Monthly Archives: October 2018

The use of non-disclosure agreements in an employment context

Last week’s successful appeal in ABC & Others v Telegraph Media Group Limited sparked the latest conversation on the use of non-disclosure agreements (“NDAs”) in an employment context. The case saw the claimants challenge the Telegraph on its attempted publication …

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Leave your estate to loved ones rather than up to chance

A key point that the public should take away from the findings in the article at the bottom is that the hidden costs of dying intestate can often far exceed the cost of putting in place a simple Will. If intestate individuals do not have close family, they risk leaving their estate exposed to third party heir hunters and the commission which such companies may take before next-of-kin are informed.Those individuals should ask themselves whether they would prefer that their estates be left to friends or even charity instead, rather than a proportion evaporating in administration costs before their next-of-kin ever sees their inheritance. Even if an individual’s wishes are similar or identical to the intestacy rules, a Will allows a testator to tailor their wishes and to provide their executors with more flexible powers, rather than resorting to the rigid intestacy rules. A Will also allows testators to set out substitute wishes in the face of unforeseen changes in circumstances, for example the unexpected death of a loved one.A simple Will provides an individual with the peace of mind that their affairs will be properly administered after their death, and ensures that the intended recipients receive the appropriate amounts in a timely and efficient fashion, rather than waiting for the council’s administrative process to run its course. All of this is not to disregard the potential tax mitigation which can also be achieved from prudent and careful testamentary and lifetime estate planning.

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Why the IHT nil rate band may be scant comfort for homeowners in the South East

The inheritance tax nil rate band has been frozen at £325,000 since April 2009 and the Government appears to have no plans to increase this threshold in the near future. When the increase in house prices in London and the South East is compared over this time period it is small wonder that so many estates are now subject to inheritance tax.The Government did introduce the new residence nil rate band in April 2017, which provides parents with an additional slice of inheritance tax relief if they leave all or part of a residential property to their children or further descendants. This was designed so that parents could leave up to £1,000,000 between them to their children tax free.However, this additional slice begins to taper off once an individual’s net wealth exceeds £2,000,000, meaning that parents whose combined net worth exceeds £4,000,000 will lose the right to claim some or all of the relief. For many families in London and the South East the family home represents a significant proportion of this figure, which does not leave much room before the residence nil rate band is lost. The relief also only applies if assets are left directly on death, meaning that individuals with certain Wills (for example where assets are left on a discretionary trust and not appointed out within two years) will miss out on the residence nil rate band completely.It will be interesting to see how the figures for 2017/18 compare to the figures in this article in due course once the residence nil rate band is taken into account.

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It’s Blockchain your Honour

In September 2018, China’s Supreme Court ruled blockchain records as admissible legal evidence. The Internet Courts in China can now use blockchain records to settle internet-related legal disputes.If the relevant parties collect and store their data via blockchain, with digital signatures, reliable time stamps and hash value verification or via a digital deposition platform and can prove the authenticity of their technology, it will be recognised, the Supreme People’s Court statement said.This may not be a surprise to some, as four months ago, China’s first Internet court in Hangzhou, ruled that evidence which has been authenticated using blockchain technology is legally binding.(Block)Chain Reaction?The application and admissibility of blockchain in the Court room has yet to be widely seen.Though blockchain records have been declared admissible as evidence by the US state of Vermont, and China’s latest ruling shows an appetite for the Courts accepting the new technology.In Vermont, the state signed a bill into law which allowed a ‘digital record electronically registered in a blockchain’ to be ‘self-authenticating’ ‘if it is accompanied by a written declaration of a qualified person, made under oath’. The Court is still requiring human verification of the system, and does not yet irrefutably trust the technology, but it is certainly a step in the right direction.  Quick off the starting BlockCourts will have to get familiar with blockchain following its rapid development and uptake. No doubt Smart Contracts will bring with them the same disputes as other contractual agreements, and when these come to fruition, new technology will be at the heart of any case.The adoption of blockchain based technology to store corporate records, such as stock ledgers, books of accounts and minutes (as has been done by Delaware’s General Corporate Law in the US) could lead to a wide variety of cases involving issues of business ownership and shareholder disputes requiring blockchain evidence to be admitted.In the UK, the Land Registry’s steps towards a register based on blockchain (most recently seen in their appointment of software company Methods in their project Digital Street) may reduce some disputes, as they progress towards complete and accurate records, but will also lead to cases where title records stored on a blockchain need to be admitted as evidence.The UK Government has also disclosed plans to conduct a pilot project for storing digital evidence on a blockchain, which was revealed in an announcement by Balaji Anbil, Head of Digital Architecture and Cyber Security at Her Majesty’s Courts and Tribunals Service (HMCTS). The system intends to create a digital evidence audit to preserve the digital chain and provide a “chronological record of system activities which capture how digital evidence has been created/accessed/modified by which entity, from what location, in such a way to enable the reconstruction and examination of the sequence of events, and actions leading to the current state of the digital evidence.”This move is encouraging in terms of the UK Court’s potential to accept blockchain evidence, which would be rendered necessary if such a system was adopted.Whilst the UK Court seems keen to embrace technology from an administrative point of view, it will be interesting to see how the Court reacts to the evidential questions the new technology will bring and the implications of architectural decisions in the technology, such as open or closed networks, access to keys and tokens.

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Pension transfers may result in Inheritance Tax Charge

Citywire has commented on the Court of Appeal decision of HMRC v Parry & Ors where the appellant argued that a lifetime pension scheme transfer was not a transfer of value for Inheritance Tax purposes. HMRC won on the contention that it was.The Court of Appeal also agreed with HMRC’s assertion that the failure by the pension saver to take lifetime income benefits at a time when she was in ill health, specifically the late stages of a terminal illness, was a further ‘disposition’ under the Inheritance Tax Act and therefore a separate Inheritance Tax charge arose.Pensions are a very useful tool in the estate planning arsenal, however this case demonstrates the care that must be taken when reviewing existing provision and before any changes are made. Further, timely planning is key as ill-health may eliminate the possibility of a tax-efficient transfer into another scheme.

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Is Blockchain technology set to revolutionise the art market?

A notable trend since Bitcoin gained its popularity has been an incredible rise in the interest in the technology behind Bitcoin known as Blockchain, which is the “thing” which allows cryptocurrencies to function. Some statistics indicate that the global blockchain …

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Try before you buy?

The Express has commented on the data released by trade lending body UK Finance which demonstrates that the number of first time buyers in August was the highest monthly level since June 2017.  Whilst this is not a particularly long time, it may demonstrate to the Chancellor that the changes to the taxation of properties owned by investors is working to assist people get on the property ladder.If the Chancellor decides the existing changes have not made enough of a difference he may well consider implementing the rumored proposal to give a capital gains tax exemption to landlords who sell property to tenants who have lived in the property for three years or more.  It has also been suggested that the exemption is split between the landlord and tenant so that the tenant has a contribution towards their mortgage deposit.This would put tenants in a very strong bargaining position if they wanted to buy the properties they have been renting, but the overall effect on the property market is something the chancellor will want to consider carefully.The fact that the phrase ‘housing ladder’ is thrown about so often demonstrates how we in the UK treat our homes – always an investment rather than just a place to live, waiting to move to the next ‘rung’.  The UK economy in turn in intrinsically reliant on the property market ‘working’ and further taxes on landlords could be the straw that breaks the camel’s back.Landlords and tenants alike will be waiting with baited breath for the budget to see if the proposals are to be implemented, however the effect of them will take far longer to be realised.

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Careful estate planning can save you a princely sum

Whilst the focus on today’s news should of course be on congratulating the happy parents-to-be, it is also a good opportunity to consider the impact of mixed domicile marriages on estate planning.The question of Megan’s domicile remains an open one, depending on the extent to which one considers marrying into the Royal Family an intention to be closely connected to the United Kingdom. Whilst their children will be UK domiciled under UK law (because, generally speaking, domicile of origin reflects the domicile of the father), Megan could find herself with a different domicile to that of her children.For couple in a similar scenario, this can have a significant impact on estate planning opportunities, for example UK domiciled spouses only have a limited spouse exemption when passing assets to their non-UK domiciled spouse. It may also mean navigating the choppy waters of double taxation relief as more than one jurisdiction seeks to claim taxing rights over the same assets.One expects that the couple will not be lacking in professional advisors however. It is also worth remembering as well that Megan will become deemed UK domiciled for IHT (as well as all other UK taxes) after she has been resident for 15 out of the last 20 UK tax years. This will cause many of the UK estate planning complexities to fall away, albeit that it may bring with it a host of other matters to consider.

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Don’t e(stop) til you get enough

This case shows that the equitable doctrine of proprietary estoppel can still play a significant role in deciding court cases, which runs contrary to the general idea of testamentary freedom.The doctrine provides that, where a person has been promised an interest in property and has, in reliance on it, incurred expenses or made sacrifices that he would not otherwise have made, the law provides a remedy. It is a common fact pattern that an individual is promised that they will receive a house or property on the death on the death of the current owner, and that individual then does something in reliance on that promise (such as working for less pay). Courts have a wide range of remedies available to resolve such disputes, which can include transferring the entire property to the claimant individual in certain circumstances.Cases such as these should remind practitioners to take care to ensure that clients’ testamentary documents and letters wishes are up-to-date. Whilst these may not be irrebuttable, a later testamentary document will go a long way towards confirming the client’s true intentions in the face of opposing arguments.

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Estate planning need not be taxing

The fact that nearly seven million parents have given children an early inheritance shows that lifetime estate planning is not something which is restricted to the high-net worth and ultra-high net worth community.Assisting children to get onto the property ladder and supporting grandchildren through education and university are two of the most common reasons for passing wealth down through the generations.Independent financial and legal advice should be sought before carrying out any significant estate planning, however this research shows that it is a financial tool that is harnessed by millions and could surely be used by more than that.

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