A summary of key legal updates for the Private Client industry over the past two weeks is as follows.
Tax policy – Spring Budget 2023 and pensions lifetime allowance
Following the Spring Budget last week (our summary of which can be read here), HMRC has issued new guidance regarding the abolition of the pensions lifetime allowance from April 2024. This includes some clarification over how the interim period between 6 April 2023 (the date announced in the Budget for the removal of the allowance cap) and 6 April 2024 (the date given in the Budget for the allowance cap's abolition) will work. The abolition from a statutory drafting perspective will be a complex project given the number of statutes that refer to the allowance. The new guidance includes that, in the interim period, lump sums above the lifetime allowance (currently £1.07 million) will be taxed at a person's marginal rate rather than at the lifetime allowance charge level of 55%. The Labour party has already said it will reintroduce the allowance, should it win the next general election. HMRC issues interim guidance on removal of UK lifetime pension allowance | STEP
Tax policy – Spring Budget 2023 and Finance (No. 2) Bill 2023
The Spring 2023 Budget resolutions were passed on 21 March, giving temporary legal effect to measures announced in or before the Spring 2023 Budget. The Finance (No 2) Bill 2023 is due to be published today and will include:
- the abolition of the pensions lifetime allowance and increases to the pensions annual allowance and money purchase annual allowance;
- measures formalising the income tax concession benefiting low-income trusts and estates;
- the CGT extension of the "no gain, no loss" window on divorce/ separation;
- measures affecting share for share exchanges in close companies;
- changes to the genuine diversity of ownership condition for non-resident capital gains tax;
- measures to effect an election to accelerate taxation of carried interest; and
- restrictions on charitable tax reliefs to UK charities.
Offshore – ROE and secondary legislation
Secondary legislation affecting the register of overseas entities ("ROE") has been published as follows.
- Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations 2023 (published on 15 March) - these draft regulations include a process for applications to be made for the removal of material from the ROE on various grounds including that the material is factually inaccurate. The draft regulations also amend the grounds on which an application for protection of relevant individuals' information can be made under The Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022, by removing the need to demonstrate that the relevant risk of violence or intimidation arises from an association with the relevant overseas entity. Previously, the right to protection applied only to individuals with a close association with the overseas entity. Register of overseas entities: draft definition of foreign limited partner, protection and rectification regulations | Practical Law (thomsonreuters.com)
- Register of Overseas Entities (Disclosure and Dispositions) Regulations 2023 (published on 20 March) – these include provisions regarding to whom certain protected information on the ROE can be disclosed and under what circumstances. This includes that required information about trusts may be disclosed to any specified person (who has functions of a public nature and is listed in the Schedule to the regulations). This part of the regulations comes into force on 11 April 2023. Register of overseas entities: disclosure dispositions regulations | Practical Law (thomsonreuters.com)
Contentious estates – Reeves v Drew and committal proceedings
In Frain v Curnock, 2023 EWHC 73 Ch, two committal applications for contempt of court in connection with Reeves v Drew & Ors [2022] EWHC 159 (Ch) – a Will dispute case last year – have been dismissed by the High Court. The original case involved the validity of a Will made in 2014 by late millionaire Kevin Reeves. Bill Reeves, the deceased's son, successfully challenged the Will on grounds of lack of knowledge and approval and in the High Court judgment there were uncomfortable findings of fact against the deceased's daughter, Louse Reeves, and the solicitor Mr Curnock, and the role they had to play in the preparation of the 2014 Will. The Court was critical of the honesty of Louise's evidence and her character. Bill Reeves brought committal proceedings for contempt of court against Louise on the basis that she knowingly made false statements in four documents verified by signed statements of truth, and also against Mr Curnock, on the basis he knowingly made a false statement in a witness statement. The High Court found, however, that Bill Reeves had commenced the committal proceedings "out of a vindictive desire to punish Louise for her pursuit of the Proceedings" and there was a risk that they had been commenced "purely as a means of harassing Mr Curnock". These motives as well as the applications failing the tests of public interest and proportionality, were all significant factors in the High Court's dismissal of the application. Frain & Anor v Reeves & Anor [2023] EWHC 73 (Ch) (19 January 2023) (bailii.org)
Contentious estates – mutual Will set aside for undue influence
In Naidoo v Barton, 2023 EWHC 500 Ch, the High Court ordered the rescission of mutual Wills made by spouses (Mr and Mrs Naidoo) in 1998 under which their combined residuary estate would be left to one of their seven children (David Barton) on the death of the survivor. In 2015, following the death of Mr Naidoo, Mrs Naidoo made a new Will in favour of another of her children (the claimant) in contravention of the mutual Wills doctrine. On Mrs Naidoo's death, the claimant son obtained probate of the 2015 Will and this was challenged by Mr Barton asserting the validity of the mutual Wills agreement. The mutual Wills doctrine prevents a survivor from altering their Will. The claimant sought an order setting aside the mutual Wills agreement on grounds of undue influence (amongst others). The Court concluded that there was a mutual Wills agreement but because Mr Barton was closely involved in giving Mr and Mrs Naidoo's Will instructions to the solicitors and there was no evidence that Mr and Mrs Naidoo had received any advice ensuring that the Wills were being entered into in exercise of their own free will, the mutual wills agreement should be set aside as the result of the undue influence of Mr Barton. Also highly relevant was that Mr Barton was at the time of the case serving a 17-year prison sentence for dishonesty and fraud offences.. In reaching the decision, it is interesting that the High Court concluded that the equitable doctrine in Royal Bank of Scotland Plc v Etridge (No.2) [2002] 2 AC relating to the vitiation of lifetime transactions applied rather than the common law doctrine of undue influence in relation to Wills. it can be easier to show undue influence using the Etridge test. One of the recommendations in the Law Commission's ongoing review of the law of Wills is the introduction of a new statutory doctrine of testamentary undue influence similar to the Etridge doctrine. Equitable remedy available where undue influence led to mutual wills (High Court) | Practical Law (thomsonreuters.com)
Contentious estates – forged Will case
In Selvarajah v Selvarajah (2023 EWHC 474 Ch) the High Court had to consider a disputed Will with unusual circumstances in that there was no evidence as to how it had been created including whether it had been professionally drawn up (there was no solicitors' Will file) or homemade. One of the deceased's four adult children accused their three siblings of causing the Will to be drawn up and executed through fraud and that one of the siblings had forged the deceased's signature. The High Court rejected the claims commenting that these had been driven by the claimant's suspicions and "wild allegations" most of which were unsupported by evidence. The Court found that the evidence of the witnesses as to the deceased's signing of the Will and their attestation was conclusive, with weight being given to the fact that both witnesses were independent professional women with substantial careers. Weight was also given to the fact that one of the defendant siblings was a solicitor and would have faced severe consequences professionally if she had bene involved in any fraud or forgery concerning the Will. The Court concluded that the Will was valid. Selvarajah v Selvarajah & Ors (Re Estate of Selvarajah Sellathurai) [2023] EWHC 474 (Ch) (10 March 2023) (bailii.org)
Contentious estates – proprietary estoppel case
In Teasdale v Carter, 2023 EWHC 490 Fam, the High Court has dismissed an appeal against a proprietary estoppel ruling in relation to a farm outbuilding (Cow House) near Sheffield. The farm building was owned by two spouses (Mr and Mrs Teasdale – who were in the process of divorcing) but one of their daughters (Rebecca Carter) had claimed that she had been promised the farm building if she discharged the mortgage. Rebecca had acted to her detriment in reliance on this promise and had been intimately involved with converting the outbuilding to a completed house, and moving into the property. The Family Court had found that Rebecca was entitled to the transfer of the property into her sole name on discharge of the outstanding mortgage, on the basis of a proprietary estoppel. Mrs Teasdale appealed the ruling but the High Court has now dismissed the appeal with Mr Justice Moor commenting that "this is one of the most regrettable pieces of litigation that I have ever come across". The total costs of the litigation were approximately £828,000 and the costs of the appeal were £220,000; whereas the property in question was worth £245,000. The Court was also critical of the fact that the parties had agreed a way forward on 7 October 2020 which would have obviated the need for further litigation but the agreement was repudiated by Mrs Teasdale. Teasdale v Carter & Anor [2023] EWHC 490 (Fam) (07 March 2023) (bailii.org)
