A summary of key legal updates for the Private Client sector over the past week is as follows.
Mental capacity and predatory marriages
Re BU (2021 EWCOP 54) is a Court of Protection ("COP") case on the topic of predatory marriages. It involves a 70-year-old woman (BU) with vascular dementia who wished to marry a man (NC) nearly 20 years younger with previous criminal convictions for fraud, theft, dishonesty and blackmail. BU had significant financial resources but lacked capacity to make financial decisions. BU's daughter brought proceedings in the COP. The Judge concluded it was not in BU's best interests to be exposed to further risk of financial abuse by NC through the coercive control he had exerted to date, and proposed an order providing no contact between NC and BU, with an attached penal notice to make NC in contempt of court if breached. In respect of marriage/ civil partnership, the Judge made a separate injunction preventing NC from attempting to enter a civil partnership with BU without first obtaining permission from the COP, as well as a forced marriage protection order under the Family Law Act 1996. Illustrating the difficult nature of the case, the Judge recognised in her judgment that the decision would unintentionally cause significant distress to BU but was necessary to secure her safety and wellbeing. England and Wales court considers danger of predatory marriage under coercive control | STEP
Transfer of Assets Abroad
HMRC v Fisher, 2021 EWCA Civ 1438 is a case involving the transfer of assets abroad ("TOAA") rules in s.739 Income and Capital Taxes Act 1988 (now in rewritten form in s.720 Income Tax Act 2007). The Court of Appeal has partially overturned an Upper Tax Tribunal ("UTT") ruling in 2020 giving the Fisher family victory over HMRC in respect of the TOAA tax charge imposed on the relocation of their family tele-betting business from the UK to Gibraltar in 2000. The UTT found that all three of the family shareholders were exempt from the tax, but the Court of Appeal has ruled that the transfer abroad could be imputed to two of the three shareholders as "quasi-transferors" for the purposes of the TOAA rules. The remaining shareholder was exempt because of her passive role in the business. The taxpayers had argued that s.739 could not apply because they had avoided betting duty not income tax, but the Court of Appeal ruled that actual avoidance of UK income tax was not an essential condition for s.739. The motive defence in s.741 ICTA 1988 (now rewritten in s.739 ITA 2007) was not available to the taxpayers. It was agreed that the transfer to the Gibraltar company was for commercial reasons but the Court ruled that this was inextricably linked with the need to avoid betting duty in the UK. Transfer of assets abroad: sale of UK family business to Gibraltar company caught by anti-avoidance rules (Court of Appeal) | Practical Law (thomsonreuters.com)
IHT and political donations
The Court of Appeal has upheld HMRC’s imposition of a £162,000 inheritance tax ("IHT") charge on Arron Banks in respect of donations totalling £977,000 to UKIP between October 2014 and March 2015. Under s.24 Inheritance Tax Act 1984, transfers of value to UK political parties are exempt from IHT provided that the party is of sufficient stature; namely, that (as at the last general election): either at least two members of the party were elected to the House of Commons; or at least one member of the party was so elected and at least 150,000 votes were given to candidates who were members of that party. UKIP had no members elected as MPs at the general election preceding the donations (May 2010). Arron Banks claimed that this application of s.24 breached his human rights and EU law. The Court of Appeal has held that there is no such breach of human rights, upholding the ruling of the Upper Tribunal which had previously reached the same conclusion. IHT exemption for gifts to political parties did not breach donor's human rights (Court of Appeal) | Practical Law (thomsonreuters.com)
Trust Registration Service and life policy trusts
The extension of the Trust Registration Service to non-taxable trusts has thrown up some uncertainties in several areas. One of these is in respect of life policy trusts. Life policy trusts are one of the "excluded" categories of trust in the legislation (paragraph 4, Schedule 3A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017) but the scope of the exclusion is very narrow. It is likely that any life policy that has a significant investment element, such as one involving an investment bond, would not be excluded. The exclusion only extends to policies that mainly provide protection in the event of death (or certain other limited circumstances) but, following a helpful announcement made by HMRC in July 2021, the exclusion can still apply to policies that happen to have a surrender value. Solicitors Journal - Trust Registration Service expansion: some uncertainties and randomness?