Some key highlights of legal updates affecting the Private Client industry over the past month are as follows.
Tax – Spring Budget 2024
The Chancellor delivered his Spring Budget to parliament on 6 March 2024. You can read our summary of key announcements for private clients here. The most significant announcement was the changes to the tax regime affecting non-UK domiciled individuals (“non-doms“) from 6 April 2025. You can read our analysis of these changes including how they affect different categories of non-dom on our “Budget 2024: Non-Dom Changes” landing page. We do not as yet have the draft legislation for these changes, nor the technical consultation on the inheritance tax (“IHT“) aspects of the reforms, and no date has been set for either. The legislation was not included in the Finance (No.2) Bill 2024 published on 13 March neither is it expected to be published on “Tax Day” on 18 April. HM Revenue & Customs (“HMRC“) have announced that the IHT consultation will be “later in the year”. It is to be hoped that there is not a long delay as although affected non-doms have just over a year to make planning arrangements, they will want sight of the legislation before taking any action. HMRC policy paper
Tax policy – Finance (No.2) Bill 2024
On 13 March, the government published Finance (No.2) Bill 2024. The Private Client provisions are as follows.
- Clause 6 – reduction in higher CGT rate for residential property gains from 28% to 24% with effect from 6 April 2024, as announced in the Spring Budget 2024.
- Clause 7 – abolition of multiple dwellings relief for Stamp Duty Land Tax (“SDLT“) as from 1 June 2024, as announced in Spring Budget 2024.
- Clause 8 – first-time buyers’ relief from SDLT for acquisitions of new leases via a bare trust or nominee arrangement, as announced in the Spring Budget 2024.
- Clause 11 – Removal of IHT relief for non-UK agricultural property and woodlands from 6 April 2024. This was announced in Spring Budget 2023 and will means that agricultural property and woodlands in the EU will no longer qualify for IHT relief.
- Clauses 16, 17 and 18 – increase in museums and galleries exhibition tax credit, theatre tax credit and orchestra tax credit. This is a permanent extension of the higher rates of tax relief for theatres, orchestras, museums and galleries and was announced in Spring Budget 2024.
- Clause 22 – changes to the “transfers of assets abroad” tax regime to extend the rules to some close companies from 6 April 2024, thereby closing the loophole created by the recent Supreme Court judgment in the HMRC v Fisher case.
The non-dom tax measures to be introduced from 6 April 2025 were not included in this Bill. Finance (No. 2) Bill publications – Parliamentary Bills – UK Parliament; Finance (No 2) Bill 2024 as published: private client tax measures | Practical Law (thomsonreuters.com)
Pensions – lifetime allowance abolition
The long-awaited regulations to deal with the abolition of the pensions lifetime allowance have been laid before parliament and will take effect on 6 April 2024. There are transitional measures to address many of the immediate impacts associated with the abolition. You can read more about these changes in this update from our Pensions and Employee Benefits team: PART 1 – Don’t forget 6 April 2024 – New Allowances replace the Lifetime Allowance (LTA) – Wedlake Bell.
Offshore – register of overseas entities (ROE)
Changes to the ROE regime came into force on 4 March 2024 via regulations under the Economic Crime and Corporate Transparency Act 2023. These include changes to the reporting rules concerning nominees and corporate trustees. You can read more about these developments and also which provisions of the ECCTA 2023 are not yet in force (although expected to be introduced this year) in our article “Update on the Register of Overseas Entities“.
Trusts – new TRS consultation
The government has launched a new consultation on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 including proposed reforms to the Trust Registration Service (“TRS”). The proposals put forward include the following.
- Aligning the registration deadline for certain trusts following the death of a settlor – introducing a common registration deadline of two years as opposed to the current 90-day deadline that applies to some trusts (including co-ownership trusts and trusts created by deed of variation) in this context.
- De minimis level for trust registration – there is currently no de minimis level, but it is proposed that a trust will not have to register if: it is not liable for relevant UK taxes; it does not own or have any interests in UK land; it does not hold more than £5,000 in assets; and it does not distribute more than £2,000 in any 12-month period.
- Offshore trusts with UK land – it is proposed that all non-UK express trusts that have no UK trustees but that own UK land should be registrable. There is currently a reporting gap as non-UK trusts that acquired UK land before 6 October 2020 are outside the TRS regime.
The consultation period closes on 9 June 2024. New consultation will consider scope and exclusions in UK trust registration | STEP
Contentious probate – Will forgery case
Wedlake Bell acted for the successful claimant in the case of Fraser v Khawaja [2023] EWHC 3143 (Ch). The facts of the case were complex and detailed and were set against the backdrop of the Covid pandemic which may have facilitated the forged Will in being admitted to probate. The Will in question named a fictitious person as sole residuary beneficiary with an address in Pakistan that did not exist. The executor claimed to be a “friend” of the deceased and acting under a power of attorney for the residuary beneficiary, both of which statements were found to be untrue. After a two-day hearing, the High Court recorded a finding of forgery against the defendant and declared the Will invalid under section 9 of the Wills Act 1837 on the basis that the “signature on the will is not that of the Deceased and… that [it] has been drafted as an attempt to commit a fraud and obtain the Deceased’s estate by deception…“. The grant of probate issued to the defendant was revoked and he was ordered to pay costs on the indemnity basis. The Chief Master confirmed that the forged Will should be stored at the High Court and the matter referred to the police. FRASER V KHAWAJA: AN ELABORATE YET FAILED ATTEMPT AT WILL FRAUD – Wedlake Bell
Mental capacity – transparency orders in the Court of Protection (COP)
VS (deceased), Re [2024] EWCOP 6 relates to whether a transparency order should be lifted to allow the applicant to make public her concerns with how her father was looked after by his attorneys (appointed under a lasting power of attorney (“LPA“) during his lifetime. The attorneys were the father’s companion and his daughter, both of whom prevented the applicant from seeing or contacting her father. In a previous COP hearing, the applicant was successful in achieving contact, but a transparency order was made at that hearing imposing restrictions on the publication of information about the case. The COP have now lifted that order agreeing with the applicant that there was a very strong public interest in understanding LPAs and the role of the COP. Also material was the fact that the applicant’s father had since died and the purpose of the transparency order in protecting him was now redundant. The applicant, Professor Carolyn Stephens, was interviewed on BBC Radio 5 Live along with Wedlake Bell partner Ann Stanyer and was freely able to discuss her case on that programme as a result. Professor Stephens and Ann Stanyer have also recently co-authored an article for the British Medical Journal on the topic of elder abuse.
Charities – further Charities Act 2022 provisions brought into force
The third tranche of changes introduced by the Charities Act 2022 (CA 2022) were brought in force on 7 March 2024.This latest group of changes includes the following.
- Governing documents – provisions making it easier for charitable trusts and unincorporated charities to change their governing document;
- Charity trustees:
- provides the Charity Commission (CC) with power to ratify the appointment of charity trustees where there is uncertainty concerning the validity of their appointment;
- wider powers to decide on how they procure goods and services;
- additional powers for the CC to authorise charities to pay an equitable allowance; and
- trust corporation status can be conferred on charitable corporate trustees of charitable trusts.
- Mergers – legal barriers to charity mergers and incorporations are removed.
Charities Act 2022: changes to law and practice | Practical Law (thomsonreuters.com); Charities Act 2022 tracker | Practical Law (thomsonreuters.com).