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Office for Tax Simplification (OTS) Inheritance Tax (IHT) Review 

The OTS has issued its formal IHT review call for evidence.

Back in mid-January the Chancellor wrote to the Office for Tax Simplification (OTS) asking it to review IHT. A month later the OTS published a document setting out the scope of its “IHT General Simplification Review”, ahead of a call for evidence.

That call for evidence was published on 27 April, with a final response date of 8 June – a period of six weeks. The document has 20 questions, spread across seven categories:

  1. IHT forms, administration and guidance;
  2. Lifetime gifts to individuals;
  3. Businesses;
  4. Farming businesses;
  5. Charitable giving;
  6. Other areas of complexity; and
  7. Wider IHT system.


The questions are largely as expected, probing the complexity and distortions caused by interacting reliefs and other taxes, while seeking ideas to “remove complexity”. The brief “Other areas of complexity” section is interesting, if a little worrying, as it says “You may, for example, wish to comment on the residence nil rate band, the IHT treatment of trusts, the IHT treatment of personal pensions and life insurance products…”

Alongside the formal document is an on-line survey which appears designed to highlight initially the insignificance of IHT – representing less than 1% of government revenue and affecting fewer than 5% of estates.

The short time for responses reflects the OTS’s aim to publish a report in Autumn 2018, to feed into the Autumn Budget.

There is not much political mileage for the Chancellor reducing the IHT take, so any simplification can be expected to be revenue neutral.


High Court decides on domicile of the deceased for the purposes of the 1975 Act claim against his estate (Proles v Kohli, 2018 EWHC 767 Ch).

The issue of a person’s domicile is usually discussed in the context of taxation, However, there is one  aspect of domicile not related to taxation  that is often overlooked but is important to estate planning and wills, namely in relation to claims under the Inheritance (Provision for Family And Dependants) Act 1975.

If a person who has not been provided for under a Will is within the category of people eligible to make a claim for ‘reasonable financial provision’ under this Act they can only do so if the deceased died domiciled in the UK.

This issue was the subject of the preliminary hearing in the case of Proles v Kohli Deceased and has recently been determined (Proles v Kohli, 2018 EWHC 767 Ch). Whilst each case will always be determined on its own facts, the decision in this particular case is interesting as it illustrates the factors the Court will take into account when considering whether the individual is domiciled in the UK or not.

This is the well-publicised case of the mistress of the late millionaire Baldhev Kohli who is challenging his will on behalf of their young daughter for whom the deceased made no provision in his will. The claim would fail if the judge ruled that Mr Kohli was not UK domiciled, so following the finding that Mr Kohli was indeed domiciled in the UK the claim can now proceed.

The circumstances of Mr Kohli relevant to the decision were as follows. He was born in India where he lived and worked for nearly 40 years. He had a wife and two sons, all of whom were based in India. In 2002 he moved to London with his son when his son started university in the UK. Mr Kohli purchased commercial and residential properties in London and established a small chain of restaurants in various suburbs. He registered his businesses to pay VAT, opened a UK bank account and registered with his local GP. A year later his second son joined him. Whilst Mr Kohli was in the UK it is alleged that he had an extra marital relationship which resulted in a daughter.

He gradually built up his property letting and restaurant business with the help of his family, until 2014 when his health declined seriously, for which he received hospital treatment.

Five years after the birth of his daughter, in late 2015, he organised a trip to India. He spent 35 days there before his unexpected death, on 8 December 2015. The fact that he died while apparently living outside of the UK led his widow, based in India – who is his executor and beneficiary and is defending the claim in the UK – to claim he was not domiciled in England.

The court found that there was a considerable amount of third party evidence that Mr Kohli had not intended his final trip to India to be a one-way trip. The court heard evidence from his doctor to whom Mr Kohli had told him he was travelling to India for ‘rest and recuperation’ and that he would be returning to the UK in a few weeks to complete his medical treatment.

Additionally, the court was presented with evidence that Mr Kohli was in the process of attempting to persuade HMRC that he should be treated for tax purposes as if he resided in the UK.

Having considered all the evidence the court concluded that Mr Kohli should be treated as domiciled in the UK and as such his daughter’s claim under the 1975 Act could proceed.

The issue of domicile is topical nowadays due to changes to the deemed domicile rules which came into effect last year and is therefore one that all professional advisers ought to be familiar with. The aforementioned case illustrates another aspect of domicile which is relevant to estate planning and something that will be relevant to any will planning, especially if any potential beneficiary is to be excluded from a will.


The Government aims to tighten regulation for claims management companies.

The Financial Guidance & Claims bill is, at the time of writing, nearing the end of its journey through parliament. It will (once it is passed) create a one stop financial guidance service and transfer claims management company supervision to the Financial Conduct Authority (FCA).

It will give the Treasury powers to define claims management services as both a Regulated Activity and a Controlled Activity, the latter regulating communications and promotions.

And it will also extend FCA regulation of claims management companies to Scotland, where such companies are currently unregulated.

Once the bill becomes law, secondary legislation will be required to further define its scope, so HMRC has now published a consultation on secondary legislation in relation to claims management services.

Whilst this secondary legislation mostly replicates the current regulatory scope within the framework of the Financial Services and Markets Act (FSMA), the Government is proposing to make one significant change, moving from a single permission covering all regulated conduct across any combination of activities and sectors, to each claims management company requiring separate permissions depending on the specific activities and sectors that they wish to operate in.

The Government believes that requiring a separate permission for each distinct sector in which claims management companies operate will make it possible for the FCA to take into account different activities and types of work across each sector. It is envisaged that this will ensure consumers are adequately protected, as claims management companies will need to have the appropriate skills, knowledge and expertise for the claims they are managing.

The proposed permissions are:

  • seeking out, referring and identifying claims; and
  • advising, investigating and representing in relation to:
    • personal injury;
    • financial services and products;
    • employment;
    • criminal injuries;
    • industrial injuries disablement benefit;
    • housing disrepair.


Claims management companies will need to be able to demonstrate to the FCA that they have suitable competency for each sector in which they wish to carry on business. They will not need to be assessed for competency or suitability in sectors which are unrelated to their business model.

Current exemptions to the claims management regulatory regime –  for certain persons and organisations, such as charities and legal practitioners – will be broadly retained, with a number of small changes, for example in relation to the description of insurance brokers and small-scale introducers.

The Government’s policy intention is that claims made under section 75 of the Consumer Credit Act 1974 (relating to the liability of a credit company for breaches by a supplier) are within the scope of the FCA’s claims management regime and it will consider whether it’s necessary to add this to the draft regulations.

The Government has requested responses to this consultation by 1 June 2018.

It remains to be seen how far any of this will go in ratifying the 2016 Budget assertion that “The government is clamping down on the rogue claims management companies (CMCs) that provide bad service and bombard customers with nuisance calls.”


An estimated 69,000 first-time buyers have benefited from the abolition of stamp duty land tax on properties under £300,000

According to the Government’s latest figures, in the period to 31 March this year, 69,000 first-time buyers have benefited from the abolition of stamp duty land tax (SDLT) on properties under £300,000, since it was first applied on 22 November 2017.

First time buyers relief (FTBR) applies to purchases of dwellings for £500,000 or less, provided the purchaser has never owned a property and intends to occupy the property as their only or main residence. Under the relief, such purchasers are not liable to SDLT on transactions valued at £300,000 or less. On transactions valued at more than £300,000 but less than £500,000, they are liable to pay 5% SDLT on the portion over £300,000.

FTBR applies to purchases in England and Northern Ireland. In Wales, it applied until Land Transactions Tax (LTT) replaced SDLT for transactions in Wales from 1 April 2018.

19% of all residential transactions to 31 March this year included a claim for FTBR. The total amount of SDLT relieved is estimated to be £159 million; half of which (49%) was, perhaps not surprisingly, seen in London and the South East.

19% of all FTBR transactions were in the South East; 13% were in London. The average amount relieved was £2,300: London had the highest average of £4,300; Northern Ireland had the lowest average at £800.

The Government estimates that FTBR will help over 1 million people to get onto the housing ladder over the next five years.

Despite the Government’s optimism, the Resolution Foundation’s report ‘Home improvements – Action to address the housing challenges faced by young people’ calls for a further reduction in stamp duty. The Foundation argues that “the main way to change the relative bargaining power of first time buyers would be to cut stamp duty across the board, while maintaining the surcharge for UK-based buyers of second and additional homes at current levels.” Please see our 30 April 2018 bulletin ‘First home purchase no easier’.


Contained within the Pensions Newsletter is an update on pension schemes and their TRS reporting requirements.

HMRC have published Newsletter 98 which gives an update to the somewhat lacking guidance on certain pension schemes having to register with the Trust Registration Service.

The guidance states:

HMRC introduced the Trust Registration Service (TRS) last year to help you and your scheme trustees meet your obligations under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 when you have incurred a UK tax liability.

As we know some pension scheme trustees have had difficulty using TRS we have changed the guidance. This means that now if your registered pension scheme is a trust, your scheme trustees don’t need to register separately on TRS. They can update their details by contacting Pension Schemes Services.

Whether you’ve incurred a UK tax liability or not you must keep the information required under the Money Laundering legislation in your own written records and provide it to us if we ask for it.

If you incur a UK tax liability and choose to register on TRS, you should not register as a new trust if you already have a unique taxpayer reference (UTR) as this will create another UTR and will lead to you or your trustees receiving Self-Assessment returns to complete for previous tax years.

If you choose to register on TRS and you’ve told us the value of the trust assets on a 41G paper, SA900 or SA970 tax returns or through another channel, when you register on TRS you should complete the ‘Other Asset’ field on TRS using the term – ‘Already notified’. You should leave all other asset fields marked as ‘£1’.

Other notable content in the newsletter:

  • Reporting of non-taxable death benefits – the issue with the tax coding notices being erroneously produced. This issue should be fixed in the summer (2018).
  • The Manage and Register Pension Schemes online service has now been delayed until Monday 4th June 2018 due to service issues. The current Pensions Schemes Online will continue until 6pm Friday 1st June 2018
  • Pensions flexibility statistics:


From 1 January 2018 to 31 March 2018 HMRC processed:

  • P55 = 6,218 forms
  • P53Z = 3,448 forms
  • P50Z = 988 forms


Total value repaid = £22,514,839

  • The annual allowance calculator has been taken down from the HMRC website due to ‘issues’ with it.
  • There is relief at source and pensions flexibility information for Scottish taxpayers:

If the member takes a payment from the pension scheme that doesn’t use up the pension pot, the first payment will be treated as an ongoing PAYE source.

If the recipient has a P45 dated on or after 6 April in the current tax year, you should operate the code on the P45 on a Week 1/Month 1 basis. If the code shows that the recipient is a Scottish taxpayer, the Scottish Income Tax rates will apply.

If payments are already made to the recipient, the additional pension flexibility payment should be added to the previous pension payment made in that tax period.

The tax will then be recalculated using the existing tax code that you’ve used, in line with Scottish Income Tax rates where the code is a Scottish tax code. This prevents the individual from incorrectly getting the benefit of the tax allowances twice.

You can find guidance on additional payments in a tax period at paragraph 1.12 of CWG2.

In all other circumstances, including where individuals have a P45 from the previous tax year (and regardless of any notification of residency status for the purposes of Pensions Tax Relief at Source), you should use the emergency code on a Week 1/Month 1 basis against the first payment in line with UK tax tables.

HMRC will issue a tax code to operate against future payments. You can find information about the emergency code for the 2018 to 2019 tax year in the GOV.UK guide Tax Codes.

Where tax has been deducted using emergency code, Scottish taxpayers have 2 options. They can:

  • wait until after the end of the tax year, when HMRC will reconcile their account using their Scottish tax code and make any repayment owed as part of its normal PAYE process
  • claim tax back in year by completing form P55, P53Z or P50Z, and HMRC will calculate the overpayment based on Scottish Income Tax rates and make a refund within 30.



DWP issues guidance about Bulk transfers without consent: money purchase benefits without guarantees

Following consultation in October 2017 and the response published in February 2018 the DWP have now published guidance to help trustees with the process of bulk transfers without consent where there are no guarantees.

This guidance is in relation to The Occupational Pension Schemes (Preservation of Benefit and Charges and Governance) (Amendment) Regulations 2018 which amended regulation 12 of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 (“the Preservation Regulations 1991”), effective from 6 April 2018.

The amendments, in new regulations 12(1B) and 12(7) to (10), change the conditions that apply to the bulk transfer of certain money purchase rights of members of occupational pension schemes.

The guidance is non-statutory and but is intended to assist trustees in relation to the additional requirements brought in under these regulations. The guidance covers a variety of areas including:

  • Legislative requirements
  • Trustee duties
  • Good practice
  • Charge caps



Regulations published on FAS increased cap for long service

Further to our bulletin PPFAB29 , the Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018/207 have now been laid.

The Regulations insert a new provision into the original regulations as laid in 2005 which sets out the definition of the compensation cap. The new regulations provides for a revised FAS cap dependent on a person’s age and length of pensionable service when the person first becomes entitled to an annual payment or an ill health payment under the Scheme.

‘The content of this newsletter is for information only. It does not represent personal advice or a personal recommendation and should not be interpreted as such.  Please do not act upon any part of it without first having consulted an Independent Financial Adviser.


If you would like to know more about further financial planning services we can offer please e mail or call us to discuss:

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