What’s new in our tax online services? Steve Savory summarises the highlights.
- One of the most widely respected products in the tax list is Trust Drafting and Precedents by Geoffrey Shindler and Julie Bell, and it’s easy to see why. There’s a lucidity to the writing which is particularly welcome in this area. The following notes in the chapter on establishing trusts under instruments of variation are typical of the clear, precise style of this work:
These provisions have given rise to a unique opportunity for inheritance tax planning after death. This planning, broadly speaking, tends to take one of two forms.
First, the transferee can be altered from one the transfer to whom does give rise to a charge to inheritance tax to one the transfer to whom is exempt from inheritance tax. A typical example of this type of tax planning is a variation away from a child in favour of a spouse. Whilst transfers of property to children or grandchildren on death will frequently give rise to a charge to inheritance tax, transfers of property to UK domiciled spouses or civil partners will typically be exempt: see section 18 of IHTA 1984. This type of planning will give rise to an immediate saving of inheritance tax by reducing or avoiding the charge which would otherwise have arisen on death.
Second, the transferee can be altered from one who has no need of the property or who wishes to make immediate gifts to others. A typical example of this type of planning is varying property away from children and in favour of grandchildren. This type of planning will not usually give rise to any immediate saving of inheritance tax – assuming the nil rate band to have been utilised, the charge which arises on death will still accrue – however, it may be efficient from a long-term inheritance tax planning perspective as it will preserve the nil-rate band if the transferor dies within seven years.
- Also updated online this month is the wide ranging and definitive Payroll Manual. This hugely popular title has what has always seemed to me to have the “dream team” of a payroll author lineup: Heather Post, Kate Upcraft, Jim Yuill, and Paul Tew. Truly The Beatles of payroll writing! Arguably, no-one uses a product like this for the simple stuff – although it covers that too. Where this calibre of author team comes into its own, as many readers will attest, is in the more complex areas. For example, and it’s hard to even write this without suppressing a wince, how about the interaction of salary sacrifice with auto-enrolment? Ouch. That’s going to get messy. Here’s what is said in the Payroll Manual about it:
The automatic procedures can accommodate salary sacrifice arrangements so long as active membership of the pension scheme can be achieved before the individual consents to the salary sacrifice arrangement. Employers may not oblige any jobholder to enter into a salary sacrifice arrangement to join a pension scheme. The employer may be offering a salary sacrifice arrangement whereby the sacrificed portion of the original salary would cover the employer’s pension contribution so if the individual declines the arrangement it would be non-compliant for the employer to reduce the individual’s pay to cover the employer’s pension contribution. The employer will be obliged to finance the cost of his contribution himself.
If the employee opts out or decides to cancel his or her membership of the pension scheme, the salary sacrifice arrangement may be cancelled, returning the employee to his former gross salary. It is therefore not necessary to oblige the employee to enter into the salary sacrifice arrangement regarding the pension contributions for a minimum period or to state any life-style changes that would allow the arrangement to be cancelled.
- Back with trusts, but this time with an international dimension, Planning and Administration of Offshore and Onshore Trusts was also updated online this month. Here’s some example commentary on recent case law concerning the removal of a trustee:
The presumption that a power of removal is fiduciary is not as strong as the presumption raised in relation to a power of appointment given that the power of removal is generally thought to be narrower in scope and does not always require a complete change of trustee (see Re Piedmont Trust)  JRC 196 (2016-2017) 19 ITELR 210, at 34–42). The power will also be considered in the wider context of the trust, for instance a power of removal conferred on the protector that could be exercised ‘with or without cause’ was held to be a personal power, exercisable by the settlor for his own benefit in JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev  EWHC 2426 (Ch).This was an unusual decision that took into account the wide-ranging powers of the protector and the fact that he was also settlor and beneficiary of the trust. Following this case, it seems that the same powers may be construed as fiduciary or personal depending on the wider context including the wording of the trust document as a whole and who is actually exercising the powers.
- Finally, a brief note that consolidated versions of UK financial reporting standards were added in the month following the 2017 triennial review. The standards are available online here:
- FRS 100: Application of Financial Reporting Requirements (2018)
- FRS 101 Reduced Disclosure Framework (2018)
- FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland (2018)
- FRS 103: Insurance Contracts (2018)
- FRS 104: Interim Financial Reporting (2018)
- FRS 105: The Financial Reporting Standard applicable to the Micro-entities Regime (2018)
Precedent of the month: what better complement to the commentary on variations from Trust Drafting and Precedents than a precedent for a deed of variation from the same work?