Legal News

See Q& A: A testator owns shares in the parent company of a trading group of companies. A testator holding shares in the holding company of a trading group may find the share value restricted for business property relief ( BPR) purposes because of excepted assets or the group company provisions, with the result that full relief is not achieved. One Lexis Nexis Will precedent leaves property qualifying for BPR at 100% on discretionary trusts. Can that wording be modified to capture property that qualifies for BPR at a lower percentage? For this Q& A, the assumed Will precedent is: Will—legacy of business property on discretionary trust, residue to spouse absolutely, then to children absolutely. The starting point is that BPR is available only at two statutory rates—100% or 50%—provided the necessary conditions are satisfied in each situation. As at 5 February 2024, there is no...

Boonyaem v Persons Unknown Category ( A) and others [2023] EWHC 3180 ( Comm) What are the practical implications of the case? There are a number of concrete takeaways for advisers and their clients, spanning interim relief, serving proceedings on unidentified parties, digital assets, and following the trail of those assets. The claimant asked the court to continue both a proprietary freezing order and a non‑proprietary worldwide freezing order; the court acceded in relation to the second and third defendants, but declined to do so against Persons Unknown Category ( A). The rationale was that orders aimed at defendants who are both unknown and unascertained cannot be enforced. That difficulty does not arise where defendants are unknown yet capable of being sufficiently identified. The ruling also reinforces the view that, in appropriate situations, cryptoassets may constitute “property” under the law of England and Wales. The...

High-ranked nations are ageing rapidly compared with lower-ranked ones, research by the International Longevity Centre in London has revealed. The analysis drew on the think tank’s Healthy Ageing and Prevention Index overall, which listed 121 countries in total in 2019 for its comparison. Among them were Switzerland in first place, Iceland in second, and the UK placed 16th in the index. It assessed the dependency ratio, a measure of the percentage of people aged 65 and over relative to working adults aged 15 to 64. A 20% ratio at a state pension age of 65 equates to five workers supporting each retiree in practice. However, projections of 50% by 2050 in some nations indicate there would be just one worker for every retiree by then, the Centre said......

The Solicitors Disciplinary Tribunal ( SDT) The Solicitors Disciplinary Tribunal ruled that Michael Little’s 2018 conviction for a tax evasion scheme meant he should no longer be permitted to practise in England. He was found guilty of assisting the heirs of investor Harry Seggerman to avoid paying tax on US$14m in inheritance. Tribunal chair Carolyn Evans stated that every allegation was proven and featured the aggravating element of dishonesty. A New York jury convicted Little on 19 criminal counts. The counts included obstructing the IRS, conspiracy, aiding the Seggerman family to submit years of false returns, as well as failing to file any such reports of......

The Boston Consulting Group UK LLP and others v HMRC [2024] UKFTT 84 ( TC) The appellants were individual partners of a management consulting firm that carried on business in the UK via a UK LLP, together with that LLP. The core question concerned the proper tax characterisation of amounts received by those individuals when disposing of particular interests in the LLP known as ‘ Capital Interests’. These Capital Interests were granted to partners and their value rose or fell in line with the group’s worldwide performance. Under the terms of the limited partnership agreement, in specified events—including retirement—an individual was obliged to transfer their interests to the LLP’s corporate partner ( BCG Ltd). The appellants argued that, as partnership interests, the disposal proceeds should be assessed to capital gains, benefitting from entrepreneurs’ relief. HMRC contended that the sums were chargeable as income. On the...

Folds Farm Trustees Ltd and another company v Cutts and others [2024] EWHC 12 ( Ch) What are the practical implications of this case? This claim illustrates trustees seeking the court’s approval for a decision in category 2 of Public Trustee v Cooper [2001] WTLR 901 (not reported by Lexis Nexis®UK), on the basis that the step was considered ‘particularly momentous’. There was no meaningful uncertainty about the extent of the trustees’ powers, and they had already determined how they intended to use them. Points of practical note for practitioners included: At a directions hearing, the court permitted reliance on updated expert evidence and, unusually, ordered the trustees’ witnesses (their directors) to attend the final hearing for cross-examination. At the final hearing, the Master observed, in the context of valuing real property, that appointments out of assets held on...

In this issue: Wills Powers of attorney and advance decisions UK taxes for Private Client HMRC Manuals updates Tax avoidance, evasion and non-compliance Contentious trusts and estates Pensions, insurance and tax efficient investments Scotland, Wales and Northern Ireland International Question of the week Additional Private Client updates this week Daily and weekly news alerts Lex Talk®Private Client: a Lexis®PSL community New and updated content Dates for your diary Trackers Latest Q& As Useful information Wills Video-witnessed Wills regulations set to expire on 31 January 2024 The Wills Act 1837 ( Electronic Communications) ( Amendment) Order 2022 ( SI 2022/18) extended the facility for remote witnessing of Wills—introduced during the coronavirus ( COVID-19) pandemic in England and Wales—until 31 January 2024. Proposals for any further...

See Q& A: At what point does income from a trust become accumulated and capital in nature, so that payments of the same funds are capital and the beneficiary cannot claim income tax back at their marginal rate? For present purposes, assume the trust is discretionary and that nobody has an interest in possession in its income. Accumulation denotes the transformation of income into capital; once that has happened, any later payments out of those same sums are treated as capital, and the beneficiary cannot reclaim income tax at their marginal rate. For income to be properly accumulated, certain requirements must be met: there must exist a power or trust to accumulate, granted by the trust instrument or under the Trustee Act 1925 ( TA 1925), or possibly arising at common law—see Lombe v Stoughton (1841) 12 Sim 304 (not reported by Lexis...

Code of Practice investigations Research by a law firm indicates HMRC initiated 1,091 Code of Practice investigations between April 2022 and March 2023, in addition to 3,300 active cases continuing from previous years. Pinsent Masons tax manager, Sophie Warren, said the volume of serious tax investigations opened by HMRC shows the extent of its clampdown on the most serious tax evasion and avoidance. According to the firm, investigations fall into two categories: COP9 is launched in selected instances where HMRC suspects tax fraud. COP8 focuses on suspected tax avoidance. From April 2022 to March 2023, HMRC commenced 417 COP9 investigations and 674 COP8 civil investigations......

Pitt v HMRC [2024] UKUT 21 ( TCC) Back in 1999, the taxpayer undertook steps to buy and sell loan notes treated as relevant discounted securities, and asserted an income tax loss approaching £700,000 for 1998/99. HMRC commenced an enquiry and moved to refuse that loss. It then served a follower notice, arguing that the principles and reasoning in the First-tier Tax Tribunal decision in Audley v HMRC [2022] UKFTT 222 ( TC), if applied to these arrangements, would eliminate the tax advantage sought. The taxpayer declined to take corrective steps by amending his return to strip out the loss, so HMRC issued a closure notice to the same effect. HMRC also imposed a penalty in relation to the claimed position and the failure to take the specified corrective action as directed......

Morina and others v Scherbakova and others [2023] EWHC 3253 ( Ch) What are the practical implications of this case? Key points in the dispute turned on private international law and domicile. Expert evidence on Russian and Belgian law assisted the judge. A decisive element when fixing the testator’s domicile was that his move from England to Belgium was driven solely by attempts to evade extradition to Russia. He had not relinquished his English home. The court closely examined how the respective legal systems interacted, and, in particular, the rules concerning the revocation of wills. It weighed heavily that his departure was a tactic, not a permanent resettlement abroad, however... What was the background? Vladimir and Elena left Russia for Singapore in 1993/94, moving on to Greece the following year. They later relocated to Belgium in 2004. After that, Vladimir spent lengthy periods in...

Fraser v Khawaja [2023] EWHC 3143 ( Ch) What are the practical implications of this case? The fraud attempted, outlined below, was grave (and potentially criminal) and should be firmly on practitioners’ radar. In the author’s view, also set out below, the Will was plainly suspicious on its face and should not have been granted probate without at least some examination by the probate registry. Its admission may have resulted from the pandemic’s disruption to the workings of the probate registries and/or inadequate controls, hinting at further, as yet undetected, schemes of a similar kind affecting unclaimed estates where no-one is actively engaged. In truth, this attempt might have succeeded but for the estate being, by chance, referred to the claimant who, together with his legal team and his own firm’s skills, resources and determination, managed to identify the intestate...

In this issue: Probate UK taxes for Private Client HMRC Manuals updates Tax avoidance, evasion and non-compliance Family businesses and ownership structures Charity and philanthropy Contentious trusts and estates International Question of the week Additional Private Client updates this week Daily and weekly news alerts Lex Talk® Private Client: a Lexis®PSL community New and updated content Dates for your diary Trackers Latest Q& As Useful information Probate HMCTS and HMRC updates to probate application forms PA1P, PA1A, IHT421 and IHT400 HM Courts & Tribunals Service ( HMCTS) has refreshed Form PA1P: apply for probate by post where there is a will, and Form PA1A: apply for probate by post where there is no will. The changes add questions to confirm whether a unique probate code has been received from HMRC,...

Keighley and another v HMRC [2024] UKFTT 30 ( TC) The lead appellant, Keighley, was a shareholder and part of the senior leadership at Primeur Ltd, a trading company that imported doormats. He put sizeable private spending on a corporate credit card, which the company settled in full, yet neither the company’s books nor his self-assessment properly reflected the income tax and National Insurance contributions ( NICs) due. HMRC raised discovery assessments and penalties against Keighley, alleging deliberate conduct, covering every year from 2001 to 2017 inclusive. While HMRC held data on the personal expenditure from the 2013–14 tax year onwards, it instead calculated assessments for earlier years on a presumption of continuity. In parallel, HMRC also issued NICs determinations, penalties and assessments to Primeur during the period. Keighley additionally held shares as a shareholder in Valley Dale Properties Ltd ( VDP) at the time. He and...

See Q& A: Where A is both sole executor and residuary beneficiary of testator T’s estate, survives T, yet dies before extracting a grant of probate, and leaves a Will naming B as executor of A’s estate, what must happen for B to deal with T’s estate? In such circumstances, because the only appointed executor ( A) died before the grant in T’s estate issued, the correct grant is therefore one of administration with the Will annexed. In the absence of any surviving or replacement executor in T’s Will, the chain of representation is treated as definitively broken. See Practice Note: The chain of representation. The Non- Contentious Probate Rules 1987, SI 1987/2024, r 20 sets out the order of priority for a grant where the deceased left a Will......

In this issue: Probate Court of Protection HMRC Manuals updates Tax avoidance, evasion and non-compliance Budgets and Finance Bills Contentious trusts and estates Art and heritage property, landed estates and farming families Pensions, insurance and tax efficient investments International Question of the week Additional Private Client updates this week Daily and weekly news alerts Lex Talk®Private Client: a Lexis®PSL community New and updated content Dates for your diary Trackers Latest Q& As Useful information Probate HMCTS Probate service—effectiveness and Call for evidence deadline With the Justice Committee’s Call for evidence on HMCTS Probate Registry delays closing on 22 January 2024, the issue received a brief discussion in Parliament on 9 January. Mike Freer, the Parliamentary Under- Secretary of State for Justice, set out recent actions to...

See Q& A: See Q& A: The estate included assets qualifying for agricultural property relief ( APR) and/or business property relief ( BPR), directed by the Will to be held on discretionary trust. Two years have elapsed since death and the trustees are looking to appoint property out of the trust, but are wary of exit charges. Will APR still be available on an exit if, during the two-year period, the trustees have owned/occupied the agricultural land, even though only one of the three trustees has been actively engaged in farming operations? How should the analysis then differ, where business property relief is also in point?......

HMRC v The Taxpayer [2024] UKUT 12 ( TCC) The taxpayer appealed to the FTT against HMRC’s refusal to permit deductions for income tax. The deductions asserted were said to stem from arrangements already contested by HMRC and which were the focus of two other lead cases. He also asked the FTT to have his appeal heard in private and for the judgment to be anonymised. He contended that these steps were required to protect his private life, preserve the confidentiality of sensitive material and prevent prejudice to the interests of justice. The FTT directed that preliminary stages of the appeal would be held in private ( Direction 3) and that, shortly before the substantive hearing, both parties should provide representations on whether the decision from that hearing ought to be published anonymously ( Direction 4). There was some doubt as to whether...

the Ali Abdullah Ali Alesayi Will Establishment v Alesayi [2023] EWHC 3150 ( Ch) What are the practical implications of this case? This ruling reaffirms the court’s method when assessing whether a party has standing to advance proceedings on behalf of a deceased person’s estate. The distinction between an executor and an administrator The action might have been issued by an executor; however, the claimant was not identified in the Proof of Will, so it could not act as executor. Acting instead as administrator, the claimant needed an English grant of representation to possess the necessary locus to commence the claim. Claims by legal entities treated the same as claims brought by individuals The claimant company had been formed as the ‘parent holding entity’ to receive assets transferred under the deceased’s Proof of Will. The court determined that bringing the claim through a corporate vehicle, rather than a natural...

A three-judge bench of the Ninth Circuit, in a published ruling, held that Spain’s state-run Thyssen- Bornemisza Collection is the rightful owner of the painting ‘ Rue Saint- Honoré, après-midi, effet de pluie’, a 19th-century piece by the French Impressionist Camille Pissarro, reportedly valued in the tens of millions of dollars. The bench found that, under Spanish law, the museum had acquired title by prescription because it bought the work without knowledge of the theft and possessed it for a sufficient period to obtain ownership, thereby meeting the requirements for acquisitive possession under that legal system. The outcome marks a setback for the California claimant who brought the suit nearly twenty years ago — David Cassirer, great-grandson of Holocaust survivor Lilly Neubauer, from whom the painting was taken as she fled Germany in 1939 — and follows almost two years after the US...