Private Client Legal Updates (3 November 2022)

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

Tax policy – Autumn Statement and tax reforms

On 26 October, the Chancellor announced that the fiscal event originally scheduled for 31 October will take place on Thursday 17 November and will be a full Autumn Statement. It is not yet clear whether this is intended to be the full Budget that should be held in the autumn (under the government's current fiscal timetable) or whether there will be a full Budget in Spring 2023. It is expected that the Autumn Statement will feature tax rises to reduce the current deficit of £50billion left by the Liz Truss administration. Reports suggest that Rishi Sunak could look at a mix of 50% tax rises and 50% spending cuts. Tax rises could include "stealth" increases in income tax and national insurance over the coming years by freezing the thresholds at which people pay higher rates. Capital gains tax rates have been vulnerable to hikes for some time and could be targeted but query whether this will bring in sufficient revenue to justify reform. Equally, inheritance tax ("IHT") could be targeted – the latest data published by HMRC shows that IHT is becoming a lucrative tax for the Treasury with receipts £400million higher than a year earlier. It looks likely that the freeze on IHT thresholds and allowances will therefore continue. EPrivateClient - article (paminsight.com); Date of "Autumn Statement" confirmed as 17 November 2022 | Practical Law (thomsonreuters.com)

Offshore – amendments to ROE legislation

The government has published factsheets explaining how certain measures in the recently published Economic Crime and Corporate Transparency Bill ("ECCT Bill") will ensure maximum transparency surrounding a legal entity trust in a chain of ownership for the purposes of the register of overseas entities ("ROE"). The ECCT Bill was published in August 2022 and will amend the Economic Crime (Transparency and Enforcement) Act 2022 (which introduced the register of overseas entities). The amendments seek to ensure that overseas entities are required to record a legal entity trustee as a registrable beneficial owner, whether or not it is “subject to its own disclosure requirements”. The amendments also seek to ensure that wherever there is a trustee in the chain of ownership of an overseas entity, it would fall under the definition of registrable beneficial owner. UK government gives assurances that new economic crime Bill will achieve transparency aims | STEP; Factsheet: beneficial ownership - GOV.UK (www.gov.uk)

Trusts – TRS and investments held on bare trust for minors

An update has been made to HMRC's TRS Manual (TRSM23160) to clarify the position with investments held on bare trust for minors and whether these need to be registered on the Trust Registration Service ("TRS"). There is an exclusion at Sch. 3A para. 6A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 for bare trusts created where an individual (often a parent) opens bank or building society account for a minor child provided this is a cash deposit account. The Manual has been updated to make clear that bare trusts holding investments (for example stocks and shares) for a minor child will not qualify for this para. 6A exclusion. HMRC's guidance has also been amended to clarify that premium bonds and NSI certificates in the name of a child are generally not registrable. TRSM23160 - Types of trust that need to be registered: contents: excluded express trusts: contents: bank accounts for minors - HMRC internal manual - GOV.UK (www.gov.uk)

Wills – Law Commission review

The Law Commission have re-started their review of the law of Wills. The original consultation on reforming the Wills Act 1837 was published in July 2017 but the Law Commission paused the project in 2019 as requested by the government. The remaining stages of the project are to complete the analysis of consultation responses, prepare a final report and instruct Parliamentary Counsel to draft a bill to give effect to the recommendations. Due to the length of time that has passed since the original consultation, and the impact of the pandemic on making a Will, the Law Commission will engage with stakeholders before developing a final policy. We can therefore expect some form of further consultation on the law of Wills in the near future. Wills | Law Commission

Contentious estates – caveats

In a letter to stakeholders on 18 October, HM Courts & Tribunals Service ("HMCTS") explained that it would no longer accept applications to enter or extend a caveat by email after 25 October 2022; however, HMCTS has confirmed to Practical Law that email may still be used to withdraw a caveat. Caveats: HMCTS guidance on email access and location of new and updated forms | Practical Law (thomsonreuters.com)

Tax – HMRC ATED nudge letters

HMRC is writing to taxpayers liable to the annual tax on enveloped dwellings ("ATED") in the 2022/23 tax year following the most recent five-yearly revaluation date of 1 April 2022. HMRC is reminding those taxpayers who owned a relevant property worth more than £500,000 at that date to submit their returns by 30 April 2023. Automatic reminders will be sent in February 2023 and HMRC will be offering a valuation banding check for those who qualify. HMRC One to Many reminder letters about ATED following April 2022 revaluation (tax.org.uk)