fees will apply to all applications received by the probate service on or after this still-to-be-announced date in May, irrespective of the date of death. Probate registries have said that any application received within working hours of the Probate Registry before the implementation date will be charged the current fee.

What can you do?
Applying for probate takes time as you need to gather a number of documents and all the relevant information regarding the value of the estate to ensure any inheritance tax obligations are correctly accounted for. If you are very recently bereaved it may therefore be very difficult to submit a full application for probate before the new fees are implemented.

If, however, you have already started the process, you may want to try and get your probate application in before May to ensure you pay the current flat fee.

If you are applying for probate through a solicitor, your solicitor will be aware of the situation and will be doing everything they can to try to get your probate application lodged with the probate registry before the new fee structure applies.

If you are making a personal application, you should be aware of a few important points:

  • In cases where you are required to submit an IHT400 or any document for assessment by HMRC for inheritance tax purposes, many probate registries have said that it is possible for you to submit the appropriate forms to both HMRC and HMCTS Probate simultaneously. They will not issue your grant until the approved IHT421 is received, but the probate registry will mark your application as lodged. To assist them in not raising this as a query, they have advised that you clearly mark on your application that the inheritance tax document will follow after assessment.
  • A ‘full application’ for probate purposes, and therefore to qualify for the appropriate fee, must include:
    • Full oath sworn by all deponents and commissioners
    • An original will and codicil (where appropriate) endorsed by all commissioners and deponents
    • The appropriate number of correct copy wills and codicils
    • An Inland Revenue account (with the exception of IHT400s/421s where assessment is ongoing and it has been noted on the covering letter that it will follow)
    • All associated documents including any affidavit evidence required at the time of submission, renunciations, powers of attorney
    • The appropriate fee.

    Upon receipt of an application in this form prior to commencement then the existing fee will be charged.

  • If the estate you are dealing with is asset rich but cash poor, the probate registries have said that executors will be able to apply to the Probate Service to access a particular asset for the sole purpose of paying the fee. Instalment options will not be available.

Where can you get more information?
The government has not published any public information on this issue beyond the consultation documents:

In the absence of public-facing information from the government, we will continue to publish updates on this, as and when they are announced, here on the STEP Blog.

If you have any specific questions about your probate application please contact your local probate registry.

George Hodgson is Chief Executive of STEP

European Data Protection Supervisor voices privacy concerns over 4AMLD

George HodgsonThe European Data Protection Supervisor’s Opinion on proposed amends to the Fourth EU Anti-Money Laundering Directive (4AMLD) shines a welcome spotlight on data protection implications and the ‘significant and unnecessary risks to an individual’s right to privacy’.

The Opinion, published on 2 February 2017, raises questions as to whether or not the proposed collection of personal data is proportionate to the fight against money laundering and terrorism financing and scrutinises the access to beneficial ownership information and the significant and unnecessary risks that this might cause an individual who has a right to privacy and data protection.

STEP has been heavily engaged with Brussels for some time on proposed revisions to 4AMLD. We have also, via our relevant STEP branches, been active on the issue in several EU Member States.

The existing 4AMLD recognises that many trusts are sensitive family arrangements, often designed to protect the interests of vulnerable family members. Trusts are therefore treated differently to corporate structures: beneficial ownership information on trusts is not publicly available and is only accessible by recognised competent authorities, and registers of trusts are confined to trusts with tax consequences, reflecting the fact that any risk assessment suggests that this is where the highest risk of abuse lies.

The proposed revisions to 4AMLD effectively put trusts on the same basis as most corporate structures. This means Member States would be required to establish comprehensive beneficial ownership registers of ALL trusts – a change that will impact on millions of ordinary families. It also would require that such register should be available, as a minimum, to anyone who has a ‘legitimate interest’ (not defined – but understood to include journalists and NGOs with an interest in this area), and allowing Member States to open such registers even to those with no demonstrable ‘legitimate interest’ in the information.

In spite of STEP’s best efforts, and the best efforts of other professional bodies who have been working with us on this issue, our arguments against these proposals were getting little attention from policy makers. The original proposals for the revision were sparked by a wave of terrorist attacks in Brussels, and then were increasingly seen as a necessary political response to the Panama Papers scandal. Brexit then did few favours for those trying to argue in Brussels for the merits of what are still generally seen as ‘Anglo-Saxon trusts’…

It is encouraging, therefore, that the European Data Protection Supervisor, a powerful voice in Brussels, has now weighed in with a stinging review of the proposed amendments. They are seen as having muddled objectives underpinned by little objective risk assessment and paying scant regard to the issue of proportionality, particularly in the proposal to allow wide access to beneficial ownership information on family trusts. We can only wait and see how this impacts on the intense debate that is currently going on in the EU Parliament on the proposals.

 

George Hodgson is Chief Executive of STEP

New Year, new line-up

Patricia WassThe past few months have seen some big changes at STEP. While we have announced them all separately, I thought it might be helpful to provide a summary of what’s what.

First, it is a great honour and privilege to be writing this as the new worldwide Chair of STEP. I was elected in October and took office on 1 January 2017 for a one-year term. I have taken over from Edward Buckland TEP, who served as Chair for two years and dedicated enormous time and effort to leading the Society. He is going to be a hard act to follow.

I will be ably supported by my two Deputy Chairs, Simon Morgan TEP (Jersey) and Paul Seal TEP (England and Wales), who were elected in December 2016 and took office, like me, on 1 January, again for one-year terms.

Simon is one of five new Board members who joined myself and Paul as of 1 January: also joining us are William Ahern TEP (Hong Kong), Nancy Golding QC TEP (Canada), Dayra Berbey de Rojas TEP (Latin America), and David Russell QC TEP (Australia/Dubai), all of whom will serve a three-year term.

I very much look forward to working with all of my new colleagues, and I would like to pay tribute to the Directors who have just come off the STEP Board, having given tremendous service to the Society. Edward Buckland TEP, George Lyall TEP, Nick Jacob TEP, John Lawrence TEP and Angelo Venardos TEP have all acted tirelessly, and in the best interests of the Society, over many years.

Earlier this week we also made another important announcement, welcoming George Hodgson as STEP’s new Chief Executive, responsible for the overall management and delivery of the Society’s strategy and activities. George is well known to STEP members across the world, having been Deputy Chief Executive and served as Interim Chief Executive since the departure of David Harvey in June 2016. His appointment follows a rigorous recruitment process over the last six months of 2016.

We have also announced a number of other appointments over recent weeks and months, with new members Assad Abdullatif TEP (Africa & Arabia – replacing Tanya Cohen TEP), William Fowlis TEP (Canada – replacing John Poyser TEP), Ian Macdonald TEP (Scotland – replacing Paraic Madigan TEP),  Alan Milgate TEP (Caribbean – replacing John Lawrence TEP), Toby Crooks TEP (England & Wales – replacing Christopher Lintott TEP), Lorraine Wheeler TEP (Jersey – replacing Edward Buckland TEP) and Babetta von Albertini TEP (USA – replacing Larry Heller TEP) joining the wordwide Council as of 1 January 2017.

In addition, Rita Bhargava TEP has been elected Chair of STEP’s England and Wales Regional Committee; Cecile Vuillier TEP and Felicity Keller TEP were elected co-Chairs of the Swiss and Liechtenstein STEP Federation, and an election is currently underway for a new Chair of the Caribbean and Latin America Regional Committee.

I would like to congratulate everyone on their election and thank all those who have stepped down. I look forward to us all working together to take STEP forward. Last year saw us celebrate the first 25 years of STEP. Now the Society is moving into the next 25 years in its history we need to build on the firm foundations that have been laid for us by the founding fathers of STEP. We will take the very best from their experiences, and then continue down the right path for the Society, aspiring to be the leading worldwide professional body for those specialising in advising families across generations.

Patricia Wass TEP is worldwide Chair of STEP

What next for offshore?

Offshore PerceptionsSTEP has published Offshore Perceptions, a major new piece of research looking at the current state of the offshore world. It paints a picture of a sector adapting rapidly to a new regulatory and institutional environment. It also confirms that measures designed to tackle abuse by a few, are actually having a major impact on costs for the legitimate clients who are the overwhelming majority of users of private client services both offshore and onshore.

The research, sponsored by First Names Group, is based on a survey of over 1,000 respondents, fairly evenly split between the offshore and onshore world, and with a very broad geographical reach.

Over three quarters of the offshore respondents to the survey report that compliance has become a burden to a ‘great’ or ‘large’ extent. Not surprisingly, this rising burden of compliance is driving up costs to the client and the report highlights a shift away from smaller clients and lower value work, both of which are no longer economically viable in the new cost environment.

Another major factor impacting the industry is the move by banks to de-risk their business. Half of all offshore respondents identified this as impacting their business to a ‘great’ or ‘large’ extent. Intriguingly, the de-risking issue was seen as important by even more onshore practitioners, with 60% telling us that it was having a ‘great’ or ‘large’ impact on the offshore worlds.

This mix of rising costs and the major banks withdrawing from many areas as they lower their risk appetite is, not surprisingly, expected to produce yet more consolidation in the offshore world, with most offshore respondents expecting the pace of consolidation to accelerate still further.

This inevitably raises fears about employment prospects, although there is still considerable optimism about business opportunities, not just in Asia and other traditional offshore markets but also, increasingly, from Africa. The survey confirms that family offices are also seen as an important growth area within the overall offshore environment.

Measures to improve transparency and tighten regulation have been one of the key global themes of the past few years, impacting offshore and onshore practitioners alike. The Offshore Perceptions report confirms that industry concerns have proved accurate in predicting that these measures, aimed at tackling abuse by a few, would result in sharply higher costs and less choice for the many.

The report also suggests, however, that the offshore world is busy adapting to the new environment and is far from gloomy. Over three quarters of offshore respondents feel optimistic (to a ‘great’, ‘large’ or ‘moderate’ extent) about the prospects for their jurisdiction and a broadly equivalent number are also optimistic about the prospects of their business sector. Many of the offshore centres have had to adapt to major challenges in the past. Generally they seem well placed to do so again.

George Hodgson is Interim Chief Executive of STEP

STEP – the reality

STEP logo iconThere have been a number of recent press articles about the role of STEP, a leading professional body, in the wealth management industry. Some of these articles have presented a highly distorted view of STEP and the activities of our members.

STEP members, known as TEPs, spend their professional lives helping families plan for their futures: from drafting a will or advising family businesses, to helping international families and protecting vulnerable family members who may have mental capacity issues or other forms of disability. With around 20,000 members worldwide, TEPs are the acknowledged specialists in giving advice to families in these areas.

Some TEPs focus on servicing very wealthy families, often with a range of international interests, who need expert advice to manage their affairs to ensure all tax and legal requirements are met in multiple countries. Most TEPs, however, are engaged in helping ordinary families deal with everyday problems. All are committed to the high technical and professional standards that STEP promotes and insists on from all its members.

Internationally, STEP has an important role to play in improving professionalism among all those working with families in areas such as inheritance planning and the care of vulnerable relatives. We are thus proud to be actively involved in helping raise standards in jurisdictions where there have to date been few, if any, equivalent professional bodies.

STEP also works constructively and transparently with a range of policymakers. As acknowledged global experts in their fields, STEP members have an important role to play in ensuring that policy development is informed by the practical experience of professionals working in the relevant area. STEP’s responses to official consultations are all publicly available on the STEP website (see www.step.org/consultation-tracker/1).

George Hodgson is Interim Chief Executive of STEP

Why do people go offshore?

George HodgsonTaking a global view, the period since 2008 has been marked by unprecedented activity aimed at improving tax transparency. First of all we had tax information exchange on request. More recently the move has begun to automatic exchange of tax information. The same period has also seen enormous emphasis internationally on improving the availability of beneficial ownership information.

All this activity focused on improving transparency ought, logically, to have been bad news for the so-called ‘secrecy jurisdictions’. It is perhaps surprising, therefore, that the reality looks somewhat different.

Researchers at the European Parliament have dug out some rather curious statistics from the Bank of International Settlements. Over the period 2008-2015 cross-border deposits have grown on average by 2.81 per cent. Over the same period, cross-border deposits in the rest of the world have grown by 1.24 per cent. In other words, during a period of unprecedented activity regarding building transparency, the share of the offshore centres in the cross-border deposit market has actually gone up.

What does that imply? Some will undoubtedly represent this as clear proof that current transparency measures aren’t working. Indeed the same EU Parliament report that presents the statistics goes on to request ‘a study on the feasibility of a global register of all financial assets held by individuals, companies and all entities such as trusts and foundations’. This just goes to show that Big Brother still has his supporters!

Others might see the continued growth in offshore in an age of transparency as demonstrating that the appeal of offshore in reality has little to do with ‘secrecy’. It is hard to imagine that any client moving funds to one of the major offshore centres does not expect those funds to be reported at some point to their domestic tax authority. It is impossible to believe that any of their advisors do not know that at some point their client’s position is likely to be reported to their domestic tax authority.

The conclusion therefore has to be that most of the funds going offshore are there not for secrecy but for other reasons, for example geographic diversification; strong financial infrastructure; or tax neutrality. But it is clear that regardless of the move to transparency, offshore centres still have strong client appeal.

George Hodgson is Interim Chief Executive of STEP