With lockdown restrictions gradually easing, the roadmap means that we can hopefully regain our “me time” and get our roots touched up, eyebrows threaded, a manicure and maybe even a tattoo or new piercing.
The last thing any of us want after not being able to have beauty treatments for so long is a regret of why did something go wrong and deal with the impact it will have on your appearance and in turn your confidence.
When you have your hair coloured, any reputable salon will arrange for a patch test or strand test if it is your first time with them, or if they change the products they use. This is usually done 24 hours before your appointment to ensure that the product is compatible with you. We have seen several clients who have unfortunately attended the salon and not had tests taken and this has resulted in not only damage to the hair and scalp; but also hair loss.
Damaged hair cannot always be repaired with deep conditioning or a hair mask, and unfortunately, a lot of clients simply had to allow the damage to “grow out”, and new hair growth to come in for the condition of the hair to be back to how it was. On average, your hair grows about ½ an inch each month meaning that it can take years before you achieve the hair you want.
Remember; always check out reviews for any new salon or parlour you have not been to before. If you are having your hair coloured for the first time at a salon, and you are not asked to have a patch or strand test, this should ring alarm bells to you. Consider going elsewhere or wait for your own stylist to be available rather than attending a sooner appointment that you may later regret.
When attending for a tattoo or piercing, the piercer or tattooist should hold a licence to carry out such business, a certificate issued by the Council. These should be clearly on display, and if they do not have such a certificate, you should question why and maybe walk away.
It is advisable to ask the piercer or tattooist about the risks of infection with performing the procedure and obtain clear aftercare advice. For example, helix piercings (those to ‘cartilaginous’ fibres) whilst infection is not necessarily more likely to occur, an infection here compared to the ear lobe is more difficult to treat and may cause severe scarring and permanent deformity.
So, be vigilant!
At Tinsdills we have a vast amount of experience supporting our clients with beauty salon negligence issues, and if you feel that you have received substandard care during a beauty treatment, contact us to see how we can assist you on 01782 652363.
Changes have today come into force to extend the limited suspension of provisions and other temporary provisions which were introduced last year under the Corporate Insolvency and Governance Act 2020 (CIGA 2020). Under the new regulations, provisions have been made to:
extend the temporary suspension in the wrongful trading provisions in section 214 Insolvency Act 1986 (wrongful trading), and section 246ZB (wrongful trading: administration), by extending the relevant period until 30 June 2021;
extend the relevant period of various temporary provisions under CIGA 2020
the exclusion for small suppliers from the prohibition on clauses triggering termination of contracts due to insolvency of the customer, to 30 June 2021;
the relaxation of entry requirements for companies into the Part A1 moratorium procedure and prescribed rules contained in CIGA 2020; and
the restriction on statutory demands and winding-up petitions.
For more information on the changes under CIGA 2020 and how these affect your business, contact one of our specialist commercial law solicitors on 01782 262031.
Want to know more about CIGA 2020 and the changes to insolvency provisions?
Is my personal guarantee still enforceable if my directorship was terminated due to the company’s liquidation?
A recent High Court decision in Nirro Holdings SA v Patrick O’Brien [2021] EWHC 279 (Ch) considered whether the term of a personal guarantee, given by a director over the debts of a company, were enforceable in circumstances where the director’s office had been terminated as a result of the liquidation of the company.
In Nirro, Mr O’Brien and his wife were directors and (originally) 100% shareholders in a company specialising in audio visual and conferencing facilities. In 2014, the company secured an agreement to supply video conferencing facilities to Google’s offices in Russia. It was required to have a joint venture partner for the deal and so entered into an agreement with a subsidiary of Nirro.
Nirro made a series of loans to the company, for which Mr O’Brien provided personal guarantees (as if often required to provide security to lenders). The company then failed to repay the loans and was placed into administration in 2016 and, in 2017, was dissolved and removed from the companies’ register.
One clause in the guarantee given by Mr O’Brien, required that he irrevocably and unconditionally guarantee the proper and punctual performance of the guaranteed obligations of his company. He further guaranteed that he would also remain a member of the board and a shareholder of the company. A later clause in the guarantee provided that, on or after a “Significant Event”, the guarantor (Mr O’Brien) would fully perform the guaranteed obligations and be liable to Nirro for losses, costs and expenses resulting from the breach. A “Significant Event” was defined to include “the guarantor resigning or otherwise ceasing to be a member of the board of directors of the Company for any reason other than ill-health, death or by mutual agreement”.
Nirro claimed that the company owed it in excess of £1.9m under the terms of the loans and that Mr O’Brien was obliged to pay that amount under the terms of the guarantee, arguing that as Mr O’Brien had ceased to be a member of the board of directors (because the company had been wound up).
Mr O’Brien, meanwhile, denied that his ceasing to be a member gave rise to a ‘Significant Event’. The case came down to a matter of contractual interpretation, as he argued that the events anticipated by the agreement giving rise to his liability included his resigning (because he would the no longer be contributing to the success of the company), rather than his being removed upon the company’s liquidation. References to the “company” implied an existing entity and so, as dissolution was not specifically referred to as a “Significant Event”, O’Brien argues it was not a triggering event.
So what did the courts decide and does it mean a guarantee is still enforceable if you cease to be a director because your company is in liquidation?
Deciding the matter in Nirro’s favour, the judge concluded that a “Significant Event” was defined to include Mr O’Brien’s ceasing to be a director in any circumstances, including the liquidation of his company. It therefore followed that he was liable to Nirro in respect of the debts owed to it.
Whilst every guarantee will be limited to its circumstances and the specific wording used it both the guarantee and any loan agreement to which it relates (as well as any earlier agreements between the parties which have been superseded, as was the case in Nirro), this recent case highlights the importance of seeking independent advice before entering into a personal guarantee.
Personal guarantees are becoming increasingly commonplace in the current commercial market and so, if you require advice on a personal guarantee (whether new or existing), why not speak to one of our specialist corporate and commercial law solicitors on 01782 262031.
In this article, we take a look at Pre and Post-Nuptial Agreements, whilst also considering Cohabitation Agreements. Read on for more information to help guide your decision to find the best option for your circumstances.
Pre-Nuptial Agreements
More frequently nowadays, couples who are intending to get married consider entering into a Pre-Nuptial agreement in advance of the marriage. This is usually the case where one party will be entering the marriage with more assets than the other and they are looking to protect those assets should the marriage breakdown, but also where one party wishes to protect possible future inheritance. A Pre-Nuptial agreement sets out how those assets are to be retained or distributed in the event of a relationship breakdown, and whilst historically it was something only considered by the wealthy, increasingly it is something which is seen as an attractive option to give more peace of mind that your assets could be protected.
The key point to bear in mind is that a Pre-Nuptial agreement is not legally binding in English law. That said, they are growing in popularity and the Judiciary are more willing to attach weight to them in certain circumstances, provided they have been properly drawn up and executed.
The agreement itself needs to set out full details of the relevant parties and additionally all property needs to be identified together with any matters of particular significance that may not be immediately obvious. Reference should be made to any children of the family and an explanation as to how they would be provided for. It is also vital for the agreement to include review dates in the event of a particular change, for instance the birth of a child, or other significant change in circumstances.
The most important requirements to remember about a Pre-Nuptial agreement are that they should be prepared in good time before the wedding, with a minimum of 21 days before the intended wedding date although ideally significantly longer. This is especially relevant in the event the agreement is complex, or wider aspects are to be considered. The document should be drafted clearly, and so that parties intentions are clear with careful attention paid to all dates and terms. Both parties should have fully and frankly disclosed to each other details of their financial circumstances, and both parties should have received competent and independent legal advice.
Provided these requirements have been addressed then there is some suggestion that if one party ever did have to rely on the agreement, then the Court would attach weight to it. It is however still the case that each situation will be decided on its own merits, and the Court would give due consideration to the fairness of the agreement in all circumstances.
Post-Nuptial Agreements
If parties are already married but wish to put in place an agreement which sets out the above, then they should think about entering into a Post-Nuptial Agreement. The considerations are the same as those mentioned above, with the difference being the agreement is only drawn up after the marriage has already taken place.
But what if you are not intending to get married and yet still wish to regulate the terms of your relationship? This may be because you are thinking about marriage at some point in the future but not considering a date at this stage, or alternatively are simply looking to establish the basis of a change in your relationship.
Cohabitation Agreements
Unmarried couples do not have the same rights as married couples, even if they have lived together for many years and therefore one way to establish financial and other arrangements such as childcare, is to enter into a Cohabitation agreement.
There is presently little Judicial guidance regarding Cohabitation agreements, however it is suggested that it may follow the same consideration as a Pre-Nuptial agreement should its content need to be relied on. In largely the same way therefore, the document should set out relevant information such as full details of the parties and any children, and any other matters of particular significance which may not be immediately obvious. Both parties should exchange full and frank information with each other about their own financial circumstances so that they are aware of each other’s position, and both should take independent legal advice on the intended agreement. Should the parties wish, they could include what provision they intend to make for each other in their respective Wills, and as before, the agreement should be reviewed on the birth of any child or if the parties circumstances change significantly. As with all legal documents, the contents should remain confidential other than between the concerned parties and their legal representatives.
In addition to a Cohabitation agreement, a Deed of Trust in relation to any property may also be considered, with this being where one party is the sole legal owner and the other partner has an equitable interest or where both parties are joint legal owners.
One important point to note is that a Cohabitation Agreement becomes void upon marriage and therefore due consideration must be given to this in the event you later decide to formalise your relationship. At that point, should you still wish to regulate the terms of your relationship, then it may be necessary to consider a Pre-Nuptial agreement, with the relevant requirements as set out above.
Whether you’re thinking about a pre-nuptial agreement or considering your options for you and your partner, Tinsdills Solicitors can assist with the necessary legal arrangements. Contact our team today: 01782 652300
If your marriage unfortunately breaks down, the last thing that you want to think about is agreeing financial matters between you and your spouse. However, even if you and your spouse divorce, financial claims remain open until you put in place what is known as a financial Consent Order. This Order will seek to end financial claims between you and your spouse and record your financial settlement.
Financial matters can be dealt with by way of Court proceedings; however, to attempt to keep matters amicable between you and your spouse, we would usually suggest that you attempt to reach a financial settlement on a voluntary basis without Court proceedings being initiated.
In order for us to be able to advise you of a financial settlement that is fair and in your best interests, we would instead initiate the process of voluntary financial disclosure. Even on a voluntary basis, both you and your spouse have a duty to provide full and frank voluntary disclosure and you must disclose everything that is relevant to your matrimonial finances.
Documents Required for Voluntary Financial Disclosure
Once you and your spouse have agreed that financial matters will be dealt with on a voluntary basis, we would ask that you provide us with the following documents:-
Your salary / wage slips for the last three months;
Your P60 for the last tax year;
If you are self employed, a copy of your last two years’ accounts and tax returns / tax statements;
Details of all your business interests together with the last two years accounts for each business;
Your last 12 months bank and building society account statements or passbooks for all accounts in which you have an interest, either solely or jointly with another;
Evidence of the amount of outstanding debts or liabilities which you have either solely or jointly with another, including credit card statements for the most recent three month period;
Your estimate of the value of any property you own in your sole name or jointly with another;
Your most recent annual mortgage statement or mortgage redemption statement for all property you own or in which you have an interest;
The surrender values for all life or endowment policies which you possess solely or jointly with another and if possible the projected maturity values of such policies;
Details of any other assets in which you have an interest, such as ISAs, PEPs, Bonds, Shares, National Savings Certificates, motor cars etc.;
Details of any monies owed by you;
Details of any monies due to be paid to you within the next twelve months for example as a result of inheritance; and
Pension valuations for all your pension funds, whether current or frozen – we suggest you request these urgently as they can take several weeks to receive.
Your spouse will collate the same documents and once ready, the financial disclosure will be mutually exchanged with your spouse or their legal representative. You will both then be able to raise questions based on the disclosure that the other has provided in the hope that constructive negotiations can take place to agree a financial settlement.
Advantages of Voluntary Financial Disclosure
The advantages of dealing with financial disclosure on a voluntary basis include the following: –
Matters may remain more amicable between you and your spouse compared to if Court proceedings were issued;
Any financial agreement reached will be agreed by both you and your spouse, rather than being imposed by the Court;
You have more control over the process, rather than needing to follow Court directions;
The time taken to resolve matters is generally reduced as you will not need to wait for Court hearings to take place;
Legal fees are generally much less when matters are being dealt with voluntarily.
Contact Us
If you would like to discuss any aspect of divorce or financial matters, please do not hesitate to contact our family department who will be pleased to assist you.
When parties separate or decide to divorce from each other, often their next concern is regarding contact with the children of the relationship. In an ideal world, people are able to agree those arrangements amicably between themselves, but what happens if there is a dispute where one party wants to spend time with the children, but the other party doesn’t agree?
Depending on whether you are the parent seeking contact, or the parent wishing to limit contact, you need to know what your options are, and if guidance is sought from the Court, what any decisions made are based on. The first step would usually be to seek legal advice to discuss any issues and reasons for concern.
Consideration needs to be given to whether the party wishing to have contact with the child holds parental responsibility. Parental responsibility means ‘all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property’ [Children Act 1989]. A child’s mother automatically has parental responsibility and does not lose it if she and the child’s father separate, whether or not they were married. A father who is married to, or the civil partner of the child’s mother when the child is born will automatically have parental responsibility. Fathers of children who are not married to, or the civil partner of, the child’s mother will have parental responsibility if they are named on the birth certificate of the child (post-December 2003).
What is a Child Arrangements Order?
Once parental responsibility has been established, in the event one party wishes contact with a child, or wishes to restrict the other from having contact with a child, then they may wish to make an application to Court for a Child Arrangements Order. This is an Order which regulates arrangements for a child relating to issues such as with whom the child is to live, spend time or otherwise have contact with, or when the child is to live, spend time or otherwise have contact with the other party.
Before any application can be made to Court you are required to attend a meeting with a mediator to determine whether mediation may be a suitable way for you to resolve your dispute, rather than using the Court. If the parties are willing and able to mediate, this may assist them in coming to an agreement in relation to how contact arrangements are put in place. It is accepted however that mediation is not suitable in all cases, and there are certain exemptions which apply depending on the circumstances.
After an application to Court is made, the case is referred to CAFCASS (the Children and Family Court Advisory and Support Service) whose role is to provide the Court with information so that a safe decision can be made about the child/children and the arrangements with either party. CAFCASS conduct safeguarding checks into all concerned individuals and also make enquiries of other authorities for instance Social Services to determine whether there has been any prior involvement with the family. CAFCASS also speak to both parties to ascertain views and listen to any safeguarding concerns. Their role is then to provide the Court with a safeguarding letter setting out their initial recommendations in advance of the case being listed for a hearing.
At present, the majority of hearings are being dealt with by way of remote Telephone Hearings so as to ensure access to the judiciary during the current pandemic. The first hearing is called a First Hearing Dispute Resolution Appointment and CAFCASS will usually be present at this hearing to provide any assistance to the Court, and also to deal with any outstanding safeguarding checks if applicable. Depending on recommendations and whether any safeguarding concerns have been identified, the Court will need to determine the next steps. If there are no child protection safeguarding concerns highlighted, then CAFCASS and the Court will try and assist the parties to reach an agreement.
If however CAFCASS have identified safeguarding concerns and made recommendations for further investigations to be undertaken, then the Court will consider and direct those, making arrangements for the case to return to the Court at a later date once those steps have been taken. These may include CAFCASS being required to produce a more detailed report called a Section 7 Report, or any other directions depending on the circumstances. Ultimately the Court will hold a Final Hearing with the Judge/Magistrates hearing evidence from adults involved, CAFCASS and any other expert necessary before making a decision.
Your Family Law specialist will be able to provide help and guidance from the beginning when you raise your concerns, through to the ultimate conclusion of the case whether that is by way of discussions direct with the other party, or through the Court process.
Contact Us
Our Family Law team have a vast amount of experience in guiding clients through the process of a Child Arrangement Order application. If communications have broken down and arrangements cannot be made amicably, call today to discuss how we can help on 01782 956123.
As employers, domestic abuse is not our business, or is it?
“There is a part for everyone to play, together we can signal to survivors and victims, that they are not alone” (Victoria Atkins Minister for Safeguarding)
In the light of the recent lockdowns due to the coronavirus pandemic, calls to domestic abuse services increased by up to 80%. A new government report published in January 2021 entitled Workplace support for victims of domestic abusehttps://www.gov.uk/government/publications/workplace-support-for-victims-of-domestic-abuse found that very few employers were aware of the signs of domestic abuse let alone have a policy in place to support survivors.
So, when it comes to domestic abuse, where do employers come in? It could be that in many circumstances the only other people outside the home that survivors have contact with and talk to are their work colleagues. These colleagues can be invaluable in helping to provide a link to support for the survivors of domestic abuse and it is likely to be beneficial to the work environment if survivors are made to feel they can talk to colleagues openly.
In January 2021 Business Minister, Paul Scully wrote an open letter to all UK employers in which, when referring to the assistance employers can give, he indicated that it doesn’t mean making employers into counsellors or healthcare workers but the actions [he] outlined can be as simple as providing a safe space to talk which in turn can have a life-changing impact on survivors.
There are over two million victims of domestic abuse a year in the UK most, but certainly not all, of whom are women. The impacts on victims and their children can be significant and wide ranging. Victims may suffer long-lasting health problems but also crippling financial difficulties.
There is also a considerable cost to the economy due to lost output as a result of time off work and reduced productivity as a consequence of domestic abuse.
Lost productivity and absence linked to domestic abuse can mean significant losses for both individuals and employers. Research puts the losses to businesses at around £316m each year as a result of work absences related to domestic abuse.
The coronavirus (COVID-19) pandemic has brought domestic abuse to the forefront, seeing increased coverage in the media largely due to the fact that many people are forced to work from home. It is notable that the Government has launched the hashtag #YouAreNotAlone which gives guidance to employers as to how they can best reassure employees suffering domestic abuse and confirming the household isolation instructions do not apply to them if they need to leave the home to escape domestic abuse.
Although it is recognised that there is no ‘one-size fits all’ approach to responding to the need for support for victims and survivors, there are some main characteristics a supportive workplace has
recognition of the problem, belief in the victim’s story and ensuring they consent to any further steps;
employers signposting to specialist services and suggesting alternative options for the individual to decide between; and
a clear and visible policy which sets out the support offer and approach for dealing with disclosures and issues related to domestic abuse
Best practice for employers
working closely with trade unions (if applicable) and/or organisations specialising in supporting victims of domestic abuse in shaping a policy and approach;
having a comprehensive domestic abuse policy which sets out signs of domestic abuse, roles and responsibilities as well as what the employer can practically offer in terms of financial assistance, flexibility and paid leave;
offering practical support to employees for example paying salaries into separate accounts, additional financial assistance, access to counselling or other health related services, access to time and space within work to make calls and other arrangements as well as flexibility and time out of work;
taking steps to ensure safety in and around the place of work, providing a safe car park space or accompanying the employees to/from public transport, ensuring the details of employee’s whereabouts are not accessible to others (particularly the perpetrator); and
having an appropriate approach to perpetrators or other employees showing abusive behaviours
The company’s policy on domestic abuse should be embedded in the wider organisation:
a specific domestic abuse policy is more effective when it is embedded into the wider organisational frameworks and cultures so that it is cross referenced in HR policies and linked to approaches to diversity and inclusion and health and wellbeing
the policy should be followed through with appropriate signposting – e.g. putting up posters and leaflets/guidance around the workplace and on the internal intranet showing a list of local service providers or specialist apps
employers should consider becoming or appointing Domestic Abuse champions who raise visibility of the issue and are trained to spot the signs of abuse and how to respond and refer individuals on
senior management and leadership raising the issue of domestic abuse can also play a key role in changing workplace culture and breaking down barriers
There are numerous areas of assistance available to support the employer in developing their response to domestic abuse and a few are mentioned below:
Business in the Community COVID-19 Domestic Abuse Toolkit for Employers
If you require any help or advice on a Domestic Abuse policy or any other areas of employment law please contact us on 01782 262031or email lawyers@tinsdills.co.uk
A recent High Court case has shed some light on the ‘fair value’ of shares held by a minority shareholder, which some would say may not have been that fair.
It is common practice for companies with more than one shareholder (particularly those with employee or minority shareholders) to include provisions requiring those shareholders to transfer their shares back to the company or to other (usually, majority) shareholders on the occurrence of certain events. Whenever a transfer takes place, the price of the shares being transferred should be considered and the articles of association (and shareholders’ agreement, if there is one) will usually determine whether that price is: nil, par value, fair value or something else. Nil or par value are easy to determine but the company’s articles of association will usually include specific wording as to when fair value is applied and how it is calculated. This is where things can get tricky.
In Re Euro Accessories Ltd Monaghan v Gilsenan and another [2021] EWHC 47 (Ch), fair value was discussed and, in particular, whether a minority shareholder was entitled to have his shares valued at an amount calculated pro rata to the value of the entire issued share capital of the company or whether the value should be diminished due to the ‘minority’ nature of his shareholding.
In 2003, the petitioner had joined the company as a sales representative. In February 2008, another shareholder voluntarily transferred 24.99% of the then issued share capital of the company to the petitioner. Some time around January 2010, the relationship between the parties broke down and, on 31 January, the petitioner resigned from the company, triggering a compulsory transfer of his shares in accordance with the company’s articles of association.
The minority shareholder argued that the meaning of the expression ‘fair value’ was akin to the definition found in the 2013 edition of the International Valuation Standards: “the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties”. The majority shareholder, however, contended that ‘fair value’ meant the value of the shares on a sale between a willing buyer and a willing seller and that, as the shares represented a minority holding, the price should be discounted to reflect that fact.
The High Court rejected the minority shareholder’s argument that ‘fair value’ (within the context of the company’s articles of association) meant that he was entitled to be paid an amount for his 24.99% minority shareholding which was calculated pro rata to the value of the entire issued share capital of the company. Instead, the Court held that it was a clear statement of general principle that, unless there were indications to the contrary (for example, in the company’s articles of association or shareholders’ agreement) then the general principle was that a ‘fair value’ had to be given to what was actually being compulsorily transferred (in this case, a minority shareholding with less control over the company than a majority or equal shareholding, inherently making those shares less valuable).
If you would like us to review your company’s articles of association or to review or put in place a shareholders’ agreement with considered fair value provisions, contact us on 01782 262031.
A trust is created when assets are transferred to other parties to hold and safeguard for the benefit of others. There are a number of different types of trust but this guide deals only with discretionary trusts.
The main parties involved with a trust are as follows:
Settlor
This is the person who establishes the trust and transfers the assets into the trust. This can be done during the Settlor’s lifetime through establishing a Trust Deed, or upon the Settler’s death through a Will.
Trustees
Trusts are typically administered by between 1 and 4 trustees who are initially chosen by the Settlor. The trustees hold the trust assets, decide on distributions of income and/or capital to the potential beneficiaries, and they are also responsible for the management of the trust assets, record and account keeping and tax compliance. The trustees must act within the terms of the trust, as set out in the Trust Deed, and should act impartially.
In a discretionary trust, the trustees have significant responsibility attached to their role and therefore great care should be taken in selecting trustees to ensure that they will carry out their duties correctly and with integrity.
Modern trust and tax law can be complex, and many people are reluctant to become involved in decisions that require not only a technical understanding, but also an independent detachment from family dynamics, and this means that independent or professional trustees are often chosen.
The trustees are often guided by a Letter of Wishes left by the Settlor of the trust to give some guidance about the objectives the Settlor had in mind when establishing the trust, and some principles to apply to the exercise of their discretion. The trustees are not bound by this Letter of Wishes and are able to exercise their discretion as circumstances require.
Beneficiaries
In a discretionary trust, no beneficiary has any right to a particular share of the trust fund. Instead, the Settlor creates a class of potential beneficiaries who can benefit from the trust, and it is up to the trustees to decide which beneficiaries receive funds from the trust, how much and when.
A discretionary trust can provide flexibility, control and protection from a variety of potential third party threats to beneficiaries, for example, poor decision making, relationship breakdown, financial difficulties, premature death and undue influence from third parties.
Inheritance Tax
Discretionary trusts come within the HMRC definition of “Relevant Property Trusts” which means that they are subject to inheritance tax, even during the Settlor’s lifetime.
A gift into a discretionary trust, when added to any previous gifts in relevant property trusts, that exceeds the nil rate band (currently £325,000.00) will cause an immediate charge to inheritance tax on the excess over the nil rate band. The charge is 20% if the tax is paid by the trustees of the trust or 25% if paid by the Settlor.
Once the value of the discretionary trust is in excess of the nil rate band then the trust is also subject to 10 year anniversary charges. The trust assets would be valued on the 10 year anniversary and a tax charge of a maximum rate of 6% of the trust is levied on the value over the nil rate band.
There can also be time apportioned “exit” charges on capital distributed out of the trust, again when the value is in excess of the nil rate band.
Due to the complexity of the tax regime that relates to trusts, we strongly recommend that you seek accountancy advice and assistance when dealing with a trust.
Income Tax and Capital Gains Tax
The trustees are responsible for paying any tax payable on income that is received by the discretionary trust. The discretionary trust pays income tax at the additional rate of 45% (38.1% for dividend income) once the standard rate of £1,000.00 of income has been exceeded. Any income falling within the standard rate band of £1,000.00 is taxed at the basic rate of 20% (or 7.5% for dividend income).
Any income that is distributed to beneficiaries carries a 45% tax credit and some or all of it may be available for a tax reclaim by the beneficiary.
The trustees may also have to pay capital gains tax if they make a chargeable disposal of trust assets.
Discretionary trusts have an annual exemption for capital gains tax, however this is usually capped at 50% of the capital gains tax allowance for an individual.
Changing Trustees and adding Beneficiaries
When setting up the trust, the Settlor will normally retain the ability to decide how changes to the trustees are dealt with, and also whether beneficiaries can be added or removed.
Each Settlor will reach their own conclusions as to the best way of setting up their trust. It is quite common for the Settlor of the trust to retain the ability to appoint additional trustees during their lifetime, and also add or remove potential beneficiaries from the trust. After the death of the Settlor, the trustees will usually have the power to appoint new trustees, but they may or may not be given the power to add and remove beneficiaries.
The detail in relation to these questions will be decided by the Settlor and will be contained within the trust deed itself.
The Probate Registry is the court body that deals with Grants of Probate and Letters of Administration (collectively called Grants of Representation), which are required in most cases for dealing with the assets and liabilities of someone who has died. The process to apply for a Grant of Representation has recently gone through a number of significant changes.
Until relatively recently applications were made by submitting a sworn statement called an Oath, but this process was replaced in November 2018 by a two page Statement of Truth (that contained broadly the same information as the Oath), which must be signed by the executors or administrators and sent to the Probate Registry alongside the relevant Inheritance Tax forms.
Further change was brought into effect in April 2020 with the introduction of a 23-page application form in place of the two page Statement of Truth. The need for a new form, and the level of information contained in the form was both questioned and criticised by professionals, given the time and cost burden this would have when administering an estate.
In the wake of the coronavirus pandemic, yet more changes to the applications have been introduced, in what appears to be an attempt to centralise the system before eventually adopting a completely online application process.
One of the major concerns legal professionals faced at the start of the pandemic was the obtaining of ‘wet signatures’ for Grant applications, whilst still maintaining social distancing. In response to this, the Probate Registry allowed the temporary acceptance of electronic signatures on the new application forms, which was a welcome announcement for professionals keen to ensure that applications could continue to be submitted during the COVID-19 pandemic, without unreasonable delays.
Shortly after the introduction of the new forms, it was announced that there would be a move to online applications, and in November 2020 it became mandatory for professionals to submit probate applications online, unless certain criteria were met. The Law Society, who regulates solicitors in England and Wales, advised against the government making the online process mandatory until there were assurances that the online systems worked effectively, and sufficient guidance had been released to assist in situations where the system could not be effectively used. Whilst literature was released on the use of the online process, the advice of the Law Society appears to have been largely ignored and unfortunately, practitioners attempting to use the new system faced a number of teething problems, resulting in the applications becoming more time consuming to complete, and causing delays to clients.
Rather frustratingly, the online application process did away with the recently introduced forms, and instead produced a two page Legal Statement, not dissimilar to the previous Statement of Truth, to be signed by the executors and sent in to the Probate Registry alongside the Inheritance Tax forms. Given all documents still needed to be sent in their paper form to the Probate Registry, the question of whether there is in fact a benefit to the new system is one many professionals are asking. From the point of view of the legal professional, the process seems to add to the workload, for the same end result.
Although there have been issues with the online process, as the dust settles and some of the initial problems are ironed out, it is a welcome relief that online applications for Grants of Representation are now being processed faster than at any point since the changes started to be introduced. While, for the sake of clients and their families, we hope that the change to online probate applications will result in a permanent reduction in the time it takes to receive the Grants, it remains to be seen how the new process will cope as more online applications are submitted.
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