Legal Practice Notes

What is a blind trust? A blind trust is designed to avoid conflicts of interest. Commonly, the settlor and beneficiary is a politician or someone in a similar public position. The settlor/beneficiary ( SB) transfers assets to trustees to hold absolutely; the trustees then manage and invest as they consider appropriate, taking no instructions from SB. They operate without telling SB how assets are bought, sold, managed or invested. The purpose is to prevent criticism of conflict where SB, in an official capacity, makes a governmental decision that affects the value of investments within the trust. The intention is that SB makes decisions without being swayed by potential effects on their own asset portfolio. Accordingly, a blind trust requires trustees to enjoy complete freedom and discretion over the buying, selling, management and investment of assets, and they are under no obligation to take orders from, or...

Company directors, and in certain circumstances shadow directors, are subject to a wide range of obligations owed to the company. Over centuries, the courts have shaped many of these obligations from broader common law doctrines and equitable standards, while others also have subsequently been codified in legislation. This Practice Note examines the director’s statutory obligations set out in sections 171 to 177 of the Companies Act 2006 ( CA 2006), commonly referred to as the general duties......

Any attempt to limit or exclude liability for defective products in a contract term, notice, or other provision is prohibited. Under CPA 1987, matters fall into four main categories: the injured person cannot discharge the burden of proof the defendant establishes one of the statutory defences in CPA 1987, s 4 the claimant is barred by one or more of the CPA 1987 time limits the defences of contributory negligence or volenti non fit injuria (the willing acceptance of risk) apply Although liability imposed by CPA 1987 is strict, it is not absolute. There remains room to avoid liability where producers can make out one or more statutory defences. Statutory defences Compliance with UK or assimilated EU law This statutory defence will succeed if the defendant demonstrates the defect arose from compliance with a requirement imposed by UK or EU law. From IP...

Affidavit or witness statement evidence In a grant of representation application, the court will ordinarily accept the details provided in form PA1P or PA1A, or the online application (previously a separate statement of truth), as the sole proof of the deceased’s Will. On occasion, extra material is required, which can be supplied by affidavit or by witness statement. From 2 November 2020, the Non- Contentious Probate Rules 1987, SI 1987/2024 ( NCPR 1987) were revised by the Non- Contentious Probate ( Amendment) Rules 2020, SI 2020/1059, to permit the use of witness statements as an alternative to affidavits for particular non-contentious probate applications and processes. Due execution An attestation clause in a Will that demonstrates compliance with section 9 of the Wills Act 1837 creates a presumption that the Will was duly executed. Practitioners must judge whether each testamentary document meets the...

Acting as a company’s agents, directors oversee its everyday operations and bear a number of obligations owed to it. Many of these obligations have been crafted by the courts over hundreds of years, developing from broader common law rules and principles of equity......

A company is UK tax resident if it is: incorporated in the UK (subject to exceptions), or centrally managed and controlled in the UK, provided it is not considered resident outside the UK under a double tax treaty (ie not treaty non-resident). The central management and control assessment is commonly known as the CMC test. For guidance on treaty non-residence, see Practice Note: Tie breakers—when tax treaties impact on the UK tax residence of companies. For details on moving a UK tax resident company from the UK, and the tax effects of doing so, see Practice Notes: Company migration or corporate inversion—how to change tax residence in practice and Consequences of company migration— UK exit charges and post-migration UK tax considerations and Corporate migration by shifting tax...

Regulated tenancies Regulated tenancies—often referred to as protected, statutory or fair rent tenancies—arise under the Rent Act 1977 ( RA 1977) and constituted the chief private residential tenancy type until 15 January 1989. Where a tenancy was granted on or after 15 January 1989, when the Housing Act 1988 took effect and assured tenancies became the prevailing private residential model, inclusion within RA 1977 is possible only in narrowly defined situations. Nevertheless, a considerable proportion of protected tenancies persists and, if they are not properly recognised, a purchaser acquiring property subject to a regulated tenancy may pay too much and be unable to achieve vacant possession. RA 1977 tenancies carry very strong security; in the majority of cases the landlord must await the tenant’s departure, though the parties may sometimes negotiate a surrender in exchange for a financial incentive. Be aware that, although several...

A pilot trust is a lifetime settlement created with a token amount (often a nominal cash sum such as £10) and it remains inactive until more money or assets are later added thereafter. Setting up a trust in this fashion is very common indeed. The starter sum brings the trust into being so it stands ready to receive the principal assets at an appropriate future time. Pilot trusts in practice A great many trusts begin life as pilot trusts. The core assets of the trust might be introduced very shortly after the pilot starts. For instance, an individual intending to place property into trust could first establish a pilot and then soon after move UK land to the trustees by an HM Land Registry transfer. Equally, some pilots may not be topped up for several years and will largely lie dormant in the interim period. As...

Although a court may determine the construction of a Will, including its language and terms, the guiding principles do not encourage contentious proceedings. The prevailing method was illustrated in Re the trusts of the will of Harold John Goddard: Goddard (as trustees of the will dated 11 February 2008 of Harold John Goddard) v Hunter (as co‑trustee of the will dated 11 February 2008 of Harold John Goddard). In his introduction, Master Kaye noted that this was a Part 8 claim to construe a Will, issued after 18 months of correspondence between the parties. Despite aspects of that correspondence, the matter was not hostile litigation, but akin to what was formerly termed a construction summons. Counsel for both sides treated their function as assisting the court, presenting arguments for and against the rival interpretations of the Will’s...

Guarantees and third party security from individuals Guarantees (see Practice Note: Guarantees) and third party security (see Practice Note: Third party security) provided by individuals are common forms of credit support in financing transactions. For example, in deals involving a corporate borrower, a lender may require the borrower’s directors to give guarantees or offer security. Where the borrower is an individual, the lender may instead seek a guarantee or security from a related family member, such as a spouse, civil partner or a parent... When taking a guarantee or security from an individual, a number of additional considerations arise beyond the general law on guarantees and security. The principal issues are explored in the following Practice Notes: Key issues in taking a guarantee from an individual in a commercial financing context Key issues in taking security from...

ARCHIVED: This archived Practice Note reviews the pros and cons for trustees of making a rebasing election under Finance Act 2008, Sch 7 Pt 2, para 126, and sets out the steps required. It further considers rebasing elections under section 3 of the Taxation of Chargeable Gains Act 1992 ( TCGA 1992) for gains arising in underlying companies, and TCGA 1992, section 43 on assets traced from other assets and movements between trusts. It also explains the implications of rebasing elections for those using the remittance basis. Abolition of remittance basis from 6 April 2025 The remittance basis for UK-resident, non-domiciled individuals ceased on 6 April 2025. The final year in which it could be claimed is the 2024–25 tax year. From 6 April 2025, a new four-year arrangement—often called the foreign income and gain ( FIG) regime—applies, granting 100% relief on eligible FIG to new...

For the income tax rates and allowances that apply in the current tax year, refer to Practice Note: Key UK tax rates, thresholds and allowances for Private Client. Personal allowances The following income tax allowances are available to individuals: personal allowance transferable personal allowance blind person’s allowance married couple’s allowance personal savings allowance dividend allowance property income allowance trading income allowance The personal allowance, blind person’s allowance, personal savings allowance, dividend allowance, property income allowance and trading income allowance are all deducted from net income to determine the taxpayer’s taxable income. This ensures that a portion of income is tax-free each year. The married couple’s allowance (which includes civil partners) is delivered as a 10% reduction in tax. In specified circumstances, the personal allowance, the blind person’s allowance and the married couple’s allowance can be...

When advising an individual on cross-border or offshore tax planning, it is essential to determine the ‘source’ of income received by or on behalf of that person. This Practice Note outlines why ‘source’ matters for income tax and explores what it means in this context. The income tax charge applies only to particular kinds of income under distinct charging provisions within the income tax acts. Accordingly, when identifying source, regard must be had to each distinct category of income. The Charges to income tax—tables sets out a summary of the charges for each category and the legislative provisions relevant to that charge. What is the meaning of source of income? ‘ Source of income’ describes where income originates or from where it is derived. Income arising in the UK has a UK source and income arising outside the UK has a non- UK (or...

Is a tax return required? Personal representatives ( PRs) are obliged to notify HMRC of any income that has not suffered tax during the administration period, as well as any capital gains realised in that time on disposals of assets within the deceased’s estate. Under the general rule in section 7(3) of the Taxes Management Act 1970 ( TMA 1970), PRs are not required to notify chargeability where the only receipts have already been taxed at source or carry an attached tax credit (for example, bank interest, dividends paid before 6 April 2016). In many estates up to the 2015–16 tax year, in practice, all estate income was taxed at source and no return was needed. From 2016–17, however, the rules for dividend income were altered by the removal of the dividend tax credit. Banks also no longer deduct tax at source on bank...

For a taxable capital gain to arise, there must be a disposal, or a deemed disposal, of an asset. The taxpayer needs to determine precisely when the disposal took place. That date dictates when the tax becomes payable and, in some circumstances, also determines the following: the amount of tax who is required to pay it, and/or whether any tax is payable at all This Practice Note sets out the timing rules that apply to: assets that are disposed of under a contract deemed disposals, and options and forfeited deposits In this Practice Note, CGT means both capital gains tax and corporation tax on chargeable gains. Disposal under a contract The general position is that where an asset is disposed of under an unconditional contract, the disposal is treated as occurring at the time the contract is entered into. This applies even if the asset is transferred or conveyed at a later date. For...

Nature of trusts The trust concept Ordinarily, the settlor starts as the owner of the assets and establishes a trust by transferring them to one or more trustees, making clear an intention that they are to be held on trust for one or more beneficiaries or to achieve a specified purpose. At common law trustees take legal ownership and hold the property or rights in trust for the beneficiaries (cestuis que trust) or for that purpose. The trustees are under an equitable obligation enforceable by the beneficiaries. However, regardless of the settlor’s intention, no trust arises unless legal title passes to the trustee; this act is the constitution of the trust. Definition While the trust idea is recognisable, arriving at a concise definition is not so easy......

What is a strict settlement? A strict settlement is an arrangement concerning land within the scope of the Settled Land Act 1925 ( SLA 1925). Some were crafted in highly intricate forms, developed by lawyers over centuries as a practical mechanism for preserving a family’s estate, while others were far more straightforward. Under the overall pattern of the 1925 property reforms, where land was held on trust it would generally be either governed by a strict settlement or placed on a trust for sale (though a few bare trusts of land sat outside both). The 1925 regime assumed that, for land intended to be kept for the long term, a strict settlement would be the usual vehicle. In reality, however, trusts for sale had, to a large extent, replaced strict settlements even before the Trusts of Land and Appointment of Trustees Act 1996 ( TOLATA 1996) was...

A secret or half-secret trust can be helpful where a testator wishes to keep the identity of a beneficiary of a testamentary gift out of the wording of their Will. Types of secret trusts secret or fully secret trusts semi-secret or half-secret trusts A fully secret trust arises where the testator’s Will leaves property to a recipient without any indication that it is to be held on trust; on the face of it the gift appears absolute and beneficial, yet in reality the recipient is bound by a trust obligation. Such an obligation can only come into being if, during the testator’s lifetime, they asked the recipient to hold the gift not for their own benefit but for someone else, and the recipient, either expressly or by acquiescence, agreed to give effect to the testator’s intention. This type of trust was endorsed by the House of...

Stamp Duty Land Tax ( SDLT) is payable on chargeable land transactions, namely the acquisition of a chargeable interest. For fuller guidance on the operation of SDLT, see Practice Note: Land transactions, chargeable interests and chargeable transactions. In Scotland, SDLT was replaced by Land and Buildings Transaction Tax ( LBTT) with effect from 1 April 2015—see Practice Note: Scotland: Land and buildings transaction tax ( LBTT)—the basics. In Wales, Land Transaction Tax ( LTT) superseded SDLT from 1 April 2018—see Practice Note: Wales: Land transaction tax ( LTT)—the basics. Consequently, references here to land, property, or similar terms for SDLT purposes should be read as excluding any interests in or over land located in Scotland (from 1 April 2015) and Wales (from 1 April 2018). A land transaction is not chargeable for SDLT where an exemption applies. The transactions identified below, concerning...

FORTHCOMING CHANGE : The Trusts and Succession ( Scotland) Act 2024 obtained Royal Assent on 30 January 2024, signalling the first significant reassessment of Scottish trusts law in more than a century since the foundational Trusts ( Scotland) Act 1921. The trusts provisions will only commence once Scottish Ministers introduce the requisite secondary legislation, whereas certain succession provisions took effect on 30 April 2024. The key updates designed to modernise the regime are outlined in News Analysis: Trusts and Succession ( Scotland) Bill passed. Practice Notes covering aspects of Scottish trusts and succession law will be further revised to reflect this new legislation... Liferent trusts A liferent trust is a vehicle that, once established, grants a beneficiary or beneficiaries the right to use the trust property and to receive its income. The individual benefiting from the use or fruits of the trust property is termed the...