Tax, Trusts and Probate, Key Updates – What’s new?
The Autumn Statement 2022 – Capital Gains Tax
I am sure we have all seen the headlines from Jeremy Hunt’s Autumn Statement. The Chancellor is going on a tax ‘Hunt’ to try and reduce the estimated £50b deficit in public finances, and Capital Gains Tax (“CGT”) is one of those in the firing line.
The Government announced the CGT annual allowance for individuals and personal representatives will be reduced from £12,300 to £6,000 from April 2023 and reduced further to £3,000 from April 2024. For most trustees, the annual exempt amount, which is currently £6,150, will be reduced to £3,000 from April 2023 and then halved again to £1,500 from April 2024.
For those individuals making significant gains, the changes are likely to go relatively unnoticed. The changes will mostly impact those with modest gains who would otherwise have no tax and no reporting requirement. Executors administering an estate may also find they are impacted by these changes if there is property or shares which realise a gain on disposal during the administration period. There are ways to plan and mitigate this and advice should be sought. There will also be additional reporting requirements to HMRC.
On a separate note, traditionally people would share one’s assets with a spouse or civil partner before sale to take advantage of each other’s personal allowance. This is likely to be less effective if the personal allowance drops significantly, but it may still be fruitful if the recipient pays a lower rate of income tax. Planning is always key!
Trust Registration Service
Are you a trustee of a trust or created a trust in your lifetime? If so, you need to be familiar with the new trust registration rules. These rules apply to new trusts and existing trusts.
Some may be familiar with the online Trust Registration Service (“TRS”) and the latest developments in the last 18 months, but a lot of lay trustees are still unaware of these important changes and are falling foul of these rules.
Previously, trusts only had to be registered when they became liable to tax, or to claim relief if it qualified. As a result of the changes, the majority of trusts are now required to be registered where they previously did not. Even if they are not taxable. This is because the change to the trust registration rules came about due to GDPR and anti-money laundering regulations above anything else.
Requirements:
- Non-taxable trusts created on or before 6 October 2020 had to be registered by the 1 September 2022.
- Non-taxable trusts created after 6 October 2020 have to be registered within 90 days of creation or before 1 September 2022 (whichever is later).
- Taxable trusts created before 6 April 2021 have to be registered before 5 October in the tax year after the one in which the trust becomes liable for Income Tax or Capital Gains Tax.
There are a few excluded trusts, for example UK-registered pension trusts, but in the whole, most express trusts are now required to be registered.
If a registrable trust is not registered with the TRS within the deadline, a penalty of £5,000 will be imposed. It is our understanding the penalty is currently intended for repeat offenders and those deliberately failing to register on time. However, it is important that you take advice as soon as possible to avoid the penalty.
If you have created a trust or are a trustee and need advice on your obligations under the new rules, please contact us.
Delays in probate applications
Delays continue to frustrate practitioners and lay individuals alike. The sheer volume of applications and the digitalisation of the probate process has resulted in delays, mistakes and difficulties contacting staff. The online probate service became mandatory on the 2 November 2020 for most probate applications, and since then we have had nothing but problems. The pandemic may well be partly responsible, with staff working remotely and redundancies, but this does not excuse all of the problems as we will see below.
It used to take about 2 weeks to get a grant of representation (“a grant”). The probate registry say that a perfect application, with no “stops”, is currently expected to take up to 8 weeks (2 months). However, where the application isn’t perfect, this can extend to over 22 weeks (5 months). Our experience is that it is taking much longer.
Apparently there has also been a significant increase in applications by almost 30% comparing this year to last year in the same period. This will obviously add to delays, but the industry is also finding the new processes are creating significant problems.
Some problems are no doubt as a result of outsourcing of scanning to a private company. Applications are no longer sent directly to the probate registry and are instead sent to a processing centre in Harlow to be scanned and then accessed by the probate registry. Wills are not automatically scanned double-sided and so the advice is to make sure the fact that the Will is double-sided is clearly stated in the online application to prevent the application be “stopped”.
Delays are significantly worse if you encounter a “stop” to your application for any reason. If the application is stopped, it is moved to an alternative queue and must wait its turn to be picked up again.
The Government’s website on probate applications states that you can expect to receive a Grant within 16 weeks, and if additional information is required it may take even longer! In essence, you can expect to wait a very long time for a Grant to be issued at the moment, and this is not set to improve any time soon.
So why is this important I hear you ask? Well, if the estate includes a property you may want to sell it sooner rather than later for a multitude of reasons, not only to receive inheritance sooner, but more importantly to prevent an unoccupied property sitting there for an extended period of time, and also the risk to the value of the property (or shares) in a turbulent market. Therefore, it is important to take all steps possible to avoid your application being “stopped”.
Stopped applications are commonly caused by:
- Incorrect applications/documents – Lay applicants may use the incorrect form(s) when making their application or incorrect submissions in those forms.
- Missing documents – when the required supporting documents are not submitted at the same time as the application.
- Missing Inheritance Tax (IHT) information. Inheritance Tax forms (if applicable) must be completed before HMCTS can begin to process applications. These forms must be submitted to HMRC 20 days before the probate application to MyHMCTS, or delays will occur.
- Missing Executors. Applications must include all the executors of an estate and it is a requirement to disclose why an executor is not applying and consider any “clearing off” requirements.
- Queries about the Will’s condition. To mitigate the risk of fraud, staple holes, rips, missing pages, or stains may be queried.
Forget one of these, or skimp on explanation, and it could take up to three times as long as if it had been done correctly.
If you are yet to apply for probate, we can take on this burden for you. When instructing us, you can request that we complete the application for the Grant only or alternatively, administer the full estate.
Speak to our Wills, Trusts and Probate specialists.
If you have any questions please contact IBB’s Wills, Trusts and Probate team on 01494 790 023 or email wills@ibblaw.co.uk.
Senior Associate
Wills, Trusts & Probate
jane.beaven@ibblaw.co.uk | 01895 201760
