HMRC has announced that trustees and personal representatives will not need to notify it of savings interest income for the 2016/17 tax year, if the tax liability is under £100 and the trust or estate has no other income.

As of 6 April 2016 – in conjunction with the introduction of a new £1,000 personal savings allowance for savings income, banks and building societies will no longer be required to deduct basic rate tax at source under the tax deduction scheme for interest.

This means that individuals, trusts and estates will, like companies, receive savings interest income gross of tax for tax years 2016/17 onwards.

While this will reduce the administrative burden for non-taxpaying individuals, who will no longer either need to register with their account provider to have this interest paid without deduction or reclaim the tax deducted at source; the measure could potentially complicate the administration of some trusts and smaller estates who do not currently need to complete a tax return but who will now need to report the untaxed interest.

HMRC has therefore announced that, as an interim measure, trustees and personal representatives will not need to notify it of savings interest income for the 2016/17 tax year, if the trust or estate has no other income and the tax liability on the savings interest income is under £100. The relief applies to trustee returns, returns for estates in administration, and payments made under informal arrangements.

The reporting arrangements for subsequent tax years will be decided and published in due course.

Interest in possession trusts, discretionary trusts with income within the standard rate band, and estates in administration currently pay income tax on savings income at the basic rate of 20% and the tax historically deducted by banks and building societies at source under the tax deduction scheme for interest has therefore satisfied their liability. These trusts may face new reporting burdens from tax year 2017/18 onwards.

The measure will not affect trustees of discretionary trusts with income in excess of the standard rate band, who pay income tax on their savings income at the higher trust rate of 45%.


The Office of the Public Guardian (OPG) is re-considering its guidance issued last September that attorneys must obtain an order of the Court of Protection before making a discretionary investment management arrangement, unless the lasting power of attorney itself grants specific authority.

In September 2015, the Office of the Public Guardian (OPG) published an updated version of its guidance ‘Make and Register your Lasting Power of Attorney: A Guide (LP12)’. The updated guidance stated that an attorney under a financial LPA would not be able to use, sign up to or continue acting under a discretionary investment management arrangement without specific authority being contained in the LPA itself.

The guidance goes on to say that, in the absence of express permission from the donor in the LPA, the attorney will have to apply to the Court of Protection for authority to appoint a professional investment manager on a discretionary basis.

This represented a significant change of practice and raised a number of legal issues – particularly for those attorneys who are already operating a discretionary management system under a registered LPA without such specific authorisation.

Following representations from a number of concerned professional bodies, the OPG has confirmed that the guidance is now under review and that a test case may well be taken to clarify whether the delegation of investment management by an attorney to a discretionary investment manager is, in fact, already legally permissible.

Practitioners will welcome clarification on this matter which as its stands leaves many attorneys in a position where they have no choice other than to apply to the Court of Protection for specific authority to employ a discretionary investment manager – a process which is expensive, can take some time and which could lead to valuable investment opportunities being lost in the interim.


The outlook for commercial property is looking less bright.

At the end of last month, the Investment Association (IA) revealed that in February the property sector saw a net retail outflow of £119m, its biggest loss since the doom-laden days of November 2008. In February 2015 the same sector had recorded its biggest ever inflow, at just over £300m. Retail net sector flows have been on a general decline since last July, with the first dip into negative territory (£27.4m) recorded in January 2016. Institutional investor interest has also been waning – in February they withdrew a net £93.6m.

One month’s IA net flow figures need treating with caution, as we have said before. February was a grim month generally – the IA saw a total net retail outflow of almost £400m. However, the commercial property figure does echo other indicators in the property market. For example:

  • What amounted to an increase of up to almost 1% in SDLT for institutional-sized commercial property prompted corresponding cuts in some deal prices and valuations: the purchaser paid no more, but what the seller lost passed to the H M Treasury.
  • The biggest real estate investment trusts (REITs) have seen share price falls over the last six months: Land Securities is down 12.6%, while British Land has declined by 15.9%. Both these FTSE 100 REITs are standing at significant discounts to their September 2015 reported net asset values – 18% for Land Securities and 20% for British Land. There have even been suggestions that they may be taken private by bidders looking to buy portfolios at a discount.
  • Returns from commercial property are slowing. The IPD UK monthly figures for February 2016 showed a return of 2.4% over the past three months, 5.9% over the last six months and 13.3% over the last twelve months. At the end of last week Cluttons, one of the leading commercial agents, forecast that returns would halve to 6.5% in 2016 against 13.8% in 2015 and 19.3% in 2014.
  • Like others, Cluttons put part of the blame for lower return expectations on the uncertainties created by the Brexit vote. Anecdotal evidence suggests some foreign buyers – major players in the London market – are adding Brexit break-clauses to their purchase contracts.

Commercial property currently offers a rental yield of nearly 5%, against a miserable 1.4% on 10 year gilts. There remains scope for rental growth as supply of new space is limited in the office and industrial sectors, while demand remains solid. However, the overall message is that, once again, the main part of the investment return from commercial property will be from income, not capital gain.


The recent stamp duty increase for second homes will not apply to the majority of ‘granny annexes’ despite the fact that they may be treated as a separate dwelling.

In last year’s Autumn Statement, the chancellor, George Osborne, announced plans to increase stamp duty on buy-to-let properties by 3%.

Based on this announcement alone it appeared that family homes with a ‘granny annex’ could also be hit by this tax increase on the basis that it would be classed as a second property. Essentially the buyer would be deemed to be acquiring a second home if the so-called ‘granny annex’ is part of the dwelling on the basis that it could be deemed to be a separate dwelling regardless of whether it shares a wall with the main property. Campaigners have raised concern of the position and the topic has also been subject of recent press coverage – see our weekend papers of 4 April 2016.

However, the Treasury minister David Gauke has now reassured campaigners it this was not the intention and an amendment will be made to the Finance Bill 2016 which would exempt the majority of ‘granny annexes’ from the tax increase.

Former secretary of state for communities and government Eric Pickles, who has campaigned for the exemption, welcomed the change.

‘It is important in terms of social policy, as annexes are used not only by elderly relatives but by other family members, disabled children with special needs and so on,’ he said.

This is a welcomed change as one wonders whether or not this potential issue was considered when the legislation was initially drafted.


A new armed forces National Insurance credit is available for spouses and civil partners who joined their partners on overseas postings. Claims can be made going back to 1975

The DWP has announced it will provide extra support for armed forces spouses and civil partners to help protect their state pension. The new credit covers the years spent abroad from 6 April 1975 onwards and counts towards the new State Pension. Up to 20,000 armed forces spouses may be eligible for a new National Insurance credit if they have previously joined their partners on an overseas posting. They may have been unable to work while abroad and therefore could not make National Insurance contributions.

The new credit has been taken forward under the armed forces covenant, which states that members of the armed forces and their families should receive fair treatment from the nation which they serve.

The DWP has published detailed guidance for individuals to find out how to claim Class 3 National Insurance credits if they:

  • are (or were) married to or the civil partner of a member of the armed forces, and
  • went with them on an overseas posting after 6 April 1975.

On 6 April 2010, the government introduced a National Insurance credit for which an accompanying spouse or civil partner on an overseas posting can apply. Applications must be made by the end of the tax year following the one in which the posting ends. It is still possible to apply for this credit which may also help if the spouse or civil partner wants to claim a working age benefit.

Pensions Minister Ros Altmann said: “Our armed forces protect our country and it is only right that in turn, we help protect their partners’ ability to receive the full state pension when they reach state pension age.

This new credit will help ensure people who choose to support their partners abroad don’t miss out on a good state pension.”


Two respected institutions consider the Single-tier State Pension.

Following the introduction of the new simplified Single-tier State Pension (StSP), there are still concerns that savers are bewildered by the new system. The new StSP is very much a lottery, and whether an individual benefits from the changes or will be worse off than if the current system had continued will depend upon an individual’s age on 6 April 2016 and their working history both before and after the changes.

Two well respected institutions have also weighed in with their own research:

  • The Institute for Fiscal Studies (IFS) has published research looking considering the winners and losers, and
  • The Pensions Policy Institute (PPI) has recently published an analysis.

The IFS estimate for individual attaining SPA between now and 5 April 2020:

  • women will gain on average £5.20 per week in additional state pension income at the state pension age, and
  • those who have been self-employed for at least 10 years will gain an average of £7.50 per week.

Whilst the aim is simplicity (where in pensions have we heard that before?) continued complexity is unavoidable in the short-run. There is a considerable risk of disillusionment as people start claiming pension incomes this year.

The IFS went on to say that some would receive a “nasty surprise” when they realised they would receive less than the advertised rate of £155.65 a week. Their figures calculated that only 17% would receive the £155.65 a week, 23% would get more but the rest were not entitled to this amount.

The PPI concentrated on individuals in their 20s. According to the findings, three quarters of people in their twenties are set to lose a notional average of £19,000 over the course of their retirement, whilst those who will make a notational gain are expected to be £10,000 better off on average.

Pensions Minister Ros Altmann has also admitted the constant changes to pensions are the results of the Government trying to overhaul the system for future generations but they have left people confused. She said: “That’s why we are in the middle of a pensions revolution, which is seeing major radical overhaul of both state and private pensions, following years of tinkering and piecemeal changes that have left people baffled and bewildered about their future finances.”


It is worth remembering the objective behind the changes to State pensions that have been carried out ever since the changes to SERPS and the introduction of contracting out via rebate only PPPs. These have all been designed to reduce the cost to the Exchequer. On that basis, why should people be surprised to find they are likely to be worse off after the changes?

By way of a footnote:

The DWP has updated a glossary giving an explanation of words and phrases used in guidance about the new state pension. The DWP has also updated its resource pack and handouts relating to the new state pension:

  • New State Pension: glossary
  • New State Pension: resources for stakeholders and employers
  • New State Pension: handouts


HMRC has provided some further clarification.

Over the last few months, we have received a number of questions over the rules surrounding eligibility for carry forward.

There were a couple of scenarios where, whilst we felt on reading of the legislation, section 228A (4)(a) of Finance Act 2004, we felt it was it clear that to be eligible for carry forward, of unused annual allowance from a tax year, unless the individual was a member of a registered pension scheme at some time during that tax year. There was still a degree of uncertainty the more the issue was debated.

We therefore decided to raise a query with HMRC Pension Scheme Services in Nottingham.  The specific points we raised related to two specific scenarios:

  1. If an individual’s only membership of a registered pension scheme was in respect of a “Protected non-group life policies under a scheme that is not an occupational pension scheme”, given that such an arrangement is still a registered pension scheme and the premiums paid are deemed to be pension input amount, would I be correct in assuming such an individual would still be eligible for carry forward in any tax year in which he was deemed to be a member?
  1. If the individual was still a member of a registered pension scheme after 5 April 2007, only for the provision of death benefits, even though life assurance premium contributions are not relievable pension contributions and cannot qualify for tax relief, as he is “still a member of a registered pension scheme” I assume that they would still be eligible for carry forward for any tax year in which he was deemed to be a member?

HMRC have confirmed to us, that in both of these circumstances, they agree with our understanding that the individual would be eligible for carry forward. The second instance is interesting as in the case of the pension term policy, tax relief has never been granted on the premiums nor did they constitute pension input amounts for annual allowance purposes.


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