Category: Articles

International Data Transfers – 21st March 2024 deadline approaches!

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International transfers of personal data to a recipient outside of the UK may only take place if:

  1. the jurisdiction is deemed to have an adequate level of protection for data subjects’ personal data compared with that of the GDPR; or
  2. there are “appropriate safeguards” in place; or
  3. there are only occasional necessary transfers and a particular derogation my apply.

The countries deemed by the UK to have adequate data protection laws are few, including the European Economic Area (EEA) countries, Andorra, Argentina , Faroe Islands, Guernsey, the Isle of Man, Israel, Jersey, New Zealand, Switzerland and Uruguay.

If personal data is to be exported from the UK to any other country then generally the most common “appropriate safeguard” utilised is the approved Standard Contractual Clauses (“SCCs”). Pre-Brexit the EU approved SCCs applied to the UK as they did to every EU country. However, new forms of SCCs approved by the EU were adopted on 4th June 2021 (“New SCCs”).

The UK’s answer to the New SCCs was and is the International Data Transfer Agreement (“IDTA”) which came into force on 21st March 2022.

As well as the IDTA, the UK adopted an addendum (“UK Addendum”) to the New SCCs which is convenient for businesses with data transfers subject to both EU and UK GDPR and/ or who may already have the New SCC’s in place.

Whilst many organisations have utilised the IDTA or the UK Addendum, some organisations have not and have legitimately continued to use the original SCCs. That option ends on 21st March 2024.

Accordingly, it will be a breach of UK GDPR/ Data Protection Act 2018 for organisations internationally transferring personal data relying on “appropriate safeguards” and utilising SCCs unless they do so utilising IDTA or the New SCCs and the UK Addendum.

You should contact us immediately if you need advice in this area to avoid the risk of incurring substantial fines.

Contact Howard Ricklow via email at howard.ricklow@wellerslawgroup.com or by phone on 020 7481 6396.

The Economic Crime and Corporate Transparency Act 2023

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These changes which are in effect from 4th March 2024 have been enacted to enhance the role of the Registrar of Companies and Companies House as a proactive regulator building on the changes introduced under the Economic Crime (Transparency and Enforcement) Act 2022.

 

The principal changes include:

  • Registered office – all companies must now have an “appropriate address” at all times. This means that companies will no longer be able to use a PO box as their registered address and the address must be one where an acknowledgement of receipt of delivery can be obtained

 

  • Email address – companies will need to provide a registered email address which will need to be monitored. This will be used for communications with Companies House and will not be publicly available

 

  • Lawful purpose – upon incorporation the subscribers of the company will need to confirm that they are forming for a lawful purpose and subsequently when filing the company’s annual confirmation statement there will need to be a statement that the company’s future activities are lawful

 

  • Company names – there are expanded restrictions on company names, including potential restrictions on names which could be used to facilitate dishonesty or deception

 

  • Annotations – Companies House will be able to annotate the Register where information appears misleading or incorrect

 

  • Companies House –may use data matching software to identify and remove inaccurate information from the Register

 

  • Powers of the Registrar – Companies House will have additional powers to scrutinise and reject company information which appears incorrect or inconsistent with existing filings

 

  • Data – the Registrar will have the power to share data with other governmental departments and law enforcement agencies.

 

UK companies will need to become aware of these important changes and ensure that they comply with the provisions since in some cases failure to do so could lead to criminal liability for the company and its officers.

Get in touch with Wellers Law Group to assist you with any changes which need to be made in terms of proper compliance.

 

This article was written by Howard Ricklow, our head of Company and Commercial law. To connect with Howard and to enquire about his services, please email howard.ricklow@wellerslawgroup.com or call him on  020 7481 6396.

 

Navigating Inheritance Tax Implications for Cohabitating Couples

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In a rapidly evolving social landscape, cohabitation has become a prevalent lifestyle choice for many couples. However, when it comes to inheritance tax, cohabitating couples often find themselves in a challenging situation when it comes to writing their wills and making them tax efficient.

Inheritance tax laws are typically structured to provide certain benefits and exemptions for legally married or civilly partnered couples. Unfortunately, cohabitating couples may not automatically enjoy the same rights and protections. As a result, the passing of assets from one partner to another in the event of death can trigger tax liabilities that may not be evident in traditional marital arrangements.

In many jurisdictions, married couples benefit from generous estate tax exemptions and the ability to transfer assets to a surviving spouse without incurring inheritance tax. Cohabitating couples, however, may face a different reality. Upon the death of one partner, the surviving partner could be subject to inheritance tax on assets that exceed the prevailing tax-free threshold (currently £325,000).

While cohabitating couples may face additional challenges, they are not without recourse. Strategic estate planning can play a pivotal role in mitigating tax liability and ensuring that a partner’s legacy is preserved.

Crafting a comprehensive and legally sound will is of paramount importance for cohabitating couples. A well-drafted will can outline the distribution of assets and provide clarity on the intentions of the deceased partner. Additionally, cohabitants should explore the inclusion of specific provisions to minimize tax exposure and enable the surviving partner to inherit without undue financial burden.

Cohabitating couples may consider strategic lifetime gifting as a means of transferring assets while minimising tax implications. By gifting assets during their lifetime, partners can potentially reduce the taxable value of their estate, thereby decreasing the inheritance tax liability for the surviving partner.

Understanding the nuances of inheritance tax is crucial for preserving financial legacies and safeguarding the interests of both partners. Cohabitating couples can take proactive steps, such as strategic estate planning, crafting comprehensive wills, and seeking professional advice in relation to cohabitation agreements, to navigate the challenges posed by inheritance tax. By doing so, they can ensure that their intentions are realised, their financial well-being is protected, and their loved ones inherit their assets as they intended in most tax-efficient way possible.

This article was prepared by Naomi Augustine-Walker, a private client solicitor in our London office. You can contact Naomi by email: Naomi.Augustine-Walker@wellerslawgroup.com or by telephone: 020 3831 2669 For our Bromley office please call 020 8464 4242 and for Surrey the number is 01372 750100.

The Difference Between Chargeable Lifetime Transfers (CLT) and Potentially Exempt Transfers (PETs)

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When planning to reduce your inheritance tax bill, understanding the difference between potentially exempt transfers (PETs) and chargeable lifetime transfers (CLTs) is essential. Making the right choice could save your family thousands in tax.

The easiest way to reduce your estate is to spend it! This can be done either by enjoying the money yourself during your lifetime or gifting it to friends, relatives or charities. But not all gifts are treated equally for tax purposes.

What is a potentially exempt transfer?

A potentially exempt transfer (PET) is a gift you make during your lifetime that could become completely free from inheritance tax. The key word is “potentially” – these gifts start as potentially taxable but become exempt if you survive for seven years after making them.

Potentially exempt transfer examples include:

  • Gifts of money to children or grandchildren
  • Transferring property to family members
  • Giving away valuable possessions or investments
  • Setting money aside for a loved one’s future

These gifts aren’t immediately taxable, which makes them an attractive option for inheritance tax planning.

What are chargeable lifetime transfers?

Chargeable lifetime transfers are immediately chargeable to inheritance tax. Such transfers commonly involve payments into a trust which will incur a 20% tax charge on anything over the gift-giver’s nil-rate band (currently £325,000).

Chargeable lifetime transfers examples include:

  • Gifts into discretionary trusts
  • Transfers to certain types of trust for disabled beneficiaries
  • Gifts to companies
  • Some transfers involving overseas trusts

Chargeable lifetime transfer vs PET – key differences

The main differences between PETs and CLTs are:

Immediate tax:

  • PETs: No immediate tax to pay
  • CLTs: 20% tax on amounts over £325,000

After seven years:

  • PETs: Become completely tax-free
  • CLTs: Original 20% charge stands, but no additional tax

If you die within seven years:

  • PETs: May become chargeable at up to 40%
  • CLTs: May face additional tax up to 40% (less the 20% already paid)

Potentially exempt transfer 7 year rule

The potentially exempt transfer rules centre on a crucial seven-year period. If you survive for seven years after making a PET, the gift becomes completely exempt from inheritance tax and no longer counts against your nil-rate band.

How the 7 year rule works:

  • Years 0-3: Full 40% tax if you die (on amounts over £325,000)
  • Year 3-4: 32% tax (20% taper relief)
  • Year 4-5: 24% tax (40% taper relief)
  • Year 5-6: 16% tax (60% taper relief)
  • Year 6-7: 8% tax (80% taper relief)
  • After 7 years: No tax at all

Potentially exempt transfer taper relief

Potentially exempt transfer taper relief reduces the inheritance tax rate on PETs if you die between three and seven years after making the gift. This relief only applies to the tax on the gift itself, not to the overall estate.

Important points about taper relief:

  • Only applies after three years
  • Reduces the tax rate, not the value of the gift
  • Only benefits gifts that exceed the nil-rate band
  • The gift still uses up nil-rate band for seven years

Who pays tax on potentially exempt transfers?

If inheritance tax becomes due on a potentially exempt transfer, the recipient of the gift is primarily responsible for paying the tax. However, if they cannot pay, the estate becomes liable. This is why it’s important to:

  • Keep records of all substantial gifts
  • Consider whether recipients could afford potential tax
  • Think about life insurance to cover potential tax liabilities

Do I have to declare a potentially exempt transfer?

You don’t need to declare potentially exempt transfers to HMRC when you make them. However, you should:

  • Keep accurate records of all gifts
  • Note the date and value of each transfer
  • Record who received the gift
  • Save documentation for seven years

Your executors will need this information if you die within seven years of making the gift.

Inheritance tax and potentially exempt transfers – exemptions and allowances

Gifts to charities and spouses are exempt from inheritance tax. You can gift as much as you like during your lifetime to these recipients and there will be no inheritance tax payable.

Annual exemptions that don’t count as PETs

Beyond these special exemptions, everyone has annual allowances that are immediately free from inheritance tax – they don’t even count as PETs:

£3,000 annual exemption:  You can give away £3,000 each tax year without any inheritance tax implications. If you don’t use it all, you can carry forward the unused amount for one year only.

£250 small gifts You can give as many £250 gifts as you like to different people each year. However, you can’t combine this with your annual exemption – so you couldn’t give someone £3,250 using both allowances.

Wedding and civil partnership gifts

  • To your children: £5,000
  • To your grandchildren: £2,500
  • To anyone else: £1,000

Why these exemptions matter:  These gifts are immediately exempt – they don’t use up your nil-rate band and won’t be subject to inheritance tax even if you die within seven years. Couples can each use their own allowances, effectively doubling these amounts when giving jointly.

Potentially exempt transfer limit

There’s no upper limit on potentially exempt transfers, but practical considerations apply:

  • Gifts over £325,000 risk inheritance tax if you die within seven years
  • You must retain enough to maintain your standard of living
  • Very large gifts might be challenged if you continue to benefit

Unused annual allowances: You can carry forward one year’s unused annual exemption. For example, if you didn’t make any gifts last year, you could give £6,000 this year. Couples could potentially give £12,000 if both have unused allowances.

Regular gifts from surplus income

Regular gifts from surplus income are completely exempt from inheritance tax – they don’t even count as PETs. To qualify:

  • Gifts must be from income, not capital
  • They must be regular (monthly, annually, etc.)
  • You must maintain your normal standard of living
  • Keep records proving the gifts are from surplus income

This exemption has no monetary limit, making it valuable for those with significant surplus income.

Chargeable lifetime transfer after 7 years

Unlike PETs, chargeable lifetime transfers don’t become exempt after seven years. The initial 20% tax always stands. However, if you survive seven years:

  • No additional inheritance tax is due on death
  • The CLT no longer affects your nil-rate band
  • The trust continues under its original terms

This certainty can make CLTs attractive despite the upfront tax cost.

Potentially exempt transfers and chargeable lifetime transfers – making the choice

Choosing between PETs and CLTs depends on your circumstances:

Consider PETs when:

  • You’re confident of surviving seven years
  • You want to make outright gifts
  • You prefer to avoid immediate tax
  • The recipients are responsible adults

Consider CLTs when:

  • You need to retain some control via trustees
  • Beneficiaries need protection
  • You’re planning for multiple generations
  • The immediate 20% tax is acceptable

Get expert advice on lifetime transfers

Understanding potentially exempt transfers and chargeable lifetime transfers is complex but getting it right could save significant inheritance tax. Our experienced private client team can help you choose the most appropriate strategy for your circumstances.

We can advise on:

  • Whether PETs or CLTs suit your situation
  • Maximising available exemptions and reliefs
  • Record-keeping requirements
  • Life insurance to cover potential tax
  • Trust arrangements for CLTs

To learn more about how PETs and CLTs affect you, get in touch with Annelise Tyler by email annelise.tyler@wellerslawgroup.com or by phone 01732 446374 today.

SDLT on Mixed Use Property

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With Stamp Duty Land Tax (SDLT) charged differently on residential and non-residential property, the disposal of a mixed-use property can lead to tax consequences that may affect the value you receive on sale.

Recently, the Chartered Institute of Taxation and the Stamp Taxes Practitioners Group agreed new guidance with HM Revenue and Customs (HMRC) on the classification of property in some common cases where there is mixed use of the premises.

HMRC have decided that the prior guidance that if the property is marketed as residential, it will be a residential property for SDLT purposes should not apply. Instead the test will be if the property is used or suitable for use as a residential property at the date of sale.

If a building is demolished or derelict, it will not be regarded as being ‘in use or suitable for use as a dwelling’, and where such a building is being reconstructed, the position will be decided on the facts: the work has to be significant – there is no ‘golden brick’ rule.

Lastly, where there is a mixed residential/non-residential use, the SDLT status of the property will depend on the facts – a ‘home office’ will be residential, but a self-contained business office (e.g. a surgery) or area let separately is likely to be classified as commercial. The test here is whether an identifiable use of an area precludes use of that area for any other purpose.

Always take professional advice before putting a property on the market.

 

Losing Capacity – Don’t leave it too late to get an LPA

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Most of us will need to consider who will manage our affairs and look after us in our later life or, if and when we lose the ability to do this for ourselves.  It may be that we first have to consider this for our ageing parents or a family member.

Most people first experience the need for a Lasting Power of Attorney (LPA) because a friend or relative has lost capacity without making one.  If you lose mental capacity and have not made a Lasting Power of Attorney, your relatives, friends or even the local authority, can apply to the Court of Protection to be able to make decisions on your behalf as a “Deputy”.  You should bear in mind that once mental capacity for decision making has been lost there is no option but to apply to the Court of Protection, which will normally be a time-consuming and expensive process, often lasting in excess of six months and during which time assets may be effectively frozen.

Generally, the Court of Protection do not appoint deputies to make decisions about your health and welfare – instead preferring to deal with issues on a decision by decision basis.

Loss of capacity is not, unfortunately, something that is limited to old age. We therefore recommend all our clients prepare both types of Lasting Power of Attorney before they are needed.

What is an LPA?

An LPA is a legal document that enables you (the Donor) to choose people (Attorneys) to make decisions on your behalf, about such things as your finances, property and your personal welfare, at a time in the future if you become physically or mentally incapable of dealing with those affairs yourself.

Anyone over the age of 18 can set up an LPA providing they have the mental capacity to understand the meaning and the effects of it. There are two types of Lasting Power:

  1. Property & Financial Affairs (e.g. dealing with the sale of your house and paying bills and making investments on your behalf); and
  2. Health & Welfare (e.g. deciding which care home you go to or where you live and medical treatment)

Appointing attorneys

You can appoint as many attorneys as you wish.

You need to consider, however, how you want them to act in practice. There are different options for this such as ‘jointly’ (doing everything together) or ‘jointly and severally’ (acting either together or separately) or a mixture of the two.

You can appoint different people for the different types of LPA based on their ability to carry out their duties. You can give attorneys as much power as you like (they do by default have the same powers as the donor). You can also place conditions and restrictions on their power.

Replacement Attorneys, who would step in if your first appointed attorneys could no longer act, can also be appointed.

The Property & Financial Affairs LPA can be used as soon as it is registered (the court registration fee is £82 per LPA, though this is reduced if your income is below £12k per annum or if you are in receipt of certain benefits). This can be useful from a practical point of view, if for example, you still have mental capacity but have had an accident and wish others to do things for you.

Whilst you have mental capacity, your attorney must follow your instructions when making any decisions with you/on your behalf.

Health & Welfare attorneys will only be able to make decisions for you once you are unable to make those decisions for yourself (case specific).

What if I have an Enduring Power of Attorney?

Enduring Powers, since October 2007, cannot be created anymore. If your Enduring Power of Attorney was made correctly, signed and witnessed before October 2007 it should still be valid. Even if they are valid, however, there are likely to be issues with them and they should be reviewed.

In particular:

  • Enduring Powers do not cover health and welfare decisions – they are limited to decisions over property and finance.
  • Much of what is covered now when Lasting Powers are prepared professionally was not considered when Enduring Powers were made.
  • Enduring Powers have less safeguarding than LPAs as there is no requirement to register them until the Donor loses capacity. This may appear to be a benefit, but registration takes time and during that time the document can often not be used easily.

Why should I seek professional help?

Whilst you can prepare LPAs yourself, seeking professional legal help is the only way to ensure you receive the individual advice needed to complete the LPAs properly.

Preparing the forms correctly is only one aspect of putting effective LPAs in place for the future. Without individual advice and support it is likely only your family will find out if the LPAs have been well done.

All our service options include:

  • Reviewing your surrounding circumstances and what you wish to do (i.e. who you wish to appoint and why).
  • Advising on the options available both in terms of who to appoint and how this will work in practice.
  • Advising on the authorities, conditions, and restrictions you should include (and those you should not) and discussing alternate options with you to achieve your wishes.
  • Providing practical advice on issues you are likely not to have considered yourself.
  • Confirming the advice provided in writing by way of a written report.

The different service options are:

  • Advice only: you prepare the documents (we will provide you with a link to do this) and we review them and provide advice. You can then finalise the forms knowing they have been checked over and the advice you need has been provided; or
  • Advice & preparation: we provide advice and prepare the forms to include acting as your Certificate Provider (an independent person who confirms you know what you are doing, no one is forcing you to complete the forms and there is no reason for you not to prepare them) and you then finalise the documents; or
  • Advice, preparation & registration: this is a full service in which we do the work for you, on your instructions, through to registration of the LPAs.

 

The Team here at Wellers will ensure that you receive the advice you need to put the appropriate documents in place to suit your personal circumstances.  Get in touch today to start your LPA. For our London office please call 020 7481 2422 , for Bromley the number is 020 8464 4242 and for Surrey call 01372 750100.

Contact us by email: enquiries@wellerslawgroup.com

 

Gifts to Pets in Your Will

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In the realm of estate planning, one aspect that is often overlooked or not well-understood is the inclusion of provisions for pets in your will. Whilst pets are considered cherished members of many families, the law typically views them as property. As such, they require special consideration in your estate planning to ensure their continued care and well-being after your passing.

The first step in bequeathing a gift to your pet in your will is to clearly identify the pet or pets you wish to provide for. Include their names, species, and any distinguishing characteristics to avoid any ambiguity. This will help ensure that there is no confusion regarding your intent.

Selecting a trustworthy individual to care for your pet is crucial. This person will be responsible for your pet’s daily needs and ensure they receive the love and attention they deserve. Make sure to discuss your intentions with this person beforehand and gain their consent.

To support your pet’s care, you can set aside funds in your will. It’s advisable to specify a reasonable amount to cover food, veterinary care, grooming, and any other needs your pet might have. You can either leave a lump sum or establish a pet trust to manage these funds.

A pet trust is a legally binding document that outlines how the allocated funds should be managed for your pet’s benefit. This ensures that the funds are used exclusively for your pet’s welfare. Specify the trustee’s role, the duration of the trust, and how any remaining funds should be distributed after your pet’s passing.

Life circumstances can change, and it’s essential to revisit your will periodically to ensure that your pet’s needs are adequately addressed. If your designated “pet guardian” becomes unable or unwilling to care for your pet, it may be necessary to appoint a new caretaker.

Consulting with an experienced estate planning professional is advisable when including provisions for your pets in your will.

This article was prepared by Naomi Augustine-Walker, a private client solicitor in our London office. You can contact Naomi by email: Naomi.Augustine-Walker@wellerslawgroup.com or by telephone: 020 3831 2669 For our Bromley office please call 020 8464 4242 and for Surrey please call 01372 750100.

Ownership of Property Depends on Intention

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Property can be owned in joint names as joint tenants, which means that each co-owner owns an undivided share in the whole property (and would therefore be the sole owner on the death of any co-owners), or as tenants in common, where each co-owner has a specified share in the property that is not necessarily equal. It is also possible for the deeds to a property to be in the name of one person but for another person to acquire an interest in it.

The relevant law in this area was set out clearly in a recent High Court case, which involved a dispute over the exact ownership of a converted barn in North Yorkshire. Arthur Aspden met Joy Elvy in 1985. In 1986, following Mr Aspden’s purchase of Outlaithe Farm, the couple began living together and went on to have two children.

The couple split up in 1995/1996. Ms Elvy left the farm with the children, but continued to be in daily contact. In 2006, Mr Aspden transferred a barn at the farm into Ms Elvy’s name and this was subsequently converted into a dwelling house at a cost of about £90,000. Mr Aspden alleged that he had provided the majority of the cash funds and carried out labouring work for the conversion, which he said he had done because the couple intended to marry and live in the barn. Ms Elvy denied this. She argued that it was ‘in recognition of her contributions to the family’ and that Mr Aspden consequently had no beneficial interest in the barn, which by this time was worth £400,000.

Judge Behrens pointed out that if a property is in joint names, the presumption will be that the co-owners intended to own it as joint tenants. This presumption can be overturned, but it is difficult to achieve this unless there is evidence that the co-owners actually intended to own the property in agreed proportions. By comparison, where a property is in a sole name, the person alleging a beneficial interest, whose name is not on the deeds, has to establish the existence of some sort of trust. There is no presumption of joint ownership. However, such a trust could arise some years after a property was initially acquired in one name.

In this particular case, the judge held that there was ‘a common intention that Mr Aspden should have some interest in the barn as a result of his substantial contribution in money and labour’. He found that Mr Aspden had a beneficial interest in the property which the judge assessed at 25 per cent.

Ripped Off By a Rogue Trader? You Can Be Compensated!

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Elderly people and those who are vulnerable are sadly prime targets for rogue traders, but the law is not powerless when it comes to helping those affected. The successful prosecution of a rogue builder promises more than £200,000 in compensation for his victims.

The builder’s modus operandi was to con householders, mostly pensioners who lived on their own, into paying extortionate sums for unnecessary work that was shoddily carried out. One victim paid more than £300,000 for work which was assessed as being worth only £1,500.

The builder was ultimately jailed for five years and four months after pleading guilty to three counts of fraud and one of theft. Proceedings followed under the Proceeds of Crime Act 2002 and he received a confiscation order requiring him to pay £217,214. That sum represents the entirety of his available assets and the authorities intend to use it to compensate his victims for their losses, at least in part.

The facts of the case emerged as he challenged the order before the Court of Appeal. He argued that his matrimonial home and a bank account containing about £100,000 were his wife’s alone, although both were held in joint names. The Court rejected his appeal as entirely lacking in merit.

Unfair Post-Nuptial Agreement Set Aside by Court

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A Russian ‘serial non-discloser’ of assets said to be worth millions of pounds had his attempt to bind his ex-wife to the terms of their post-nuptial agreement dashed recently in the family court.

The agreement was entered into in Israel after ten years of marriage. Mr Justice Mostyn ruled that although the man’s ex-wife would have understood the agreement in a literal sense, she would not have understood the rights she was thereby giving up under English law. The agreement, therefore, was grossly unfair and was set aside by the court.

Instead of the $1 million specified in the agreement, the ex-wife was awarded £12.5 million to meet her reasonable needs and those of the couple’s children.

However, the practical issue for the woman will be locating and obtaining her ex-husband’s assets. He denies having significant wealth, claims to face litigation to settle a $10 million debt and appears to have placed his assets in offshore trusts.

British courts will not enforce agreements that are, on the face of them, grossly unfair. A pre-nuptial or post-nuptial agreement which is reasonably fair and which is entered into by both parties freely and with the benefit of professional advice is likely to be upheld by the court. This was not such an agreement, however. Further information on agreements can be found in an article written by Diane Flowers, one of our family law team here.

Please contact our family team on 020 8464 4242 or email enquiries@wellerslawgroup.com for more information.

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