Carter Bells LLP Solicitors

Wider horizons for tax-efficient giving

(July 2010) It is a well known cliché that charity begins at home and many individuals like to favour local or national charities either during their lifetime or by leaving legacies to charity in their Will. Apart from the philanthropy, giving to charity is tax efficient. Charities and the individuals giving to them are able to take advantage of various tax reliefs and the Gift Aid Scheme.

Following two recent cases heard in the European Court of Justice, changes contained in the Finance Act 2010 will see the tax reliefs extended to charitable organisations in European Union member states plus Norway and Iceland.

Before there is a rush to benefit cat and dog homes on the Costa Blanca, such charities must first be registered with the Revenue and must satisfy a "management condition" indicating that the management of the charity meet a "fit and proper person" test.

In order to avoid discrimination, all UK charities must also register with the Revenue to secure the tax reliefs. Simply being registered with the Charity Commission will no longer be sufficient.

For those individuals who have lived and worked in the European Union and may have come into contact with charities they wish to recognise, these changes open up new territories for tax efficient charitable giving.

Ownership of Property by Cohabitees

(June 2010) In the recent case of Leonard Kernott v Patricia Jones, the Court of Appeal decided that notwithstanding that the relationship of Mr Kernott and Ms Jones as cohabitees had broken down, Mr Kernott retained a fifty per cent share of the property they acquired in their joint names when they lived together in 1985.

In 1993, Mr Kernott moved out and Ms Jones remained in the house with their two children and made all the mortgage repayments during that time. Mr Kernott subsequently purchased another property in his name.

Twelve years after their separation, Mr Kernott sought the re-payment of his one half share in the property.

At the time when Mr Kernott and Ms Jones separated, it was agreed that they owned the property equally. The Court decided that notwithstanding that, since Mr Kernott’s departure, Mr Kernott had acquired alternative accommodation and Ms Jones had paid all the mortgage payments and the outgoings, there was nothing to imply that their agreement to share the property equally had changed.

The case serves as a salutary warning to cohabitees when acquiring property together to consider carefully their respective interests in the property.

In order to avoid arguments as to the extent of their respective interest in the property, cohabitees should always consider entering into a Declaration of Trust at the time the property is purchased in order to set out clearly the extent of their respective shares in the property.

Private Client: Valuation of Property

(May 2010) If you are involved in dealing with the administration of a person’s estate (perhaps as executor or administrator) and if the estate includes property (i.e. land or a house or flat), you need to consider carefully the valuation of such property - particularly where the property may not be sold. There are signs that H M Revenue & Customs is taking a tougher line when considering the valuation of property.

Recently, H M Revenue & Customs have suggested that when valuing property, valuations from three estate agents or a Royal Institution of Chartered Surveyors valuation should be obtained. The Revenue implies that if the property is then sold for a higher valuation, the Executors may be liable to a penalty for under-declaration in addition to the extra inheritance tax and possibly also interest.

It is therefore important that if you are involved in the administration of an estate you take professional advice in order to ensure that your own position as executor or administrator is protected.

Private Client News

(May 2010) New Chancellor of the Exchequer, George Osborne, has announced that the first Budget of the new Conservative/Liberal Democrat Coalition will be on the 22nd June with emergency measures likely to be implemented to tackle the deficit. Certain details have already emerged in the negotiations between the parties and the Coalition agreement:

• The Conservative pledge to raise the Inheritance tax threshold to £1 million is no longer a priority for the Coalition. Alistair Darling in his last Budget said the Inheritance tax threshold would be frozen at £325,000 for four years; whether there is any movement in the threshold remains to be seen.

• It seems likely that Capital gains tax on non-business assets will be aligned at rates similar or close to the current rates for income. This could mean the introduction of a 40% Capital gains tax rate, which would mean the end of the favourable 18% rate that has existed since 2008. The Coalition agreement does, however, hint at a favourable rate for entrepreneurs. For individuals thinking of disposing of assets, making gifts or transfers into trust, it is important to take advice before it is too late.

• Whilst all politicians seem keen to avoid discussing VAT, it is likely that VAT will increase from 17.5%.

It also unclear when some of these tax measures will be introduced – immediately, in January next year, or at the start of the new tax year in April 2011? In uncertain times, contact Carter Bells LLP for reassuring and up-to-date advice for you and your family.

Private Client News

Consumer Credit - A further twist in avoiding liability

If a consumer defaults under a consumer credit agreement, e.g. a finance agreement for some furniture or a car, the credit company normally has the right under the credit agreement to take steps to recover the whole of the amount owing plus interest charges.

Commercial claim handlers (otherwise known as Claims Farmers) have been active in promoting a defence for credit agreement defaulters, which is known as the "missing agreement" defence. In essence, under the Consumer Credit Act the credit company has to produce a copy of the original agreement or a copy directly derived from it. In practice many credit companies have found it difficult to produce the necessary paper trail and documentation and consequently have been unable to enforce the agreement. The High Court however has now held that a creditor can satisfy the duty by providing a reconstituted version of the signed agreement. Whilst the decision does appear to stretch the limits of the intention behind the legislation, it does bring to a halt the missing agreement defence that has been previously relied upon.

Private Client News

The Perpetuities and Accumulations Act 2009 will be implemented on 6th April 2010.
It may seem a specialist area but the Act will have a significant impact on family trusts. The 21-year limit on the ability of trustees of private trusts to accumulate rather than distribute income will be abolished and a standard perpetuity period of 125 years is introduced for all new trusts. The changes will help those trustees who were reluctant to pay out income to a beneficiary who was too young, had difficulties in dealing with large sums of money or had drug or alcohol problems. The Act retains the existing 21 year limit on accumulations for charitable trusts; any change would need the permission of the Courts or the Charity Commission.

Private Client News

Clients who want to make a Will should be encouraged to sign a Lasting Power of Attorney (LPA) at the same time, according to the Ministry of Justice.
Junior Justice Minister, Bridget Prentice MP, is concerned that only 100,000 LPAs have been registered so far. In an interview with the BBC's Today radio programme, she said that increasing life expectancy means that every person in Britain should have an LPA in place, ready to be used when necessary.
The Ministry of Justice is now asking the Law Society to promote the idea to its members, in the hope of increasing the take up of LPAs among the general public.
For further information on LPAs please contact either Margaret Gale, Roger Crouch or Frances Hemus.

Private Client News

The Government have confirmed that they will opt out of a European Commission proposal to simplify the rules on obtaining probate for estates with an international dimension in the EU. The proposal provides for the application of a single criterion for determining both the jurisdiction and the law applicable to a cross border estate including the deceased's habitual place of residence. It is proposed that people living abroad will, however, be able to opt to have the law of their country of nationality apply to the entirety of the estate. It will be interesting to see how this proposal develops and whether the UK decides to opt back in at a later date.

Don’t become an intestate

Recent research has indicated that as many as 1,200 widows and widowers are made to leave their homes each year by resentful children or other relatives laying claim to an inheritance. This is due to the unusual way in which the intestacy laws apply when there is no Will.

Married couples often assume, wrongly, that if their spouse were to die then they would inherit automatically the whole of the estate; however, this is not always the case. The intestacy laws may mean certain assets are distributed to other surviving relatives. For example, those couples with children will inherit their spouse’s personal possessions and the first £250,000 of the estate. This was only increased in February 2009 from £125,000. Given that the average house price in London and Surrey is £245,000, this is not a particularly high allowance. The remainder of the estate will be split in two. One half will pass into a statutory trust in which the surviving spouse has a life interest. The other half will pass equally to children on attaining the age of 18.

Where the deceased was childless but there is a surviving parent, sibling, nephew or niece, the surviving spouse will receive the first £450,000 and half of the residue; the remainder will go to other relatives.

The intestacy rules can cause family conflict, particularly in scenarios where wives in second marriages may come up against children from their spouse’s first marriage. The intestacy rules were drawn up in 1925 and are a reflection of the society that existed at that time. Whilst the Law Commission are reviewing the intestacy rules (for example, should they be extended to cohabiting couples?), it remains sensible to make sure that a properly drafted Will is put in place reflecting your wishes and protecting your family after your death.

For further information contact Carter Bells’ private client team.

Commercial Landlords

A recent 'code of conduct' applies to commercial Landlords in relation to money claims pursued against individuals. Failure to follow the 'pre-action protocol' may result in an adverse costs order, loss of interest or even a suspension in the legal claim (which will usually mean further costs).

Residential Landlords and Tenants:

• Ensure all demands for service charges are sent with a summary of rights and obligations of tenants, otherwise a tenant may withhold payment
• Make sure demands are sent out within 18 months of being incurred. otherwise the tenant may not have to pay them!
• The wording in the Notice should be changed from 'Lands Tribunal' to 'Upper Tribunal'

Tenancy Deposit Schemes

Almost three years after the laws relating to the protection of tenants' deposits came into force (April 2007), we are acting for an increasing number of landlords and tenants seeking advice on the implications for failing to protect deposits (or for failing to comply with the terms and conditions of the particular deposit scheme).

Law Society research reveals risks of nightmare will writing companies

The Law Society has published the findings of its research into unregulated will writers. Many people have been left with invalid or badly drafted wills and have had to seek the later intervention of a solicitor to sort out the mess. The research shows that far from saving money by using one of these will writers, people have had to pay more in legal fees to resolve the situation than they would have by going directly to a solicitor. Read more here.

"Final" Companies Act reforms now in force

1st October 2009> saw the implementation of the final changes in the Companies Act 2006. Whilst this Act was brought on to the statute book on 8th November 2006 it has over 1000 sections and so it has been implemented in stages. Many features of company law have their origins more than a hundred years ago and are not necessarily suitable now for regulating companies.

The final changes now in force amongst other things deal with the following:
• New company formation: From the 1st October the documentation required is very different; the historic memorandum setting the objects or purpose of the company is an abbreviated document and there are new model articles or constitution depending upon the type of company.
• Existing companies formed before October 2009 will have constitutions that are based on the former law. The articles containing the constitution that have matters that are not required now may be regarded as out of date and could be changed provided the appropriate procedure (special resolution requiring the requisite majority) is passed.
• All forms used by Companies House have been updated so if you are in the habit of filing forms, for example on change of directors or situation of registered office you will need to do this on the new form. Details can be obtained from Companies House website: www.companieshouse.gov.uk
• Directors of existing and new companies now have the ability to prescribe a “service address” rather than their usual residential address. Home addresses will not be put on the record after 30th September although Companies House will still hold a database of these which can be disclosed in limited circumstances. If no action is taken the residential address will automatically become the service address until the information is provided in the next annual return. If you want to take advantage of this and protect your self from unwanted access to your home address then changes can be notified on Companies House form CH02.