A round-up of legal updates for the Wills and probate industry over the past month is as follows.
Tax policy – new tax year
The new tax rates and allowances that came into effect from 6 April 2023 and that affect private clients include the following.
- Capital gains tax (“CGT“) – the annual exemption reduces from £12,300 to £6,000 for individuals, and from £6,150 to £3,000 for trustees.
- Income tax – the additional rate (45%) threshold reduces from £150,000 to £125,140; the dividend allowance reduces from £2,000 to £1,000; and the personal allowance remains frozen at its current level (£12.570).
- Inheritance tax (“IHT“) – the nil-rate band and residence nil-rate band remain frozen at current levels (£325,000 and £175,000 respectively).
- Corporation tax – with effect from 1 April 2023, the main rate increases from 19% to 25%; the 19% remains as a small profits rate for companies with profits up to £50,000.
Tax policy – Finance (No. 2) Bill 2023
On 23 March, the UK government published Finance (No. 2) Bill 2023, giving effect to measures announced in the 2023 Spring Budget and the 2022 Autumn Statement, most of which will come into effect for the 2023/24 tax year. It is expected that the Bill will receive Royal Assent in the summer of 2023. The provisions of the Bill that affect private clients include the following.
- Income tax – the rates for tax year 2023/ 24 (clauses 1, 2, 3 and 4).
- Pensions – the abolition of the lifetime allowance charge and increase in the pensions annual allowance (Clauses 18, 19, 20, 21, 22 and 23).
- Separated spouses and civil partners – the extension of CGT “no gain no loss” window on divorce and separation (clause 41).
- Trusts and estates – the formalisation of an existing interim concession that removes trustees and personal representatives from income tax where the only source of income is savings interest and the tax liability is less than £100. The measure will ensure that, with effect from 6 April 2024, trusts and estates with income of any kind up to £500 do not pay tax on that income as it arises. Where the settlor has made other trusts, the amount is the higher of £100 or £500 divided by the total number of existing trusts. Beneficiaries of UK estates will not pay tax on income distributed to them that is within the personal representatives’ £500 limit. (Clause 29, Schedule 2)
- Charities – the definition of “charity” restricted to UK charities and definition of “community amateur sports club” restricted to UK clubs (Clauses 343 and 344)
- Pension benefits and IHT – the expansion of the dormant assets scheme (Clause 347).
- Museums and galleries exhibition tax relief – the extension of sunset date (clauses 13 and 14).
Spring Finance Bill 2023 published – GOV.UK (www.gov.uk); Finance (No 2) Bill 2023 as published: private client tax measures | Practical Law (thomsonreuters.com)
Tax policy – Tax Administration and Maintenance Day
The government declared on 18 April the date for the “Tax Administration and Maintenance Day” that was announced in the Spring Budget. The Tax Administration and Maintenance Day will take place on Thursday 27 April and will set out announcements that “will outline the action the government is taking to simplify the tax system, tackle the tax gap and modernise the tax system“. Written statements – Written questions, answers and statements – UK Parliament
Estate administration – Law Society guidance on applying for grants of probate
The Law Society has published an online guide giving latest guidance on probate fees, online probate applications, current waiting times, and how to avoid delays with applications. The guide includes information on current HM Courts & Tribunal Service staffing levels and how recent recruitment should result in improvements to waiting times “from March 2023 onwards”. https://www.lawsociety.org.uk/topics/private-client/applying-for-probate
Contentious estates – Will forgery case
In Watts v Watts, 2023 EWHC 679 Ch, a son of a deceased testator failed to establish that his mother had forged his father’s last Will so as to exclude the son from benefiting from the estate as he would have done under an alleged earlier Will. The Will in question left the entire estate to the wife who was also appointed sole executrix. On its face, the Will was signed by the deceased and witnessed by a legal secretary and the solicitor who drafted the Will. The son alleged that the signature of the deceased was a forgery and cited expert evidence from a Paper Scientist and Forensic Document Examiner. At trial, the judge concluded that the expert had little expertise in handwriting analysis and was “confused” in cross-examination. The judge also observed that the son was not credible witness and had distorted views of the factual matters relevant to the case. The evidence of the solicitor was found to be a “clear recollection” of the matter, despite the Will file no longer being in existence. The solicitor had met the deceased, a long standing client of the firm, on two separate occasions – once to take instructions and once to oversee the execution of the Will. The judge ruled that the Will in question was not a forgery. The case is interesting for Will drafting practitioners as it emphasises the importance of face-to-face meetings with the client as well as full attendance notes that may later be needed in evidence. Claimant’s will forgery charge against 92-year-old mother thrown out | News | Law Gazette
Contentious estates – Reeves v Drew and committal proceedings
In Frain v Curnock, 2023 EWHC 73 Ch, two committal applications for contempt of court in connection with Reeves v Drew & Ors [2022] EWHC 159 – a Will dispute case last year – have been dismissed by the High Court. The original case involved the validity of a Will made in 2014 by late millionaire Kevin Reeves. Bill Reeves, the deceased’s son, successfully challenged the Will on grounds of lack of knowledge and approval and the judgment included uncomfortable findings of fact against the deceased’s daughter, Louse Reeves, and the solicitor Mr Curnock, and the role they had to play. The Court was critical of the honesty of Louise’s evidence and her character. Bill Reeves brought committal proceedings for contempt of court against Louise on the basis that she knowingly made false statements in four documents verified by signed statements of truth, and also against Mr Curnock, on the basis he knowingly made a false statement in a witness statement. The High Court found, however, that Bill Reeves had commenced the committal proceedings “out of a vindictive desire to punish Louise for her pursuit of the Proceedings” and there was a risk that they had been commenced “purely as a means of harassing Mr Curnock“. These motives as well as the applications failing the tests of public interest and proportionality, were all significant factors in the High Court’s dismissal of the application. Frain & Anor v Reeves & Anor [2023] EWHC 73 (Ch) (19 January 2023) (bailii.org)
Contentious estates – mutual Will set aside for undue influence
In Naidoo v Barton, 2023 EWHC 500 Ch, the High Court ordered the rescission of mutual Wills made by spouses (Mr and Mrs Naidoo) in 1998 under which their combined residuary estate would be left to one of their seven children (David Barton) on the death of the survivor. In 2015, following the death of Mr Naidoo, Mrs Naidoo made a new Will in favour of another of her children (the claimant) in contravention of the mutual Wills doctrine. On Mrs Naidoo’s death, the claimant son obtained probate of the 2015 Will and this was challenged by Mr Barton asserting the validity of the mutual Wills agreement under which the survivor was prevented from altering their Will. The claimant sought an order setting aside the mutual Wills agreement on grounds of the undue influence of Mr Barton, and the High Court agreed. Highly relevant was that Mr Barton was at the time of the case serving a 17-year prison sentence for dishonesty and fraud offences. In reaching the decision, it is interesting that the equitable doctrine in Royal Bank of Scotland Plc v Etridge (No.2) [2002] 2 AC relating to the vitiation of lifetime transactions applied rather than the common law doctrine of undue influence in relation to Wills. it can be easier to show undue influence using the Etridge test. Equitable remedy available where undue influence led to mutual wills (High Court) | Practical Law (thomsonreuters.com)
Contentious estates – forged Will case
In Selvarajah v Selvarajah (2023 EWHC 474 Ch) the High Court had to consider a disputed Will with unusual circumstances in that there was no evidence as to how it had been created including whether it had been professionally drawn up (there was no solicitors’ Will file). One of the deceased’s four adult children accused their three siblings of causing the Will to be drawn up and executed through fraud and that one of the siblings had forged the deceased’s signature. The High Court rejected the claims commenting that these had been driven by the claimant’s suspicions and “wild allegations” most of which were unsupported by evidence. The Court found that the evidence of the witnesses as to the deceased’s signing of the Will and their attestation was conclusive, with weight being given to the fact that both witnesses were independent professional women with substantial careers. Weight was also given to the fact that one of the defendant siblings was a solicitor and would have faced severe consequences professionally if she had bene involved in any fraud or forgery concerning the Will. The Court concluded that the Will was valid. Selvarajah v Selvarajah & Ors (Re Estate of Selvarajah Sellathurai) [2023] EWHC 474 (Ch) (10 March 2023) (bailii.org)
Contentious estates – proprietary estoppel case
In Teasdale v Carter, 2023 EWHC 490 Fam, the High Court has dismissed an appeal against a proprietary estoppel ruling in relation to a farm outbuilding (Cow House) near Sheffield. The farm building was owned by two spouses (Mr and Mrs Teasdale – who were in the process of divorcing) but one of their daughters (Rebecca Carter) had claimed that she had been promised the farm building if she discharged the mortgage. Rebecca had acted to her detriment in reliance on this promise and had been intimately involved with converting the outbuilding to a completed house, and moving into the property. The Family Court had found that Rebecca was entitled to the transfer of the property into her sole name on discharge of the outstanding mortgage, on the basis of a proprietary estoppel. Mrs Teasdale appealed the ruling but the High Court has now dismissed the appeal with Mr Justice Moor commenting that “this is one of the most regrettable pieces of litigation that I have ever come across“. The total costs of the litigation were approximately £828,000 and the costs of the appeal were £220,000; whereas the property in question was worth £245,000. The Court was also critical of the fact that the parties had agreed a way forward on 7 October 2020 which would have obviated the need for further litigation but the agreement was repudiated by Mrs Teasdale. Teasdale v Carter & Anor [2023] EWHC 490 (Fam) (07 March 2023) (bailii.org)
Taxation – discounted gift schemes
On 17 April, HMRC issued Revenue and Customs Brief 4 (2023) giving notice of a change to the valuation rate of interest used for inheritance tax (“IHT“) purposes when valuing the retained rights in a discounted gift scheme. Valuations are required at the start of the scheme and at ten-year anniversaries. The rate will increase from 4.5% to 6.75% per annum from 1 May 2023. Discounted gift schemes make use of insurance bonds and involve a trust for the benefit of others (such as the settlor’s children) with the settlor retaining the right to 5% annual capital withdrawals. Discounted gift schemes are common IHT planning and are not considered by HMRC to conflict with the general anti-abuse (“GAAR”) rule. Discounted gift schemes: HMRC issues notice of change to valuation rate of interest for IHT | Practical Law (thomsonreuters.com)