Monthly Archives: September 2018

Lawyer legacy leaves large litigation liability

It (should) be well-trodden practice for solicitors to advise their clients to seek independent legal advice should the client wish to benefit that lawyer under their Will. This ruling demonstrates the need to consider this best practice more widely than perhaps previously thought. The client in question had been advised to take independent legal advice the first time the Will was prepared, however on each subsequent revision (and particularly where the amount of the legacy increased), the solicitor had not done so.The tribunal also found that it was not sufficient for the solicitor in question to believe that the ‘independent’ advice sought was truly independent. The SRA rules were applied in this instance in an objective manner and the two advisers were found to be too closely connected. The standard to be achieved was that of an ordinary person.

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Franklin my dear, I don’t give an (estate) plan

Dominic Cole and Peter Daniel analyse the ways in which individuals can achieve the full sale price of their businesses (with some help from Mr Benjamin Franklin). What the article highlights is that the tax landscape for owner-managers can be complex as various taxes cross over at different points in a business’s lifetime.Given that a number of tax reliefs and exemptions require that shareholdings have been owned for a specific period of time before a chargeable event (notably Entrepreneurs Relief and Business Property Relief for capital gains tax and inheritance tax respectively), owner-managers should plan well in advance of any sales of gifts.

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Better to be pregnant this year rather than next?

I was interested to read that James Hambro have suggested to clients that they may want to consider reviewing assets standing at a gain to see whether they wish to dispose of them now in the expectancy that Capital Gains Tax (CGT) rates will increase after the next budget.CGT is sometimes regarded as a tax on the wealthy, and therefore could be seen as a good target for increased taxation politically. In fact, as identified by St. James Place (https://www.sjp.co.uk/wealth-management/tax-year-end-2018/capital-gains-tax), HM Revenue and Customs raises more money from CGT than it does from Inheritance Tax. If you sell any investments that were not held in a pension fund or an ISA, you could be liable for CGT on the profits you earned. The same goes for sales of buy-to-let property or, indeed, any property which is not your main residence. CGT therefore affects many more people than some may think and any political maneuvering to increase rates could be felt widely.

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Mortgage Fraud and Negligence – the case of Stoffel & Co v Grondona

Judgment has now been handed down in the appeal by the Appellant, Stoffel and Co, in the case of Stoffel & Co v Grondona [2018] EWCA Civ 2031 (13 September 2018). This case concerns what some see as the more juicy bits of property law and others see as a nightmare; that being negligence, illegality and mortgage fraud.A claim was originally brought by Ms Grondona as her solicitors negligently failed to register the transfer of her property together with the discharge of the existing charge and registering a new legal charge. All fairly standard things to be done in a conveyancing transaction.When the case was brought to appeal by the Appellant, they sought to use a defence of illegality – as Ms Grondona had been a participant in a mortgage fraud to deceive the mortgagee.It seems harsh on first glance that this defence was not successful. However, the Appellant had no knowledge of the deception, they were not party to it and they could not therefore seek to use this to escape their negligence. The judgment is therefore a clear reminder that the question to be considered is whether relief should be granted and not whether a transaction is tainted with illegality (as per Lord Toulson in Patel v Mirza [2016] UKSC 42 at [107])

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Executors may not realise they have an Income Tax liability

The Telegraph reports this morning that many executors are not aware that they are liable to pay taxes on income produced by estate assets during the administration period.Executors are personally liable to pay the tax and therefore, if they distribute the whole estate thinking there is nothing else to pay, they may find themselves hit with a liability they do not have the funds to meet. Assets such as cyrptocurrencies and more sophisticated investments can make estates more complex and executors may feel that they need to take an increased amount of advice to ensure that all liabilities are dealt with properly.

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Old MacDonald had a start-up – EIS oh no!

Peter Daniel and Dominic Cole provide a keen insight into the Office for Tax Simplification’s proposal that the reliefs available to owner-managed business be simplified.I found one point particularly interesting. The authors highlight that there is an uneven playing field between 10% Entrepreneur’s Relief for those who establish their own business (and only then up to a lifetime maximum of £10,000,000), compared to tax-free gains through SEIS/EIS for investors (with no lifetime cap). This surely only works to discourage individuals from setting up in business themselves.Hurdles such as these must surely prejudice businesses towards outside investment compared to internal growth driven by owners. Hopefully if the OTS’s proposals are taken on board by HMRC they will review the entire landscape in a holistic manner.

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UK Property held through a company may face increased scrutiny

As part of the drive towards increased transparency, a register of shareholders of UK property owning companies may have the unintended effect of making borrowing by those companies more laborious as registration of the company will need to take place before a charge can be registered on the property.Privacy is one of the reasons that people may wish to hold property through offshore companies despite the changes to the Inheritance Tax treatment of such structures.As privacy decreases it is an opportune moment for people to identify what information about them is already in the public domain and look at rectifying any errors. The CB profile Service (www.collyerbristow.com/profile) could be a useful way of cleaning an erroneous online profile.

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Wide ranging tax reforms suggested by the Lib Dems

Vince Cable has suggested the creation of a ‘citizen fund’ to help the wider population benefit from investment returns.Of particular interest is the suggestion to abolish inheritance tax and instead tax gifts during people’s lifetimes. Lifetime giving can still be a very efficient form of estate planning in the right circumstances but replacing tax on death is unlikely to encourage people to give assets away during their lifetime. Further, the current exemptions are not all the generous and many people already fall foul of the current limits.The other suggestions such as putting ‘capital gains tax at the same level of income tax’ would more likely have a larger impact on the government purse, but will likely prove unpopular, particularly with small business owners who may be already feeling the squeeze due to increased costs.

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HMRC error may mean over-payment of tax by non-resident trustees

HMRC failed to apply the 7.5% basic rate dividend tax credit to non-resident trustees in the tax year 2016/17. HMRC has confirmed that it is aware of the issue and that it has resolved the problem for the 2017/18 trust tax calculations, but has not yet confirmed how it intends to respond.These oversights demonstrate the importance of reviewing self assessment tax returns carefully. It is critical that non-resident trustees take appropriate advice if they feel that they may have been exposed to the error. When even HMRC are prone to such lapses it really does highlight the increasing speed with which the offshore tax landscape has changed.

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Q. When is an extension not an extension? A. When it is a garden room a finger width away from the dwelling.

Planning law is known to be a complex area of law and is often difficult to interpret. A recent decision by the Planning Inspectorate (reference: APP/B9506/C/17/3187537) has shown just how important it is to pay attention to the details when considering planning matters.The case concerned permitted development rights under The Town and Country Planning (General Permitted Development) (England) Order 2015 (SI 2015/596) (“GDPO”). This Order effectively grants planning permission in respect of certain developments, which are known as permitted development rights.  One such permitted development is for “buildings within the curtilage of the dwellinghouse” although there are limitations and conditions on what can be built.The owner of the property in this case erected a a steel framed Garden Room which only had a finger width gap between it and the main property. It was originally held that this was in breach of the GDPO.  On appeal however, it was held that there was no breach of the GDPO as:”The GPDO makes a clear distinction between extensions to a dwelling and buildings, etc that are constructed within the curtilage of a dwelling and this is a distinction that would be evident in most circumstances. It does not indicate whether such Class E structures should be a minimum distance from the dwelling although the Technical Guidance refers to buildings attached to a dwelling falling within Class A.”The clear distinction of the Garden Room being constructed as a separate structure (and not therefore an extension to the main property) meant that it could not be in breach of the GDPO and that it was not required to be a minimum distance away from the property, even though a casual observer might perceive the garden room as an extension to the dwelling and not as a free-standing structure and the original enforcement notice for was quashed.

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