A summary of key legal updates in the Private Client sector over the past week is as follows.
Pension tax reforms to pay for pandemic
The Treasury is reportedly looking at pensions taxation to recoup some of the cost of the pandemic. A report from The Telegraph citing "well placed Whitehall sources" provides that measures being considered (presumably for the next Budget) are: a reduced lifetime allowance, a flat rate of tax relief or a tax on employer contributions. The government announced a freeze on the lifetime allowance of £1,073,000 in the March 2021 Budget but could reportedly reduce this to £900,000 or £800,000. The “triple lock”, which uprates the state pension by the highest of average earnings, inflation or 2.5%, is said to be unaffected. Treasury 'planning pensions raid to pay for pandemic' : CityAM
Testamentary capacity and the Golden Rule
Hughes v Pritchard, 2021 EWHC 1580 Ch is a testamentary capacity case in which a Will was overturned despite the solicitor following the "Golden Rule" and obtaining a favourable capacity assessment from a GP which was backed up by an expert report. The testator, a Welsh farmer, executed his third Will in 2016 when he was aged 83. He was suffering from moderately severe dementia and grief following the recent suicide of one of his sons. The new Will made a fairly major change in giving a parcel of farmland to the deceased son's brother, rather than his wife and child. The latter challenged the Will on grounds of capacity and proprietary estoppel. At trial, the GP revealed that, when he made his assessment, he thought the Will made only minor changes and this was also the testator's understanding; in fact, the changes were significant in effect. The case highlights the need for very clear instructions to be given to GPs when instructing them to prepare a capacity assessment. Welsh farmer's will overturned despite expert report asserting capacity | STEP
Co-ownership of property and the Trust Register
HMRC have clarified a point in respect of trusts of co-owned land and whether these need to be on the UK Trust Register. This is in the context of the new Trust Register rules under the Fifth Anti-Money Laundering Directive which generally require all express trusts to register. There is an exclusion for land held jointly (as a result of which a trust automatically arises) provided the trustees and beneficiaries are the same persons. HMRC have clarified that the equitable shares of the co-owners do not need to be 50:50 for the exclusion to apply; the land can, for example, be held as tenants in common whereby the split is 70:30. However, if the trust involves other beneficiaries (e.g. children of the joint owners), the trust will need to be registered. Co-ownership Of Property And The TRS - Lawskills
IHT Conditional Exemption and Covid-19
On 14 June, HMRC updated its guidance to reflect the delay to the lifting of the lockdown restrictions on 21 June and the impact this has on the inheritance tax "conditional exemption" scheme for heritage assets. In respect of conditionally exempt properties, the new guidance includes that the exemption will not be jeopardised where the owner closes the heritage property or delays its opening to 1 August 2021. In respect of conditionally exempt objects on loan to a museum, gallery or other venue which has had to close, HMRC will not treat the withdrawal of public access to the object as jeopardising the exemption, even if the object is not on show at all until 1 August 2021. COVID-19: HMRC further extends temporary changes to IHT conditional exemption scheme for heritage property | Practical Law (thomsonreuters.com)
