A round-up of legal updates for the Wills and probate industry over the past month is as follows.
Tax policy – Autumn Statement and tax reforms
It has been an eventful month in terms of tax policy announcements. On 14 and 17 October 2022, the new Chancellor, Jeremy Hunt, announced further U-turns on Liz Truss’ mini-Budget announcements made on 23 September. These are:
- corporation tax – the top rate will increase from 19% to 25% from April 2023 (for companies earning annual profits above £50,000) as planned, reversing the contrary announcement in the mini-Budget;
- income tax – the basic rate will remain at 20% indefinitely, not cut to 19% as per the mini-Budget; and
- dividend tax rate – the plan to cut the rates of income tax on dividends by 1.25% from April 2023 will no longer go ahead and the current rates, which took effect in April 2022, will remain in place.
The mini-Budget announcements that are still going ahead are: the abolition of stamp duty land tax for properties under £250,000 in England and Northern Ireland; the abolition of the 1.25% increase in national insurance rates that took effect in April 2022; and the cancellation of the Health and Social Care levy. For trusts, the rate at which they pay income tax will remain as it is currently, with the trust rate being 45% (not 40% as per the mini-Budget) and the dividend trust rate being 39.35% (not 32.5% as per the mini-Budget). T
Following Liz Truss’ resignation as prime minister on 20 October and Rishi Sunak’s appointment on 25 October, the Chancellor announced on 26 October that the fiscal event originally scheduled for 31 October will take place on Thursday 17 November and will be a full Autumn Statement. It is not yet clear whether this is intended to be the full Budget that should be held in the autumn (under the government’s current fiscal timetable) or whether there will be a full Budget in Spring 2023. It is expected that the Autumn Statement will feature tax rises to reduce the current deficit of £50billion left by the Liz Truss administration. Reports suggest that Rishi Sunak could look at a mix of 50% tax rises and 50% spending cuts. Tax rises could include “stealth” increases in income tax and national insurance over the coming years by freezing the thresholds at which people pay higher rates. Capital gains tax rates have been vulnerable to hikes for some time and could be targeted but query whether this will bring in sufficient revenue to justify reform. Equally, inheritance tax (“IHT“) could be targeted – the latest data published by HMRC shows that IHT is becoming a lucrative tax for the Treasury with receipts £400million higher than a year earlier. It looks likely that the freeze on IHT thresholds and allowances will therefore continue. https://www.step.org/industry-news/uk-government-reverses-ir35-extension-repeal-plans; Government announces reversal of Growth Plan tax measures | Practical Law (thomsonreuters.com); Date of “Autumn Statement” confirmed as 17 November 2022 | Practical Law (thomsonreuters.com)
Contentious estates – proprietary estoppel case
On 19 October, judgment was given in the much-anticipated Supreme Court case of Guest v Guest [2022] UKSC 27. This is a proprietary estoppel case involving a farm where the owners had given assurances to their son over many years (during which he worked on the farm for little financial reward) that he would inherit a substantial share. Following a breakdown in relations, the parents had cut the son out of their Wills meaning that he would not receive any share of the farm after their deaths. The judge at first instance ordered that the parents make a compensatory lump sum payment to the son of about £1.3m. The consequence of that order was that the farm would have to be sold in order to realise the lump sum. The parents appealed to the Court of Appeal where their appeal was dismissed. The parents then appealed to the Supreme Court. This appeal has been allowed in part with the parents being permitted to choose between two alternate remedies: either putting the farm into trust in favour of their children (subject to a life interest for the parents) or paying compensation to the son but with a reduction to reflect his earlier-than-anticipated receipt (a point not taken into account in the original ruling). If the compensation amount cannot be agreed, it will be referred to the Chancery Division. Guest and another (Appellants) v Guest (Respondent) – The Supreme Court
Trusts – new question on TRS form
On 18 October, HMRC confirmed that it has included a new question on the Trust Registration Service (“TRS“) registration form for taxable trusts on whether the trust is an excluded trust under Schedule 3A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLR 2017“). When trustees or agents of a registered taxable trust next log in to the TRS they will be asked to confirm if the trust is a Schedule 3A trust. The new question is required because certain taxable trusts that meet one of the exclusions, although registrable, are exempt from the requirement to share trust data with third parties (see HMRC’s TRS Manual at TRSM 60010). TRS: new question to confirm taxable trusts excluded under Schedule 3A MLR 2017 not subject to data sharing | Practical Law (thomsonreuters.com)
Trusts – TRS and investments held on bare trust for minors
An update has been made to HMRC’s TRS Manual (TRSM23160) to clarify the position with investments held on bare trust for minors and whether these need to be registered on the TRS. There is an exclusion at Sch. 3A para. 6A of the MLR 2017 for bare trusts created where an individual (often a parent) opens bank or building society account for a minor child provided this is a cash deposit account. HMRC’s TRS Manual has been updated to make clear that bare trusts holding investments (for example stocks and shares) for a minor child will not qualify for this para. 6A exclusion. HMRC’s guidance has also been amended to clarify that premium bonds and NSI certificates in the name of a child are generally not registrable. As already set out in the Manual, HMRC do not regard Child Trust Funds and Junior ISAs as trusts and therefore do not require these types of account to register on the TRS (see TRSM10030). TRSM23160 – Types of trust that need to be registered: contents: excluded express trusts: contents: bank accounts for minors – HMRC internal manual – GOV.UK (www.gov.uk)
Wills – Law Commission review
The Law Commission have re-started their review of the law of Wills. The original consultation on reforming the Wills Act 1837 was published in July 2017 but the Law Commission paused the project in 2019 as requested by the government. The remaining stages of the project are to complete the analysis of consultation responses, prepare a final report and instruct Parliamentary Counsel to draft a bill to give effect to the recommendations. Due to the length of time that has passed since the original consultation, and the impact of the pandemic on making a Will, the Law Commission will engage with stakeholders before developing a final policy. We can therefore expect some form of further consultation on the law of Wills in the near future. Wills | Law Commission
Contentious estates – fraudulent calumny case
Sharpe v Dyson (2022 EWHC 2462 Ch) is an unsuccessful fraudulent calumny case. It relates to a 2019 Will which left the residue of the estate to the deceased’s former cohabitant’s sister. The beneficiaries of the deceased’s earlier Will challenged the 2019 Will on grounds of fraudulent calumny alleging that the cohabitant’s sister had poisoned the deceased’s mind against them. The judge dismissed the claim and upheld the 2019 Will. Sharpe v Dyson & Anor [2022] EWHC 2462 (Ch) (04 October 2022) (bailii.org)
Probate – caveats
On 25 October, HM Courts & Tribunals Service (“HMCTS“) issued simplified probate caveat application forms. Applicants (professional and lay) can use the updated PA8A form to apply to stop an application for a grant of representation for up to six months and can apply for caveat extensions using the new PA8B form. Previously, practitioners used a different form to enter a caveat to that used by personal applicants. Separately, in a letter to stakeholders on 18 October, HMCTS explained that it would no longer accept applications to enter or extend a caveat by email after 25 October 2022; however, HMCTS has confirmed that email may still be used to withdraw a caveat. Caveats: HMCTS guidance on email access and location of new and updated forms | Practical Law (thomsonreuters.com); Form PA8A: Apply to stop a grant of probate by post – GOV.UK (www.gov.uk); Stopping a probate application: Challenge someone else’s probate application – GOV.UK (www.gov.uk); Caveats: HMCTS introduces forms for use by both practitioners and personal applicants | Practical Law (thomsonreuters.com)