Online Probate Applications - practical tips on avoiding problems with your application by Ian Bond - 16th September 2021 - practical tips on ...
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Online Probate Applications -
practical tips on avoiding
problems with your application
by Ian Bond
16th September 2021
www.fraserandfraser.co.uk Trust & Tax Update 7 Oct 2021 • 1 - 14. TRS expansion – Sept 2021; • 15 -19. Tax Planning in Oct 2021 • looking ahead to the Autumn Budget on 27 Oct 21 • 20-24. IHT Changes due for deaths from 1 Jan 2022
www.fraserandfraser.co.uk
John D. Bunker LLB. CTA TEP
Consultant Solicitor & Chartered Tax Adviser,
Tax Trusts & Estates, Irwin Mitchell and freelance lecturer
• Co-Editor of new Law Society IHT Planning Handbook
• Published mid-Dec 2020, of which John has written 1/3 of content
• 30+ years experience as a solicitor, 25 as a CTA,
• specialising in wills, trusts, estate and tax planning
• A member of SFE who has contributed regularly to the SFE Forum.
• John serves on HMRC’s Capital Taxes Liaison Group & TRS Sub-group for 5 MLD; & TACT’s
Private Trusts Committee; represents STEP on HMCTS Probate Users Forum; & in Sept
completed 3 ½ years as Chair of CIOT’s Private Client (UK) Taxes Committee.
• After 23 years as a partner, moved in 2012 to technical & training role for Thomas Eggar, now
developed within Irwin Mitchell’s national team;
• with the Chichester, Gatwick, Leeds, London, Manchester, Reading & Sheffield offices.
• John has developed external training work in a freelance capacity,
• with enthusiasm for his subject, John seeks to illuminate technical details with
practical insight, in training for local law societies, branches of STEP, CIOT, SFE and
other professional groups, as well as MBL, CLT, Professional Conferences & individual firms.
5MLD & Trust Registration Service (TRS)
www.fraserandfraser.co.uk
TRS Agenda: Changes to TRS since May 2021
• This Webinar builds on, the Fraser & Fraser Webinar on 6 May 2021.
• So what are key developments since then?
1. TRS opens for 5MLD 1.9.21 & deadline to register1.9.22
2. Time to register new trusts & update existing ones extended to 90 days
3. New TRS Manual to provide Guidance (& also Gov.uk)
4 /5. Recap on the big picture & main Private Client paras in Sch 3A.
6. Co-owners & trusts of land
7/9. Life Policies: Surrender values & other policies with investment element
10. Healthcare policies: special provision to be made.
11. Recap on Pensions & pilot trusts
12. Child bank accounts: special provision to be made.
13. Mental Capacity: what are the provisions for?
14. Other key issues
www.fraserandfraser.co.uk
1. TRS open for Express Trusts from 1.9.21
• 5MLD (5th Anti Money Laundering Directive)
• Trusts element took effect from 6 October 2020
• But only from 1 Sept 2021 able to register on TRS
• Trusts under 5MLD can now be regd on TRS
• “Registerable Express Trusts”
• All express trusts must register,
• Unless within one of exclusions
• see Sch 3A – see 5 below.
www.fraserandfraser.co.uk
2. Deadline to register on TRS = 1 Sept 2022
• Can register express, non-taxable trusts from 1 Sept 2021
• Main deadline date now 1 Sept 2022
• extended from 10 March 2022 – allowing a full year
• or 90 days after trust set up
• or duty to register arises – if later
• Extended from 30 to 90 days
• Deadline for amendments to trusts on TRS:
• Also extended from 30 to 90 days –
great news!
www.fraserandfraser.co.uk
3. New Guidance in TRS Manual Sept 2021 & on Gov.uk
• New TRS Manual created & updated Sept 2021
• still needs more updating
• gives technical guidance that can’t go into Gov.uk
• www.gov.uk/hmrc-internal-manuals/trust-registration-service-
manual
• HMRC have more control over content of Manuals
• Cf. restrictions with Guidance on Gov.uk!
• But many amends suggested by HMRC’s TRS Sub-group still o/s
• Gov.uk: Initial draft Guidance on 5 MLD
• www.gov.uk/guidance/trust-registration-extension-an-overview
• www.gov.uk/topic/personal-tax/trusts
• www.gov.uk/guidance/register-your-clients-trust
• NB some of the details also need correcting or clarifying!
www.fraserandfraser.co.uk
4. 4MLD & 5MLD: the big picture
• Trusts registered under 4MLD now called:
• “Registerable Taxable Trusts”
• need to register with TRS only where any tax due
• To be registered under 5MLD now called:
• “Registerable Express Trusts”
• All express trusts to register, unless within one of exclusions –
see Sch 3A
• Trust that registers under 5 MLD may need to switch to 4 MLD
• Becomes “Registerable Taxable Trusts”
• if any of the 5 taxes becomes payable
• so different rules & timetablewww.fraserandfraser.co.uk
5. Sch 3A: Excluded Trusts Key paras for Private Clients
1. Legislative Trusts;
2. Trusts imposed by court order;
3. Pension scheme trusts;
4. Trusts of insurance policies;
5. Charitable trusts;
6. Pilot trusts;
7. Trusts having effect on death;
8. Death & life insurance;
9. Co-ownership:
• Trusts meeting legislative requirements:
• 16. A trust holding property (under) ss. 71A or 71D IHTA 1984;
• 17. A trust under paragraph 1 of Schedule 4 IHTA.
• 18. A trust of funds derived from a payment of PI trusts;
• 22. A trust for a disabled person; and 24. Interpretationwww.fraserandfraser.co.uk
6. Co-ownership of land: para 9
exclusion
Para 9. “Co-ownership: A trust of jointly held property where the
trustees and the beneficiaries are the same persons.”
• Very restricted,
• so must register, e.g.:
• Any joint ownership by e.g. 2 for 3 people – where the 3rd is abroad
• As well as the deceased’s partner given a right to occupy a house after death;
• unless a trust in estate on death & wound up within 2 years
• If any one Exclusion applies that’s all you need
• Though we await more examples in TRS Manual re how they interactwww.fraserandfraser.co.uk
7. Life policies: paras 4 & 8
• NB very limited exclusions in Sch 3A:
• Para 4. “Trusts of insurance policies: A trust of a life policy
or retirement policy paying out only—
• (a) on the death, terminal or critical illness or permanent
disablement of the person assured; or
• (b) to meet the cost of healthcare services provided to the person
assured.”
• Para 8. A trust where (a) the trust is holding only benefits received on the
death of the person assured under a policy within paragraph 4, and (b) less
than two years has passed since that person’s death.www.fraserandfraser.co.uk
8. Life policies: paras 4 & 8 (2)
• 2 year window for trusts of life policy proceeds,
• before need to register –para 8;
• But only if within the limited scope of para 4.
• Seems to be much misunderstood
• All other life policy trusts need to be registered on TRS
• from the start.
• Watch any trusts of life policies which include
• any cash or surrender value
• but see below.
• Or could pay out in any circumstances
beyond para 4.www.fraserandfraser.co.uk
9. Life policies: Surrender value?
• What if policy has a surrender value (S.V.)?
• Para 4 seems to mean not excluded?
• But HMRC issued this statement in July 2021
• “HMRC has confirmed that Sch3A(4) can be properly interpreted
as including trusts holding policies which have surrender values,
and that those trusts would remain excluded until such time as
the policy is actually surrendered. It follows…that pay-outs
received from such policies on death would continue to benefit from
the exclusion at ..(8).”
• HMRC said would include this in next iteration of TRS manual -but not in yet!
• Life policies being reviewed for Dec update of TRSM
• A mere S.V. does not mean lose the exclusion in para 4
• if essentially re protection.www.fraserandfraser.co.uk
10. Life policies: Different forms of policy
• Policies with an investment element:
• trusts of investment bonds, discounted gift trusts,
• & other policies with investment element
• must register with TRS – not within para 4 exclusion
• & limits to the July 21 ref to S.V.s by HMRC - see 9
above.
• Trusts holding healthcare insurance policies:
• HMRC said Sept 2021:
• “amendments will be made to the legislation to clarify that
all healthcare policies held in trust, including those that are not
part of a wider life policy, are excluded from registration.”www.fraserandfraser.co.uk
11. Pension schemes and Pilot trusts
Para 3. Pension scheme trusts are excluded
• well regulated already
• But not pilot trusts - set up to receive pension death benefits
Para 6. Pilot trusts: were excluded if
• in place before the Regulations came into force;
• i.e. only before 6 Oct 2020
• & value no more than £100 = very low de minimis
• All new pilot trusts must register!
• E.g. any pilot trust to receive pension death benefits;
• Or a pilot trust for life assurance - even if wind up within 2 yearswww.fraserandfraser.co.uk
12. Bare Trusts and Child bank accounts
• Bare trusts are caught as Registerable Express Trusts for 5 MLD
• Unless within one of the exclusions – see 5 above
• Even though not “Taxable” as trust is “look through”
• for income tax, CGT & IHT
• Bare trusts are an AML issue/risk
• But one exclusion to be made:-
• Child bank and building society accounts
• “Amendments will be made to the legislation to ensure
that trusts required in order to open a bank account for a
child are excluded from registration.”
• HMRC Sept 2021www.fraserandfraser.co.uk
13. Mental Capacity provisions: what are they for?
• Mental capacity of trustees, beneficiaries etc.
• Provisions to help, so that if lacking capacity
• an exemption may apply if a 3rd party access request
• to the data held for trust
• Not used for any other purpose
• But many issues with the TRS Manual & a revised draft under review
• HMRC say no obligation to record mental capacity on TRS
• & trying to find right way to ask questions
• 2 issues: capacity is time & case specific – so not always “yes/no”!
• &
• do trustees need to take extra steps to check if a beneficiary lacks capacity?
• Probably no.www.fraserandfraser.co.uk
14. Other key issues for express trusts & Questions
• If any of 5 taxes becomes payable, registerable express trust
• becomes a registerable taxable trust
• & different rules & timetable for TRS
• Trusts having effect on death:
• 3 never need to be on TRS: BMTs, 18-25 Trusts & Disabled persons trust
• 3 may need to be registered if more than 2 years from death:
• Bare trusts, IPDIs & Relevant property trusts
• NB: await more guidance on interaction with co-ownership provisions
• Questions?www.fraserandfraser.co.uk Tax planning 2021
www.fraserandfraser.co.uk
15. Tax changes Sept 2021
Health & Social Care Levy etc.
• Changes in NICs – increase of 1.25% for both employers & employees
• & Dividends – also a 1.25% increase - all start April 2022
• becomes “Health & Social Care levy” in April 2023
• when extends to over 66s
• OTS: both reports on IHT & CGT still await attention
• Apart from changes to IHT process from 1.1.22 – see 20 below
• CGT & IHT: annual Exemptions/NRB/RNRB frozen until 2026
• but not the rates!
• Freezing of rates etc. a “stealth tax” = large increase in amount raisedwww.fraserandfraser.co.uk
16. Watch out for Autumn Budget 27 Oct 2021
• Watch out: “Santa Rishi” has become “Reality Rishi”!
• Chancellor Rishi Sunak has moved on from handing out goodies
• Now Covid realities & the need to raise cash starts to bite.
• NICs were needed – IHT & CGT alone would not raise enough;
• Divs & extension to over 66s were included to show fairness
• Or all the cost would be borne by younger working people.
• Now inconceivable that will not also make IHT & CGT changes
• To show “sharing the pain” of tax – whether Autumn 21 or soonwww.fraserandfraser.co.uk
17. What might change in Budget on 27 Oct
• Rishi Sunak may follow these Office of Tax Simplification proposals:
• 1. Normal expenditure out of income exemption
• OTS proposed replace with less generous relief
• Encourage clients to use it while they can!
• But get the details right:
• Get written commitment from client to continue payments &
• client complete income & expenditure records – as per IHT 403.
2. CGT rates: could increase to bring more into line with Income taxwww.fraserandfraser.co.uk
18. What might change in Budget on 27 Oct?
Businesses & Farms
3. Abolishing CGT uplift on death where a full relief for IHT
• As “double benefit” is not justified?
• Not just businesses /farms
• but also applies to spouse exemption.
• If done, would need lots of new will planning
• & variations of estates/trusts
4. Increasing the BPR “trading threshold” for hybrid businesses
• from over 50% to at least 80% as for CGT hold-over relief
• OTS say why get 100% relief if only 51% “trading”?
• Businesses & farms with large rental income need to re-thinkwww.fraserandfraser.co.uk
19. What might change in Budget on 27 Oct?
Advising clients: succession planning
• Help clients appreciate:
• will not always have the best of both worlds
• Anticipate end of the double benefit of no CGT +no IHT on death
• If any clients considering gifts of agricultural /business assets
• Current APR/BPR regime = as good as it gets
• So a good time to gift?
• Lower capital gains? Business values may be relatively low
• Also risk of “trading threshold” being raised to 80%?
• May be worth “banking” BPR at 100% on current terms
• So succession planning might be accelerated?www.fraserandfraser.co.uk IHT Changes due for deaths from 1 Jan 2022
www.fraserandfraser.co.uk
20. IHT Accounts for Deceased Estates
• new rules for deaths from 1.1.22 - to be announced in October;
• To achieve target that 90% of non-tax paying estates don’t need to do A/cs;
• Will change the Excepted estates rules:
• withdraw the simpler IHT 205 account &
• reduce the circumstances when full IHT 400 needed to get Grant of Probate
• Follows OTS IHT report
• said too many estates not paying IHT had to do full accounts to HMRC,
• Many estates where an IHT 205 provided a ref point –e.g. on death of 1st
spouse
• So a few points for your clients to watchwww.fraserandfraser.co.uk
21. Valuations still needed for Probate & CGT
• Executors will still need to get valuations / make enquiries re estate
• Will still need “gross and net estate” figures for probate application
• Watch out for Probate requirements
• Valuations needed e.g. for property & shares –
• re “base cost” for CGT – value @ date of death
• Property value not “ascertained” for IHT & so not stuck with it for CGT
• Records still need to be kept for future ref – e.g. on death of 1st spouse
• Clients (& Executors on 1st death) should still keep records of lifetime gifts,
• & anything that may have an effect on the 2nd spouse’s estatewww.fraserandfraser.co.uk
22. Do clients want to simplify? At what cost?
• Most estates benefitting from this change will be first spouse’s estates
• So what choices are open to spouses in estate planning?
• If they really want to save some cost in expenses on death, then:
• Need to avoid too much in a trust, or foreign assets (don’t know the figures
yet!)
• Or too much in lifetime gifts or any legacies on first death
• E.g. likely will still need an IHT account:
• to claim an RNRB, a transferable RNRB or TNRB
• & if lifetime gifts above a certain level;
• But in practice, good for tax & personal reasons to make these gifts etc!www.fraserandfraser.co.uk
23. Joint tenants or Tenants in common?
• One inappropriate “simplification” is owning property as Joint Tenants
• So passes by survivorship to surviving joint owner, rather than as
• Tenants in Common (TiC) so a specific share included in the estate
• Needed if a trust arises under the will – only operates if a share as TiC.
• Is this a time for clients to take stock of estate planning as a whole?
• Review how assets are owned and what will happen on death;
• Who get’s what –including anything in trust- & is that what the client wishes?
• How will jointly owned property pass & is that as required?
• Get the details right when buy property: See 24.www.fraserandfraser.co.uk
24. Get the TR1 right : Court of Appeal in Ralph case
• A recent Court of Appeal case (Ralph v Ralph [2021] EWCA Civ 1106 - 22.7.21)
• on ways of owning residential property
• reminds us re care needed in completing the TR1 Transfer of title
• CoA refused to rectify the TR1 to change the trusts re the property
• TR1 gives option to put X in box for Tenants in Common
• or for Joint Tenants; or to refer to a separate Declaration of Trust
• Important to liaise with Residential Property lawyer / conveyancer
• & to consider if a separate Decl of Trust is needed,
• or have a clear record of agreement re option chosen!25. Questions & Answers
Any questions on:
• 1 - 14. TRS expansion –Sept 2021; • 15 -19. Tax Planning in Oct 2021
• looking ahead to the Autumn Budget on 27 Oct 21;
• 20-24. IHT Changes due for deaths from 1 Jan 2022www.fraserandfraser.co.uk
Inheritance Tax Planning Handbook
“It is the sort of book that sits on your desk, rather than your shelf, and is highly likely to be well
used in the office by everyone ranging from the trainee solicitor to the head of the department”
- Caroline Bielanska
“It is written in a really approachable, accessible style while imparting a huge amount of extremely
complex information”
“Like receiving tax advice over a coffee from a good friend, who also happens to be an IHT expert”
John Bunker
Consultant Solicitor and
Chartered Tax Adviser
+44 (0)1243 813 152
+44 (0)7801 012 737
john.bunker@irwinmitchell.comJohn D Bunker LL.B CTA TEP
Solicitor, tax adviser and lecturer
JDB Legal and Tax Training Ltd
www.Jdbtraining.co.uk
Tel: 07507 914931
Copyright: JDB Legal and Tax Training Ltd
Disclaimer: The content of this presentation is intended as guidelines for
those attending the course and other readers. It is not a substitute for
considered advice on specific issues. Consequently, we cannot accept
any responsibility for this information or for any errors or omissions.You can also read
