Private Client Legal Updates (24 August 2022)

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

Trusts – TRS guidance

HMRC has announced that it has produced some brief "step by step" guidance to assist with registration on the Trust Registration Service ("TRS"). The guidance can be requested by sending an email to trustenquiries@hmrc.gov.uk.  This guidance repeats HMRC's undertaking that there will be no penalty for a first offence of failure to register or late registration of a trust, unless that failure is shown to be due to deliberate behaviour on the part of the trustees. This leniency reflects the fact that registration is a new and unfamiliar obligation for many trustees. TRS: HMRC to provide step by step guidance on request | Practical Law (thomsonreuters.com); HMRC provides further last-minute assistance with TRS registration | STEP

Trusts – TRS and discrepancy reporting

On 2 August 2022, HMRC updated its Trust Registration Service Manual to include guidance on discrepancy reporting by parties ("relevant persons") who enter into a business relationship with a trust (Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 s.30A). "Relevant persons" include legal professionals, accountants, and trust and company service providers. Before the start of the business relationship, the relevant person will need to request that the trustee provides a "proof of registration" document (available for download from the TRS). The relevant person should check this against information obtained from the trustee, and if there are any "material discrepancies", these should be reported to HMRC. An example of a "material discrepancy" is where a beneficial owner has been omitted from the TRS record. The HMRC guidance provides that the relevant person can first seek to resolve the discrepancy directly with the trustee. TRSM70030 - Discrepancy reporting: contents: Requirement to review proof of registration - HMRC internal manual - GOV.UK (www.gov.uk)

Offshore – register of overseas entities

Companies House has now written to all overseas entities who already own or lease property or land in the UK and must register beneficial ownership information on the register of overseas entities by 31 January 2023. Where the registrable beneficial owner of an overseas entity is a trust, the letter includes an undertaking to those trustees that their information will not be publicly available but will only be shared with law enforcement and other public authorities such as HMRC. UK public will not have access to trust information on register of overseas entities | STEP

Contentious probate – revocation of Will

Sangha v Sangha's Estate [2022] EWHC 2157 (Ch) (12 August 2022) relates to the construction of a revocation clause in the Will of Diljit Kaur Sangha who died with assets in India and the UK. The deceased had made a UK Will in 2007 covering all his UK and Indian property. He then made a Will in 2016 dealing only with his property in India but the Will contained a revocation clause which provided: ""this is my last and final WILL and all such previous documents stand cancelled". The issue was whether the phrase "all such previous documents" revoked all previous Wills, or just the Wills that dealt with the Indian property. The High Court took into account that the deceased did not demonstrate intention to revoke the provisions relating to his UK estate, as well as the fact that the 2016 Will was drafted in India and related to the deceased's Indian property only. Accordingly, the High Court ruled that the 2007 Will had only been revoked insofar as it related to the Indian estate; the provisions relating to the UK estate remained valid. This was a complex case and also involved claims relating to the validity of the 2007 Will on attestation grounds and the marital status of the deceased's two purported wives. EWHC rules revocation clause in will disposing of Indian assets did not apply to English estate | STEP

Tax - CGT gains must be reported twice

HMRC has confirmed that a capital gains tax ("CGT") return on the sale of a UK property will usually have to be filed twice: once within 60 days of completion via the online UK property account and again when the taxpayer completes their annual self-assessment return. The Institute of Chartered Accountants in England and Wales comments that the decision was "inevitable" but the six-month delay in communicating it is "most unsatisfactory". HMRC confirms that CGT property returns must be filed | ICAEW 

Mental Capacity – Law Society practice note on LPAs

On 17 August, the Law Society published an updated version of their Lasting Powers of Attorney ("LPA") practice note. This is extensive and covers issues such as taking instructions, verifying instructions, capacity to make an LPA, drafting points, disclosure of the donor's Will and reporting suspected abuse. Lasting powers of attorney | The Law Society