Legal Practice Notes

This Practice Note This Practice Note outlines how the family courts address questions of capacity and the methods for assessing it, including the use of expert opinion. Within family proceedings, capacity is pertinent both to a person's ability to litigate and to settle proceedings, such as by agreeing a consent order. The focus is chiefly on an adult's capacity, or on cases where a 16–17 year old is involved in the proceedings and is expected to lack the necessary decision-making capacity on reaching 18. For matters concerning children's representation, see also Practice Note: Children as parties to public law proceedings. Broader issues about capacity in the context of family relationships are addressed in Practice Note: Capacity to marry, cohabit and have sexual relations. In Richardson- Ruhan v Ruhan, Mostyn J observed that a person's capacity to run proceedings is not contingent on...

Issues of vesting While it is evident that the recipient of a gift must be identified, it is equally vital to establish when the gift vests, as this affects who is included or excluded. The doctrine of early vesting is commonly applied: it provides that a gift vests at the date of the testator’s death, or at the earliest practicable moment thereafter in the circumstances, whether relating to real or personal estate. Care must be taken with this rule of convenience; for example, a contingent gift should not be interpreted so as to vest sooner than the testator intended. Where no specific time for vesting is stated, the gift will ordinarily vest on the testator’s death unless that would clash with other terms of the Will, or it can be shown that the testator meant the gift to take effect later. In general, the...

Duty to distribute to the correct beneficiaries When a trust concludes, trustees are obliged to transfer the trust property to the proper beneficiaries. Misdistribution exposes trustees to potential liability for breach of trust; however, they may ask the court to grant relief where their conduct was honest and reasonable... Relief for honest and reasonable conduct If the court considers that a trustee is, or could be, personally liable for a breach of trust, but finds they acted honestly and reasonably, and should fairly be excused both for the breach and for not seeking the court’s guidance, it may relieve them from personal liability, in full or in part. ‘ Honestly’ signifies acting in good faith, while ‘reasonably’ reflects prudent behaviour. This relief is discretionary, and in exercising that discretion the court will weigh the interests of both trustees and beneficiaries when deciding whether, and to what...

FORTHCOMING CHANGE : The Trusts and Succession ( Scotland) Act 2024 obtained Royal Assent on 30 January 2024, representing the first substantive review of trusts law in Scotland in more than a century since the principal statute, the Trusts ( Scotland) Act 1921, was enacted. The trusts provisions will commence only once Scottish Ministers make the required secondary legislation, whereas some succession measures took effect on 30 April 2024. The core updates designed to modernise the law are set out in News Analysis: Trusts and Succession ( Scotland) Bill passed. Practice Notes covering Scottish trusts and succession will be further revised to reflect this new legislation. What is a Personal Injury (‘ PI’) trust? A PI trust is: any type of lawful trust arrangement that ring-fences sums paid as a result of personal injury to the injured individual for the injured person’s...

Ordinary power of attorney An ordinary power of attorney is a straightforward instrument that authorises an attorney to handle the donor’s financial affairs. Its scope can be as expansive or as restricted as the donor decides. Although some practitioners draw a line between a general and a limited power of attorney as separate forms of ordinary powers of attorney, the label 'general power of attorney' is now commonly used to mean 'ordinary power of attorney'. An ordinary power of attorney is automatically revoked if the donor loses mental capacity, which distinguishes it from an enduring power of attorney or a lasting power of attorney ( LPA). Powers of attorney are a species of agency, yet they differ from conventional commercial agencies because they serve to confirm to third parties that the attorney holds authority, and to define its extent, rather than to regulate the...

ARCHIVED: This archived Practice Note offers a brief overview of the income tax and capital gains tax regime introduced by the Finance ( No 2) Act 2017, relevant to offshore trusts settled by non- UK domiciliaries before they became deemed domiciled in the UK, applying from 6 April 2017 until 5 April 2025. It outlines the income tax and capital gains tax ( CGT) rules for non- UK resident trusts established by non- UK domiciliaries prior to becoming deemed domiciled in the UK from 6 April 2017, operating under section 835BA of the Income Tax Act 2007 ( ITA 2007), a provision brought in by the Finance ( No 2) Act 2017 ( F( No 2) A 2017). This Note does not cover the inheritance tax ( IHT) treatment of residential property held through such trusts; see Practice Note: IHT on UK...

This Practice Note sets out the criminal offences concerning offshore tax evasion found in section 106 of the Taxes Management Act 1970 ( TMA 1970). Offences under the TMA 1970 Under the TMA 1970, the offences include: failing to notify that one is chargeable to tax failing to submit a return delivering an inaccurate return Who may be guilty of the offences? Any individual who has not fully or correctly revealed that they are chargeable to income tax ( IT), capital gains tax ( CGT), or both, in relation to offshore matters. The government has indicated that ordinary principles of criminal secondary liability also apply, so the offence extends to an agent who knowingly files returns that omit tax due. See Practice Note: Joint enterprise and secondary liability. Elements of the offences which the prosecution has to prove The components of the offences are...

When a charity plans to: mortgage (or re‑mortgage on revised terms) property it owns buy property with mortgage funding, or grant a charge to secure other liabilities the charity trustees must address several considerations and complete certain further steps. Here, ‘charity trustees’ means those who have overall control and manage the administration of the charity (for example, the directors of a charitable company or the officers of a charitable unincorporated association). Power to mortgage The charity must have authority to borrow and to charge its property as security for that borrowing. This authority may be expressly included in the charity’s governing document. If no express power exists, a sufficient power may arise: under the Trusts of Land and Appointment of Trustees Act 1996, s 6(8), which grants trustees of land ‘all the powers of an absolute owner’ (including the ability to borrow money and...

Cross-border issues emerge whenever an individual holds assets in more than one jurisdiction, faces capacity difficulties while living in or visiting another jurisdiction, or has a nationality, habitual residence, or domicile that connects them to a different jurisdiction. In an ever more globalised world, such challenges are increasingly frequent. In any case with an international element, it will be necessary to determine: Which court has jurisdiction over the person Which state’s laws will be applied Whether orders made in one state will be recognised by the authorities of another state Whether any private mandate intended to operate on incapacity exists and if it will be effective elsewhere Hague Convention XXXV on the International Protection of Vulnerable Adults The Hague Convention XXXV on the International Protection of Vulnerable Adults was formally concluded at The Hague on 13 January 2000, aiming to bring...

Although forfeiture claims are not, strictly speaking, probate proceedings, they will almost inevitably draw personal representatives and/or beneficiaries into litigation before the court... Forfeiture principle The doctrine is rooted in the idea that it would be unjust to let a wrongdoer profit from their offence. As a matter of public policy, a person who has unlawfully killed another is prohibited from receiving any advantage that flows from the death, whether the entitlement arises under a Will or by intestacy... The restriction applies regardless of the route by which the benefit would otherwise pass (testamentary or intestate). It also extends to anyone who has unlawfully aided, abetted, counselled, or procured the killing. It appears that both the principle and the Forfeiture Act 1982 ( Fo A 1982) operate only against the offender. Thus, one person’s crime may bar that individual from asserting what would...

Spouse and civil partner Those eligible to bring a claim include: the deceased’s spouse or civil partner a former spouse or former civil partner of the deceased, but not someone who has entered a further marriage or civil partnership In practice, a spouse or civil partner is a commonly seen category of claimant. A spouse or civil partner can apply under I( PFD) A 1975 against the estate of their deceased spouse or civil partner where the distribution effected by the Will, the intestacy regime, or a mix of both, fails to make reasonable financial provision. For help on the standard of reasonable financial provision for a spouse or civil partner, see Practice Note: Family provision claims—reasonable financial provision. Marriage The claimant must demonstrate they were the deceased’s spouse or civil partner at the date of death. The marriage needs to be recognised under English law. In most...

FORTHCOMING CHANGE : On 30 January 2024, the Trusts and Succession ( Scotland) Act 2024 obtained Royal Assent, representing the first review of Scottish trusts law in more than a century since the principal Trusts ( Scotland) Act 1921 was enacted. The trusts provisions will require secondary legislation from Scottish Ministers before they commence, whereas the succession provisions took effect on 30 April 2024. Key changes intended to modernise the law are outlined in News Analysis: Trusts and Succession ( Scotland) Bill passed. Practice Notes addressing Scottish trusts and succession will be updated as required to reflect this new legislation. This Practice Note explains the procedure for obtaining confirmation in Scotland for testate estates, in scenarios both where no inheritance tax ( IHT) is payable and where IHT is due. For guidance on confirmation in intestate estates, see Practice Note: Application for...

When advising an individual on cross-border matters or offshore tax planning, pinning down the situs (that is, where assets are located) for property held by or on behalf of the person is essential. This Practice Note sets out why situs matters for succession and inheritance tax ( IHT) and explores what ‘situs’ means in this context. Its purpose is to introduce the common law notion of situs. Nevertheless, in real-world scenarios the situs of each item must be assessed on a case-by-case basis, with attention to the applicable authorities. Although common law (private international law) usually fixes an asset’s situs, legislation may adapt the position for particular taxes (for example, capital gains tax ( CGT)), for double taxation relief, or for non-tax reasons. For further information, see: Practice Note: Private client and private international law—summary of main principles Practice Note: Situs of...

This Practice Note outlines the enforcement routes available for implementing an order made under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 ( TOLATA 1996). It describes the steps required after an order for sale where a party refuses to execute a conveyance, sets out the procedural path to be followed, and explains the approach on an application to commit for contempt of court. Section 14 TOLATA 1996 empowers the court to declare the nature and scope of an individual’s interest in property held on a trust of land and/or to direct a sale of that property. Either a trustee or a beneficiary of the property is entitled to bring such proceedings. See Practice Note: Eligibility to apply under TOLATA 1996. Order for sale TOLATA 1996, s 14 grants the court a discretion to make such orders as it...

What are unapproved share options? Share options give an individual the right to acquire shares once specific conditions are met—such as a period elapsing or a defined event occurring—provided the holder pays the fixed amount to buy those shares at that time. See Q& A: What is the difference between a share and a share option? The term unapproved option refers to any share option not granted under the statutory tax-advantaged arrangements—being a company share option plan ( CSOP), an enterprise management incentives ( EMI) scheme or a save as you earn scheme ( SAYE)—and originates from the time when these schemes typically needed HMRC’s formal approval before the associated statutory tax reliefs could apply. Although, since April 2014, HMRC approval is no longer required for a statutory tax-advantaged scheme, the expression continues to be used. Unapproved options can be granted under a...

This Practice Note considers when VAT zero-rating applies to developers who sell or let non-residential properties they have transformed for residential use—either as dwellings or for a relevant residential purpose. Why does zero-rating matter? If zero-rating is unavailable, the supply is generally exempt and the developer is unable to reclaim VAT (ie input tax) on costs, for example on the building’s conversion, professional fees and possibly on buying the property. For further guidance, see Practice Note: When can a person recover VAT? VAT cannot be reclaimed if it ought not to have been charged. Put simply, VAT charged in error is not reclaimable. Care is therefore required throughout projects. Where the project creates a dwelling, the conversion services are commonly taxed at 5%, or are zero-rated where a housing association commissions the work (see Practice Note: VAT treatment of building work). A 20% VAT claim may be...

For UK VAT to be chargeable, a transaction must satisfy five cumulative criteria. Specifically, it must: amount to a supply of goods or a supply of services constitute a taxable supply occur in the UK be made by a taxable person be carried out in the course or furtherance of any business operated by that person This Practice Note explains what each of those five requirements means. It does not, however, consider the importation of goods or those cases where a UK customer is obliged to account for UK VAT on services received from abroad—ie, the reverse charge; for those topics, see Practice Notes: VAT—the reverse charge on cross-border supplies and VAT—importing goods. This Practice Note also includes references to EU Directives and case law; for details on the continuing significance of EU Directives, and of judgments of the Court of...

Article 11 of the Organisation for Economic Co-operation and Development ( OECD)'s model tax convention ( MTC) is concerned with the taxation of interest paid cross border. It specifically addresses how taxing authority is divided between: the state of residence of the person receiving the payment (the recipient state), and the state of residence of the person making the payment (the source state) This Practice Note examines: the meaning of ‘interest’ in a double tax treaty or convention ( DTT) context the model convention approach to the taxation of interest targeted anti-treaty shopping provisions variations on this approach in DTTs, and the practical contexts in which an assessment of the interest article will arise The EU Interest and Royalties Directive, which exempts from withholding tax all interest payments between associated companies of different Member States, and which was...

Trustees and personal representatives can, in fact, carry on a trade. For example, where a self-employed trader dies, the personal representative may keep the business running until it is wound down or sold. In the same way, trustees or interest in possession beneficiaries might be trading and could qualify for reliefs such as roll-over relief or business asset disposal relief. The broad tax rules governing trading apply to all traders alike, whether they are individuals, trustees, or personal representatives. This Practice Note sets out those principles below. Is there a trade? The key issue to examine is whether there is a trade. At times this will be clear, for instance when personal representatives step in to continue the deceased’s business; however, in other situations even a solitary transaction can amount to a trade. As an illustration, trustees who buy a property to renovate may,...

Abolition of the remittance basis and introduction of a residence-based IHT regime from 6 April 2025 The Finance Act 2025 ( FA 2025), which secured Royal Assent on 20 March 2025, enacts the abolition of the remittance basis and introduces a residence-based system from 6 April 2025. FA 2025 also removes domicile as the principal test for inheritance tax liability. Additional reforms revise the rules for excluded property status, scrap the protected settlements status of offshore trusts, and alter the overseas workday relief provisions. For further detail on these measures, see Practice Notes: The abolition of the remittance basis of taxation from 2025–26 and A new residence-based regime for IHT from 2025–26. Significance of settlor’s domicile for offshore trusts A trust’s exposure to UK income tax and capital gains tax ( CGT) is governed by the residence of its trustees. In some...