Private Client Legal Updates (9 February 2023)

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

Tax policy – tax cuts unlikely in Budget

Chancellor Jeremy Hunt has said he will "resist the urge" to cut taxes to protect the fight against inflation. Hunt backed the Bank of England's decision last week to increase the base rate by 0.5% to 4%. His comments appear to be an attempt to manage expectations ahead of the Budget on 15 March. Politics latest news: Jeremy Hunt will 'resist the urge' to cut taxes to protect battle against inflation (telegraph.co.uk)

Compliance – MDR guidance

On 3 February, HMRC published guidance on the new mandatory disclosure rules ("MDR") regime coming into force on 28 March 2023. The MDR regime requires the disclosure to HMRC of cross-border tax arrangements where these involve circumventing the Common Reporting Standard or opaque offshore structures. The MDR replaces the UK's "DAC6" regime, the legislation for which will be revoked at the same time. The guidance does not yet explain how to make a report under the MDR and will be updated to provide this information. Further details are also needed around the meaning of "opaque" and in what situations investments and trusts might be considered to obscure beneficial ownership. It is expected that HMRC will update the guidance with further details before 28 March. Check if you need to tell HMRC about a cross-border arrangement (MDR) - GOV.UK (www.gov.uk); Disclosure of CRS avoidance arrangements and opaque offshore structures: guidance and schema published | Practical Law (thomsonreuters.com)

Contentious estates – delay as a defence in probate claim

McElroy v McElroy, 2023 EWHC 109 Ch is a case that demonstrates the circumstances in which the doctrine of laches can be used to defeat a probate claim. In this case, the brother of the deceased made a claim to revoke a grant of letters administration made to the deceased's widow nine years previously. The estate had been fully distributed to the widow. The brother argued that the deceased had been domiciled in Scotland at his death, meaning that a previous Will he made before his marriage should not be treated as revoked under Scottish law and remained valid. That Will made the brother the sole beneficiary of the £490,000 estate. Laches can be raised where the claimant has delayed asserting their rights such that it would be unfair for the court to grant relief. The doctrine is generally an equitable defence and the court decided that it was possible for the defendant to raise it in this case. The amount of time that had passed since the completion of the administration made it unconscionable for the brother to recover from the widow the estate assets she had received. The fact that the brother had no good reason for the delay, was also a factor. Delay is valid defence to probate claim in certain circumstances (High Court) | Practical Law (thomsonreuters.com)

Contentious estates – forged letter of wishes

A man who forged a letter of wishes has received a prison sentence of five years and three months. The forged letter made the man the sole beneficiary of the estate and gave him £2,186,079 as an inheritance, at the expense of an air ambulance charity which would otherwise have benefited under the Will. The solicitors to whom the letter of wishes was produced after the deceased's death were suspicious as to its validity and began an investigation. The court decided that the deceased did not have sufficient mental capacity to have understood the letter when it was purported to have been signed by her. The two witnesses to the letter of wishes provided sworn affidavits confirming they had signed the letter after the deceased, but later confessed they had signed it after her death. The Crown Prosecution Service commented that: "We hope this sentence sends a strong message that anyone seeking to take advantage of vulnerable people, particularly for financial gain, will be prosecuted." Scammer jailed for trying to steal £2.1m left by friend to air ambulance charity | The Independent

Tax – ATED chargeable amount for 2023/24

On 1 February, the Annual Tax on Enveloped Dwellings (Indexation of Annual Chargeable Amounts) Order 2023 were made, setting the annual chargeable amounts for the annual tax on enveloped dwellings (ATED) on or after 1 April 2023. In line with the 2022 Autumn Statement, the annual chargeable amounts have increased by 10.1% in line with the September 2022 CPI. The new chargeable amounts are: £4,150 for values over £500,000 and up to £1 million (up from £3,800), £8,450 for values up to £2 million (up from £7,700), £28,650 for values up to £5 million (up from £26,050), £67,050 for values up to £10 million (up from £60,900), £134,550 for values up to £20 million (up from £122,250) and £269,450 for values exceeding £20 million (up from £244,750). ATED annual chargeable amounts order made | Practical Law (thomsonreuters.com)

Trusts – Trust Register and unauthorised unit trusts

HMRC has updated its Trust Registration Service Manual to confirm that there is no specific exclusion from registration for unauthorised unit trusts. Trusts created in the course of professional services or carrying out commercial transactions including authorised unit trusts are excluded. TRSM10030 - Introduction to the Trust Registration Service: contents: common types of trusts and interaction with the register - HMRC internal manual - GOV.UK (www.gov.uk)

Estate administration – review of funeral services

On 27 January, the Competition and Markets Authority ("CMA") published its first annual review of market outcomes in the funerals sector. The Funeral Markets Investigation Order 2021 had implemented a package of remedies to address problems with competition within the sector including the introduction of transparency rules. The CMA concludes in their review that the transparency rules are having a constraining effect on funeral prices after many years of real-term rises. Review of funerals market - GOV.UK (www.gov.uk); CMA publishes review of outcomes in funeral sector following Funeral Markets Investigation Order 2021 and further guidance | Practical Law (thomsonreuters.com)