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

Tax - new tax year

Below are some points to note in respect of tax rates and allowances for private clients for the new tax year 2022/23.

  • Income tax – the personal allowance remains at £12,570 (frozen at this level until April 2026); the basic, higher and additional rate bands remain the same; the general and savings rates within those bands remain the same (20%, 40% or 45%); but the dividend rates rise by 1.25% (in connection with the health and social care levy) to 8.75%, 33.75% and 39.35%.
  • Capital Gains Tax ("CGT") – the annual exemption remains at £12,300 for individuals and estates, and £6,150 for trustees (frozen at these levels until April 2026); and the CGT rates (10%, 18%, 20% and 28%) remain the same.
  • Inheritance Tax ("IHT") - the nil-rate band (£325,000) and residence nil-rate band (£175,000) remain frozen until April 2026; the IHT annual exemption (£3,000) and tax rates (20%, 36% and 40%) remain the same.
  • National insurance contributions – like dividend rates, these rise by 1.25% so that the main NIC rate is 13.25% (employees) and 15.05% (employers).
  • Annual tax on enveloped dwellings – our "Private Client Legal Updates" post last week set out the new chargeable amounts for 2022/23.

Trusts – rule in Saunders v Vautier

Batt v Boswell [2022] EWHC 649 (Ch) is a case described by the judge as "the worst kind of trust and inheritance litigation" but provides a useful review of several areas of trust law including the rule in Saunders v Vautier. The case involved a claim for breach of trust brought by Helen Batt against her brother as trustee of a family trust. The terms of the trust were such that the parties' mother had a life interest, with capital being held for the two parties. The sister's claims included that distributions had been made in breach of trust. The High Court dismissed the claim, finding that the assets had been properly transferred under the rule in Saunders v Vautier [1841] EWHC Ch J82 under which, a beneficiary who is of full age and capacity and absolutely entitled to the trust interest, can call on the trustee to direct all the trust assets to them and bring the trust to an end. Where two or more persons were absolutely entitled as co-owners, the court confirmed the rule applied to each co-owner separately, provided the property was of such a nature that each share could be severed without harm to the remainder. As the fund in this case was in cash, there was no difficulty in severance. Assets of will trust had been properly transferred to beneficiaries using rule in Saunders v Vautier (High Court) | Practical Law (thomsonreuters.com)

HMRC – accelerated payment notices

In Exclusive Promotions & Mark Fox v HMRC (2022 UKFTT 00103 TC), the First-tier Tax Tribunal ("FTT") has ruled that HMRC was wrong to refuse to consider representations made against accelerated payment notices ("APNs"). However, although HMRC should have responded as part of its general duty to respond to submissions about quantum and failure to do so made its APN determination unreasonable, the FTT had no jurisdiction to review it: any challenge would need to be through judicial review. As a result of the ruling, HMRC may now be more inclined to respond to such representations or risk judicial review. HMRC wrong to ignore representations about "non-computational" challenges to the amount of APN (First-tier Tribunal) | Practical Law (thomsonreuters.com)

Tax – ATED, SDLT and "Homes for Ukraine" scheme

The government announced on 31 March that it intends to legislate within Finance Bill 2022/23 so that companies that currently qualify for the existing reliefs available from ATED and the 15% rate of SDLT for dwellings that are let on a commercial basis or used in a property development or trading business, will continue to be able to claim relief while the dwelling is being used under the "Homes for Ukraine" scheme.

Annual Tax on Enveloped Dwellings: reliefs and exemptions - GOV.UK (www.gov.uk); Stamp Duty Land Tax: corporate bodies - GOV.UK (www.gov.uk)