A summary of legal updates for the Private Client industry over the past week is as follows.  

Tax policy - Spring Statement 2022

There were no major announcements for the Private Client industry in the Spring Statement which was dominated by the effect on the economy of the Russia/Ukraine war and the related "cost of living" crisis. The headline announcements were:

  • the basic rate of income tax set to be cut from 20% to 19% in 2024. This will apply to the basic rate of non-savings, non-dividend income; the savings basic rate; and the default basic rate (which applies primarily to trustees and non-residents). There will be a three-year transition period for gift aid relief on gifts to charities, allowing the income tax basic rate relief to remain at 20% until April 2027;
  • the health and social care levy to remain but there will be an increase in national insurance thresholds from July 2022, aligning them with the income tax personal allowance; and
  • the publication of the government's "Tax Plan" setting out its proposed approach to cutting taxes. This includes looking at reforms to tax reliefs and allowances over the next two years.

Head of the Wedlake Bell Private Client team, Jenny Cutts, has had comments on the Spring Statement published in IFA Magazine here. 

2022 Spring Statement: key private client announcements | Practical Law (thomsonreuters.com)

LPAs – discretionary investment management 

Further to the Law Society's recent report of a change of guidance from the Office of the Public Guardian ("OPG") on the requirement to have an express discretionary investment management clause within a financial Lasting Power of Attorney ("LPA"), the Society of Trust and Estate Practitioners ("STEP") has now issued their own statement and have confirmed that the OPG "has agreed to change its guidance". The OPG have also updated its LPA guidance (LP12) to state that in circumstances where the donor already has investments managed on their behalf by a discretionary fund manager ("DFM") or would like to allow their attorneys to use discretionary investment management, they should "consider taking legal advice on whether it is necessary to make specific provision" for this in the LPA. The previous guidance stated that express provision was needed, so this is a shift in tone. It is not clear whether further updates to the OPG guidance will be made but STEP have advised that the OPG verbal confirmation "will be sufficient for an attorney needing to instruct a discretionary investment manager in the interim period." This should mean that, for LPAs without the relevant express wording, DFMs will be able to act without the need for an application to the Court of Protection for authority. LPAs no longer require discretionary investment express provision | The STEP Blog

Ukraine crisis – tax implications for UK expats

UK expats being forced to return from Ukraine, Russia or Belarus may face unexpected tax liabilities. This would be the case, for example, for income tax purposes if they are forced to return before being absent from the UK for a complete tax year. There may also be capital gains tax issues for expats if they are prevented from staying non-UK resident for five tax years after a disposal of assets. HMRC has been called on to make concessions in these circumstances. EPrivateClient - article (paminsight.com)

Trusts – usufructs and the Trust Register

The below commentary relates to whether usufructs (arrangements used in civil law jurisdictions such as France whereby a person is given a right to use/ occupy a property which belongs to another person) are registrable under the UK's Trust Register rules. This could potentially be the case, for example, where the arrangement is viewed as an express trust and the property owner is UK resident and uses a UK adviser. The commentary explains that HMRC have confirmed that usufructs do not have to be on the Trust Register. This is even though, in the UK, a usufruct is treated for IHT purposes like an interest in possession trust. It is however possible that the usufruct will need to be registered on the equivalent Trust Register in the country concerned, depending on how they view usufructs and interpret the Trust Register rules. https://www.linkedin.com/posts/gillsteel_lawskills-trusttuesdays-trs-activity-6909408051519176704-hUaG/?utm_source=LawSkills+Newsletter&utm_campaign=df73976ea4-2203-March-Newsletter&utm_medium=email&utm_term=0_9a60f70293-df73976ea4-353668114&mc_cid=df73976ea4&mc_eid=4f4411ff40

Mental capacity – consultation on the Mental Capacity Act Code of Practice

On 17 March, the government published a consultation on proposed changes to the Mental Capacity Act 2005 Code of Practice and implementation of the Liberty Protection Safeguards. This includes proposals on LPAs including: additional guidance on who cannot be a certificate provider (paragraph 8.11); clarification of the status of foreign powers of attorney in England and Wales (paragraph 8.30); and guidance on when attorneys can make gifts (paragraph 8.49 to 8.59). The consultation closes on 7 July. Changes to the MCA Code of Practice and implementation of the LPS - GOV.UK (www.gov.uk); Government launches consultation on changes to England and Wales MCA Code of Practice and implementation of Liberty Protection Safeguards | STEP