Some key highlights of legal updates affecting the Private Client industry over the past month are as follows.
Tax policy – Autumn Budget
On 29 July, Chancellor Rachel Reeves delivered a fiscal update to Parliament in which she announced that the Budget will be held on 30 October 2024 and there will be a return to a single fiscal event each year (presumably as opposed to having an Autumn/ Spring Statement in addition). The government also published draft legislation for the next Finance Bill covering previously announced measures (such as the abolition of the furnished holiday lettings regime) along with the following documents (with further detail promised in the Autumn Budget):
- a call for evidence on changes to the taxation of carried interest;
- a policy paper on the taxation of non-UK domiciliaries (“non-doms”) – for further information on which, see our Globally Speaking briefing here but some key points are:
- inheritance tax (“IHT”) protection for existing “excluded property” offshore trusts settled by non-doms will come to an end from 6 April 2025;
- the proposed one-year 50% reduction in the taxation of foreign income for certain UK resident non-doms who do not qualify for the “four-year FIG regime” from 6 April 2025, will be dropped; and
- the temporary repatriation facility will be retained, but at a rate to be revealed in the Autumn Budget (12% had been proposed by the Conservatives).
- a policy paper on the imposition of VAT on private school fees from 1 January 2025 (which also applies to fee pre-payments made on or after 29 July 2024).
With the Chancellor announcing that the new government have inherited a £20billion funding gap from the Conservative government, she explained that “the Budget will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax”. Speculation will now continue on the extent to which those “difficult decisions” involve tax rises. Recent rumours are that the Treasury is drawing up plans to equalise the rates of capital gains tax (“CGT”) with income tax, and will present proposals to Rachel Reeves ahead of the Autumn Budget. Treasury draws up plans to bring CGT into line with income tax to fix ‘broken’ Britain (telegraph.co.uk); Chancellor: I will take the difficult decisions to restore economic stability – GOV.UK (www.gov.uk); Chancellor statement on public spending inheritance – GOV.UK (www.gov.uk); UK government reveals revised plans for non-dom tax regime | STEP
Vulnerable clients – cap on care costs
In connection with the Chancellor’s above fiscal update, the government has announced that, due to a lack of funding, the government would not be progressing the adult social care charging reforms under the Care Act 2014 which had been committed to by the Conservative government, including the £86,000 lifetime cap on care costs. Government issues statement on public spending inheritance stating it will not be progressing certain commitments introduced by previous government | Practical Law (thomsonreuters.com)
Mental capacity – LPA waiting times
The average clearance time for LPA applications is now 76 working days (from 91 working days) according to the Office of the Public Guardian’s annual report. This is still some way off the target of 40 working days. OPG making headway in reducing E&W POA registration delays | STEP
Contentious estates – deathbed gift case
The recent case of Rahman v Hassan (2024 EWHC 1290 Ch) held that registered land can be the subject of a deathbed gift (donatio mortis causa – “DMC”). The case was unusual in that the DMC was set out in a text message during one of the Covid lockdowns. An appeal was anticipated, and the High Court has just granted permission. The grounds of appeal include whether land certificates or copies of leases are indicia of title (or “dominion” from a DMC perspective). The Court had ruled that the deceased’s act of handing over the land certificate in respect of the registered property in question was sufficient to part with “dominion”. EWHC’s approval of deathbed gift of registered land is to be challenged on appeal | STEP
Tax – late-payment interest rate
Following the Bank of England’s 1 August 2024 decision to cut the bank base rate to 5% from 5.25%, HMRC is reducing the late-payment interest rate to 7.5% and the repayment rate to 4% from 20 August 2024 for most taxes and payments. HMRC cuts late-payment and repayment interest rates (lexis.com)
Contentious estates – testamentary capacity and the “golden rule”
In Bond v Webster, 2024 EWHC 1972, the High Court has set aside a 2019 Will leaving much of the estate to the deceased’s two youngest sons (at the expense of his other two children) on grounds of lack of testamentary capacity and knowledge and approval. The practitioner who drafted the 2019 Will failed to follow the “golden rule” and obtain a medical opinion on the testator’s capacity, even though he was 77 and had a brain tumour. The Court admitted to probate a 2017 Will that largely split the testator’s estate equally between his four children. Bond & Anor v Webster & Ors [2024] EWHC 1972 (Ch) (02 August 2024) (bailii.org)
Tax – PPR relief and calculation of period of ownership
HMRC has confirmed in its CGT Manual CG64923 that completion dates, not contract exchange dates, should be used to determine the period of ownership of a property for the purposes of CGT principal private residence (“PPR”) relief. This conflicts with Section 28 of the Taxation of Chargeable Gains Act 1992 but ICAEW has reported HMRC’s view that s.28 should now generally be ignored. Need to know: CGT on residential properties | ICAEW
Contentious estates – Will rectification case
Angelova vs Kershaw & Clark [2024] EWHC 1830 (Ch) represented a successful claim by a fiancée of the deceased to rectify part of his Will under section 20 of the Administration of Justice Act 1985 due to a clerical error by the solicitor who drafted the Will. The deceased had instructed the solicitor to make his fiancée a beneficiary of a discretionary trust regardless of whether the couple were married, but the required clause was not included in the final version of the Will. The deceased died before the couple married meaning that the fiancée could not benefit from the trust. The High Court ruled that the Will should be rectified to include a clause listing the fiancée as a beneficiary alongside the words “whether or not we are married at the date of my death”. Court approves will alteration after solicitor’s error | News | Law Gazette; Judgment Alert: Angelova v Kershaw and others [2024] EWHC 1830 (Ch) (lexis.com)
Contentious trusts – professional negligence claim
In Playfair v Pannells LLP, 2024 EWHC 1933 Ch, the beneficiaries and trustees of three family trusts have been refused a time extension to serve a professional negligence claim on several professional firms who they allege gave incorrect advice on the restructuring of the trusts in 2007 and 2008. The High Court decided the claimants had no good reason for failure to serve the claim form in time and should have sought a standstill agreement. High Court refuses time extension to serve claim on law firm – Legal Futures
Tax – IHT receipts still on rise
HMRC has reported that IHT receipts for April 2024 to June 2024 were £2.1billion, £83m higher than the same period last year, demonstrating the effect that the frozen IHT nil-rate bands and allowances continue to have on tax take. HMRC reveal IHT receipts at £2.1b for first three months of tax year 2023-24
Wills – assisted dying Bill
Lord Falconer has introduced a private member’s Bill in the House of Lords to legalise assisted dying in England and Wales for terminally ill patients with less than six months to live. If enacted, the Bill will reduce the risk for relatives who assist in a patient’s death. At present, such persons are in danger of losing all access to the deceased’s estate through the forfeiture rule. Assisted dying Bill introduced to UK House of Lords | STEP