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

Tax policy – mini-Budget

The new Chancellor, Kwasi Kwarteng, will deliver a "mini-Budget" (referred to by the government as "The Growth Plan") to Parliament on Friday 23 September 2022. This is expected to announce tax cuts, including a reversal of this year's national insurance rises and next year's planned corporation tax rises. There is also speculation that the government could cut stamp duty land tax in an attempt to drive economic growth. Rumours around reforms to income tax are also circulating (in particular, a reversal of the freeze on personal allowance thresholds announced in March this year, and bringing forward the planned reduction in the basic rate of income tax from 20% to 19%). When is the mini-Budget? Predictions and what to expect from Kwasi Kwarteng’s announcement (telegraph.co.uk); Liz Truss to cut stamp duty in push for prosperity | News | The Times

Contentious probate – 1975 Act case

In Ramus v Holt, 2022 EWHC 2309 Ch), the High Court dismissed a widow's challenge to her husband's Will under the Inheritance (Provision for Family and Dependants) Act 1975 ("1975 Act") made on the grounds that the Will left her with a life interest that could be terminated at any time by the trustees. The deceased and his wife were in the process of separating and divorcing at the time of the deceased's death (by suicide). The wife claimed that the Will did not provide her with reasonable financial provision as the trustees could stop payment of the income to her at any time and could refuse to advance capital. Her concern was also founded on a personality clash with her daughter who was one of the trustees. The Court dismissed the claim, finding that financial provision did not become "unreasonable" because of the identity of the trustees, particularly where there were other trustees who would need to consent to the exercise of the power in question. (Ramus v Holt, 2022 EWHC 2309 Ch). Widow's tense relationship with trustee were not grounds for reasonable provision claim, finds EWHC | STEP

Tax – trusts and Business Asset Disposal Relief 

The Court of Appeal judgment in The Quentin Skinner 2015 Settlement L and others v HMRC [2022] EWCA Civ 1222 has been published. The case relates to capital gains tax ("CGT") and business asset disposal relief ("BADR"); specifically the circumstances in which BADR can be claimed on a disposal of business assets by trustees. Under s.169J of the Taxation of Chargeable Gains Act, there needs to be a "qualifying beneficiary" ("QB") for BADR to apply. The issue in this case was whether the QB should have held an interest in possession ("IIP") in the trust's shares throughout the one-year period ending on the date of the disposal or whether the individual only needed to be a QB at the time of the disposal. The First-tier Tribunal found the latter; the Upper Tribunal overturned this decision, but the Court of Appeal has now upheld it. As the judgment contradicts HMRC's view in their CGT Manual, it is likely that HMRC will try to appeal. Individual only needs to be qualifying beneficiary at time of disposal by trustees for entrepreneurs' relief (Court of Appeal) | Practical Law (thomsonreuters.com)

Offshore – transfer to offshore trust set aside for mistake

In Abadir v Credit Suisse Trust Ltd [2021] EWHC 2573 (Ch), the High Court set aside, on the grounds of mistake, a transfer to an offshore trust made by a UK resident, non-domiciled individual because his professional advisers had failed to advise that he was deemed domiciled for inheritance tax purposes at the time of the transfer meaning the assets did not qualify as excluded property and were subject to tax charges, interest and penalties of £4.6 million. The law concerning rescission of a voluntary disposition on the grounds of mistake is set out in Pitt v Holt [2013] UKSC 26. Transfer to offshore trust set aside after mistake as to IHT consequences (High Court) | Practical Law (thomsonreuters.com)

Tax – HMRC investigating tax evasion involving Puerto Rican bank 

HMRC is writing to around 600 UK customers of the collapsed Puerto Rican bank Euro Pacific Bank urging them to check their tax position and make disclosures under the Worldwide Disclosure Facility to correct their tax affairs. The Bank has been linked to tax evasion and money laundering and HMRC has already launched criminal investigations into some UK customers. EPrivateClient - article (paminsight.com); HMRC investigates Euro Pacific accountholders for suspected tax evasion | STEP

Offshore – "requirement to correct" guidance

On 7 September, HMRC published additional guidance on the "requirement to correct" ("RTC") rules. The RTC was introduced by Finance (No.2) Act 2017 and affects any person who had "relevant offshore tax non-compliance" at the end of tax year 2016-17 and who failed to correct that non-compliance by 30 September 2018. The additional guidance clarifies a number of points, including that if a taxpayer dies while their affairs are within scope of the RTC, any penalty is unlikely to be applicable to their personal representatives. HMRC publishes additional guidance on requirement to correct previous offshore tax non-compliance | Practical Law (thomsonreuters.com)