Some key highlights of legal updates affecting the Private Client industry over the past month is as follows.
Tax policy – Autumn Statement
The Chancellor’s Autumn Statement on 22 November 2023 did not include any headline announcements for private clients, despite speculation in the weeks leading up to the speech that Jeremy Hunt would take this opportunity to reduce the rates of inheritance tax (“IHT“), or even abolish IHT completely. Instead, the main headlines included: national insurance rate cuts, “full expensing” tax relief for businesses, and the rise of the National Minimum & Living Wage. Read our full update on the Autumn Statement here and why the reform of IHT may instead be on the agenda for the Budget in spring 2024. Autumn Statement 2023 – Private Client Reaction – Wedlake Bell
Tax policy – Finance Bill 2024
The Finance Bill 2024 was published on 29 November 2023 following draft legislation published on 18 July 2023. The Bill is expected to receive royal assent in the summer of 2024. The private client measures include: provisions in connection with abolition of the pensions lifetime allowance charge; and measures to counteract the promotion of tax avoidance schemes. Budgets, Finance Bills and other fiscal events: private client measures | Practical Law (thomsonreuters.com)
Offshore – transfer of assets abroad
The Supreme Court has ruled in HMRC v Fisher [2023] UKSC 44 that the “transfer of assets abroad” (“TOAA“) rules in s.739 of the Income and Corporation Taxes Act 1988 did not apply to the sale of a tele-betting business by a UK company, owned by the UK resident Fisher family, to a Gibraltar company owned by the same family. The decision overturned the Court of Appeal’s earlier ruling in favour of HM Revenue & Customs (“HMRC“). The ruling was on the basis that the TOAA provisions only apply to impose a tax charge on individuals (i.e. natural persons) and not bodies corporate, and the Supreme Court decided that none of the individual members of the Fisher family (despite being shareholders in the transferor company) could be said to be transferors of the business for the purposes of the TOAA rules. In doing so, the Supreme Court confirmed that s.739 does not apply to an individual in relation to a transfer made by a company in which they are a shareholder, regardless of the size of their shareholding. HMRC had argued that the transfer, albeit conducted through their company, could be imputed to the Fishers as quasi-transferors. Taxpayer succeeds before Supreme Court in Fisher v HMRC [2023] UKSC 44 | Old Square Tax Chambers; Commissioners for His Majesty’s Revenue and Customs (Respondent) v Fisher and another (Appellants) (supremecourt.uk); Transfer of assets abroad provisions did not apply to UK resident shareholders in a company that had transferred assets overseas (Supreme Court) (Full update) | Practical Law (thomsonreuters.com)
Probate – inquiry into probate delays
On 22 November 2023, the House of Commons Justice Select Committee launched an inquiry into HM Courts & Tribunals Service’s probate registry performance, following continued delays in obtaining a grant of probate. The closing date for evidence is 22 January 2024 and Wedlake Bell will be submitting evidence. Call for Evidence – Committees – UK Parliament; UK MPs begin inquiry into continuing probate delays | STEP
Private Client Disputes – enforcement of foreign judgments
The UK government has decided to sign the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters. The decision follows a consultation held earlier in 2023 which produced almost unanimous support. The 2019 Hague Convention provides a global framework of uniform rules to facilitate the recognition and enforcement of judgments from one jurisdiction to another: contracting parties must recognise and enforce civil and commercial judgments within its scope. At present, there is no comprehensive private international framework between the UK and the EU covering civil and commercial matters; there is also no bilateral judgment enforcement treaty between the UK and US. The 2019 Hague Convention will not come into force in the UK until twelve months after ratification takes place. UK to sign 2019 Hague Convention as soon as possible | STEP; Government response to the Hague Convention of July 2019 on the Recognition and Enforcement of Foreign Judgements in Civil or Commercial Matters (Hague 2019) – GOV.UK (www.gov.uk)
Contentious estates – 1975 Act case involving conditional gifts
Sim v Pimlott and others [2023] EWHC 2296 is an interesting case affecting testators who want to discourage beneficiaries from challenging their Will by making that beneficiary’s gift conditional upon that beneficiary not bringing a claim. The Will in this case attached such a “no contest” condition to two cash gifts to deceased’s wife, but also gave the wife a life interest in the residue of the estate (to which the same condition did not apply). The wife pursued a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“1975 Act“) claiming that her share of the estate under the Will did not constitute “reasonable financial provision”. In respect of the conditions attached to the cash gifts, the judge found that it was reasonable to discourage a beneficiary from embarking upon a legal claim that would delay the administration of the estate and the distribution of assets to beneficiaries, and come at a financial cost. Accordingly, as the wife had broken the relevant conditions, the Court found that it was not unreasonable to deny her entitlement to the cash gifts. In the event, however, as the ruling meant that the wife received no capital amounts under the Will, the Court effectively enlarged the wife’s life interest so as to require the trustees to set aside a capital sum to provide a property for her to occupy rent-free. The wife was penalised at the costs hearing both in bringing the case and ignoring a Part 36 offer. The case is interesting for its discussion of the reasonableness of “no contest” clauses, and also its reminder for practitioners to thoroughly assess the merits of a claimant’s case before advising them to embark on a claim under the 1975 Act. High Court considers claim under Inheritance Act 1975 where entitlement under will conditional on not pursuing action | Practical Law (thomsonreuters.com); Sim v Pimlott | Practical Law (thomsonreuters.com)
Charities – national debt determined to be charitable purpose
The Court of Appeal has ruled in Zedra v Attorney General, 2023 EWCA Civ 1332 that a charitable fund set up by a banker in 1928 to help pay off the government’s post-World War I national debt, should now be given to HM Treasury under a “cy-près scheme” and applied to reduce the current national debt as the fund now has no chance of achieving its initial object (the fund being worth £550 million, but the national debt being more than £2.5 trillion). The trustee, Zedra Fiduciary Services, had argued that the cy-près scheme should involve the money being spent on more general charitable purposes. Court rejects claim that £550m National Fund should be used for charitable aims | Third Sector