Come on over to our new place!

Wealth Lawyer UK has a brand new website and a fresh new look.  Click here for a link to the new site, now hosted on Fladgate’s website. 

We’ve also made it even easier to get your fortnightly fix on developments in the legal Private Wealth world.  Just register your interest on the new website and blogs will be emailed direct to your inbox as they appear – it couldn’t be easier.

UK tax legislation update: taxation of non-doms

Over the past couple of years, the Government has placed non-doms on notice of its intention to change the way in which they and their offshore trusts are taxed for UK tax purposes.  Now finally all previously trailed provisions have been reintroduced into draft legislation, so here is a brief reminder of the main provisions affecting the personal taxation of non-doms, with some practical pointers.  All of the following measures can be found in the Finance (No.2) Bill 2017:

Can you disinherit your children if you want to?

You may recall that, a couple of years ago, the English press was full of reports of the Will case of Ilott v Mitson.  (For some background on the case, see my 2015 and 2017 blogs about it.) 

The case was of interest to any testator who is considering cutting out children from their Will.  However the Ilott case has now been applied in the more recent case of Nahajec v Fowle [2017] EW Misc 11 (CC), in which another impecunious child applied to the court and was successful in obtaining provision from her father’s estate, contrary to her father’s express wish that she should receive nothing.  So what can the Nahajec case teach us about whether it is possible, even, for parents to successfully exclude adult children from receiving any inheritance from them?

IHT Residence Nil Rate Band: depending on downsizing?

HMRC have published new guidance covering the downsizing provisions of the Residence Nil Rate Band (RNRB) (click here for a link to it).  This will be of interest to advisers looking for a relatively straightforward introduction to this aspect of the RNRB which may be suitable for forwarding on to clients.

 

Whenever individuals interested in their IHT planning downsize, gift or sell a property, the impact on the availability of the RNRB should be considered.

Inheritance Tax planning for business owners is often overlooked

When it comes to selling up or transferring on a business to the next generation, entrepreneurs and family business owners are usually encouraged to take measures to reduce the level of Capital Gains Tax payable on the disposal of the business.  Far fewer entrepreneurs are advised to consider their Inheritance Tax (IHT) planning, though, and yet failure to consider the IHT aspects of a sale can cost families dearly in the long term, when 40% IHT is levied on the proceeds of the business sale in due course.

UK beneficial ownership registers: now it’s your turn, trustees

On 26 June 2017, the UK Government introduced a beneficial ownership register for trusts for the first time, in response to its need to comply with the EU’s 4th Anti-Money Laundering Directive.  Which trusts will be affected and what will trustees have to do?

Who owns the equity? Investment property ownership when relationships break down

The thorny issue of a couple’s beneficial interests in a jointly owned property following relationship breakdown has once again been examined by the court, this time relating to a Privy Council decision on appeal from the Bahamian Court of Appeal.  The case concerned the relationship between Mr Marr and Mr Collie, who together had jointly purchased several properties over the years in the Bahamas during their 17 year relationship.

Will we have a UK public register for offshore entities owning UK property?

The UK may become the first country to introduce a beneficial ownership register for overseas companies and other legal entities owning UK property (of any kind) or who wish to procure UK Government work.

To Airbnb or not to Airbnb?

This week, I have a guest post from my colleague Grace Laws in our Property team, with her advice on the legal dos and don'ts of Airbnb letting:

Airbnb has become known as the world’s largest accommodation provider but it owns no property. It gives property owners an opportunity to let their properties out on a short-term basis with relative ease and gives consumers an opportunity to stay in a home and ‘live like a local’ in their location of choice. As a result of this it has become well known in recent years and is used frequently by many.

For property owners it has become an easy and profitable way of generating additional income, particularly for those with residential properties in desirable city centre locations. However, if you choose to use Airbnb or any other short-term letting website for letting your property, it is important that you consider the legal consequences of doing so alongside the financial benefits.

Protecting personal representatives: interim estate distributions

How should a personal representative (PR) deal with a request from a beneficiary for an interim distribution before the estate is finalised?  Estates can take many months to conclude but a beneficiary may be in need of some of their inheritance sooner.  Can an executor help out without putting him or herself on the line?

Finance Bill 2017: Non-dom tax changes dropped – for now?

The Finance Bill 2017 contained a number of measures altering the way in which long term UK resident non-doms and UK residential property held in certain offshore entities would be taxed in the UK.  However, last week it became clear that all of the non-dom tax changes would be dropped from the Finance Bill, to allow a slimmed down version of the Bill to progress through the legislative process before Parliament is dissolved ahead of the General Election on 8 June.

So what is the current state of the law?  Are the relevant pre-6 April 2017 tax laws still in force?  Are non-doms who have been resident here in the UK for 15 out of the previous 20 tax years now deemed domiciled, or can they still make use of the remittance basis of taxation?  Does foreign corporate ownership of UK residential property still provide a UK Inheritance Tax (IHT) shelter or not?

‘No looking back’ – one ATED tax trap to avoid

April is ATED filing month – 2017/2018 ATED tax returns must be filed and any ATED tax paid by 30 April at the latest.  Even if no ATED is due, because a relief from ATED applies, that relief still needs to be claimed on an ATED tax return, which must be submitted by the end April deadline just the same.

LEIs and UK trusts: time to apply for another ID number

Trustees of UK trusts holding a UK managed investment portfolio will soon need to apply for a Legal Entity Identifier (LEI) number from the London Stock Exchange.

The EU legislation known as the Markets in Financial Instruments Directive (MiFID) affects firms who provide services to legal entity end users which involve financial instruments, such as shares, bonds and collective investments.  Its latest incarnation, MiFID II, comes into effect on 3 January 2018.  It places upon them new transaction reporting obligations, meaning that they cannot execute a trade in a financial instrument on behalf of any client for whom they do not have an LEI.

Ilott v Mitson Supreme Court decision: UK testamentary freedom reasserted

Last week, the Supreme Court brought to an end a 13 year legal battle over the late Mrs Jackson’s Will.  The Will left virtually all of Mrs Jackson’s assets (some £480,000) to three UK charities, cutting out entirely her only child (Mrs Ilott), who was for many years estranged from her mother but who lived in very financially straitened circumstances with her husband and five children.

How to manage UK probate fee increases

Currently most applications made by solicitors for a UK grant of representation for a deceased’s estate incur a flat fee of £155 payable to the Probate Registry.  However, perhaps within a little over two months’ time, a grant could cost as much as £20,000!  How did we get here and, more importantly, what can be done about it?

A simple way for non-dom married couples to manage the Inheritance Tax on UK residential property from 6 April 2017

Offshore companies holding UK residential property will no longer be opaque for UK Inheritance Tax (IHT) purposes from 6 April 2017.  The change is being achieved, courtesy of the Finance Bill 2017 as currently drafted, by removing IHT ‘excluded property’ status from an interest in a closely held company (see the 15 December 2016 blog for a brief definition) which derives its value, directly or indirectly, from UK residential property. 

Finance Bill 2017 tax changes: how can UK resident non-doms protect their offshore trusts?

To date, UK resident non-doms may not have been greatly impacted by the UK tax system’s plethora of measures to try to get the foreign income and gains received by offshore trusts (i.e. trusts that are not UK tax resident) taxed in the UK.  This is because one of the key anti-avoidance provisions, the ‘S.86 Settlor Charge’ which can make a trust’s settlor liable for the offshore trust’s gains, only applies to settlors who are both resident and domiciled in the UK.

Long term UK resident non-doms to be deemed UK domiciled

The UK Government has released draft legislation giving effect to its proposal to deem the domicile status of certain UK resident non-doms to be UK domiciled, regardless of their actual domicile.

The changes only apply to non-doms who, on or after 6 April 2017, have been tax resident in the UK for 15 out of the previous 20 tax years.   For example, in tax year 2017/2018 beginning on 6 April 2017, the changes would only affect any individual who has been resident in the UK continuously since UK tax year 2002/2003 or earlier.  These non-doms will be deemed to be UK domiciled.

Becoming deemed UK domiciled has a number of implications for UK taxes.

‘Toxic’ survivorship clauses: does your Will contain one?

Do you have a survivorship clause in your Will?  Chances are you do, if you leave assets to someone outright in your Will.  The mischief that these clauses are designed to avoid is this.  If A gives a gift to B in his Will and B dies the day after A, B’s estate will get the gift and it will be B’s Will that decides where A’s gift ends up.  However, in these circumstances, A may have wanted someone else to get the gift instead (A may not like B’s choice of heirs!).  Survivorship clauses are meant to solve this problem.  They also prevent the delay associated with the same money being administered through two separate estates and can reduce the total Inheritance Tax bill on both estates. 

Survivorship clauses introduce a condition of survivorship to an otherwise outright gift in a Will – for example: ‘I give £100,000 to my nephew if he survives my death by 28 days’.  Sometimes a catch-all survivorship clause is included instead; for example: ‘My estate is to be divided as if any person who dies within 28 days of my death had predeceased me’.  However, this exact catch-all phrase unfortunately caught out the estates of the late Mr and Mrs Winson, as recently decided in the case of Jump v Lister [2016] EWHC 2160 (Ch).