Private Client Legal Updates - 9 March 2023

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

Tax policy – Spring Budget next week

Below are some news items in connection with the Spring Budget that will take place on Wednesday 15 March next week.

• HMRC has published statistics that show that income tax receipts for the period from April 2022 to January 2023 reached record-breaking levels, exceeding £206 billion. The increase in receipts is being attributed to fiscal drag on individuals and will increase pressure on Jeremy Hunt to announce tax cuts in the Budget on 15 March, but reports so far show that this is unlikely. Income tax receipts at all-time high | RSM UK
• On 6 March, the Treasury announced that the Finance (No 2) Bill 2023 will be published on Thursday 23 March. The contents are expected to be confirmed in the Spring Budget. Finance (No 2) Bill 2023 to be published on 23 March 2023 | Practical Law (thomsonreuters.com)
• The Society of Trust and Estate Practitioners ("STEP") and other professional bodies have signed an open letter urging the UK government to fund an improvement in HMRC’s service levels in the Spring Budget. The letter cites the problems getting in touch with HMRC because of recent cuts to customer service staff. Professional bodies unite to urge Chancellor to improve HMRC service levels | STEP

Compliance – ROE and PSC registers and human rights

On 30 January, the UK government published an updated memorandum on the compatibility of the register of overseas entities ("ROE") legislation (Economic Crime (Transparency and Enforcement) Act 2022) and the register of persons with significant control ("PSC") legislation (Part 21A of the Companies Act 2006) with the European Convention on Human Rights ("ECHR"). This follows a November 2022 ruling by the Court of Justice of the European Union ("ECJ") in the Joined Cases C-37/20 and C-601/20 WM and Sovin SA v Luxembourg Business Registers that Luxembourg's beneficial ownership register regime (which was mandated by EU law and did not require the public to demonstrate a "legitimate interest" before accessing information) was unlawful on human rights grounds. The ruling was not binding on the UK but there was the possibility that affected individuals could use it to mount challenges on ECHR grounds as both the ROE and PSC regimes provide for unconditional public access to the registers. The memorandum concludes that the government continues to assess that the ROE and PSC regimes are compliant with Article 8 of the ECHR. The government justifies this by saying that there are good reasons in policy terms for there to be no "legitimate interest" or "proper purpose" filter and this is compensated for by other provisions such as the ability for individuals to apply to the registrar to withhold information from public view if there is serious risk of violence or intimidation. Supplementary ECHR memorandum: amendments made to parts 1-3 Economic Crime and Corporate Transparency Bill (BEIS measures) - GOV.UK (www.gov.uk); Economic Crime and Corporate Transparency Bill: government memorandum on beneficial ownership registers | Practical Law (thomsonreuters.com); Companies House ownership registers do not breach human rights, says UK government | STEP

Estate administration – NAO report on online probate service

The National Audit Office ("NAO") has issued a report on the HM Courts & Tribunals Service ("HMCTS") court reform programme. One of the programme's projects was the 2020 introduction of an online probate service. The NAO report is critical of many aspects of the programme's delivery and, in relation to the online probate service, reports that there are inefficiencies with the service with many online probate cases being started online but later needing manual interventions by court staff. Also included in the report is that online probate services were passed from the development teams to the operational teams without a clear transfer of responsibility. Despite the need for improvements, the report comments that it is unclear whether HMCTS can deliver the programme's outstanding work with the remaining funding. HMCTS have issued an initial response but will have said that a formal response to the report and its recommendations will be made in due course. Progress on the courts and tribunals reform programme - National Audit Office (NAO) press release; HMCTS response to National Audit Office report on Reform - GOV.UK (www.gov.uk)

Offshore – domicile ruling

In Coller v HMRC [2023] UKFTT 212, the First-tier Tribunal ("FTT") has found that a taxpayer was domiciled in England for UK tax purposes. The case is interesting for its detailed analysis of the taxpayer's father's acquisition of an English domicile of choice. The father had an Austrian domicile of origin but had moved to England in 1938 having fled to escape the Nazi persecution of Jews. The FTT found that there was significant evidence to show that the father had formed an intention to reside in England permanently and indefinitely: he had cut all ties with Austria and had established a "deeply settled life in England" by the time of the taxpayer's birth, meaning that the taxpayer assumed an English domicile of origin. Evidence of the father's intention included that he: served in the British Army, had sworn allegiance to the Crown, obtained a naturalisation certificate (a condition of which was an intention to reside in the UK), had got married in England and had three children there, had purchased two family homes in London, had a wide circle of friends in London, had established a business in England, and had invested in three additional properties in England. The FTT cited Holliday v Musa [2010] EWCA Civ 335 and the statement from that judgment that "the strong starting point is that somebody does intend to reside in England permanently and indefinitely where he has clearly set up a home here for a very long time, has had a family here, and does not have a home elsewhere". Domicile of origin lost where no links to home country retained (First-tier Tribunal) | Practical Law (thomsonreuters.com); Coller v Revenue and Customs Commissioners | Practical Law (thomsonreuters.com)

Mental capacity – access to small savings accounts

The Ministry of Justice ("MOJ") has published its response to the 2021/22 consultation on whether it should be possible to access small funds (up to £2,500) on behalf of a vulnerable person without needing to make an application to the Court of Protection ("COP"). This situation commonly arises where a parent needs to access funds in a child trust fund or junior ISA for their child who has turned 18 but lacks capacity. The MOJ has decided that there should not be a separate process for small funds but, to address the operational barriers imposed by the time and cost of a COP application along with applicants' lack of awareness of the Mental Capacity Act 2005, the COP will improve the application process by providing digital access to the forms and simplifying the content. The MOJ will also embark on a programme of awareness raising. Government response - Mental Capacity small payments scheme (publishing.service.gov.uk); UK government will not change MCA 2005 to give parents access to small savings accounts | STEP