It’s a new year and a new decade – Welcome to 2020! This time of year can trigger many feelings – optimism, reflection, uncertainty or all of the above. As we think back to some of the hot topics we followed throughout the year, we realise many are still relevant as we step into the new year.
Keep reading for our thoughts and commentary on what we’re keeping a close eye on in 2020.
A look back: The Office of Tax Simplification (OTS) issued its second report on Inheritance Tax in July 2019 after a request from the Chancellor to review and streamline the administrative and technical aspects of the tax. This resulted in 11 recommendations that would, hopefully, make the structure of this complex tax clearer and easier to understand.
There was also a suggestion that Inheritance Tax would be cut after Sajid Javid said he was considering making changes to this unpopular tax.
Looking forward: While we do not expect Inheritance Tax to disappear in the near future, we’ll continue to watch for any updates as discussions are likely to continue throughout the year.
A look back: Well, 2019 was a wearisome year for Brexit as we were still as uncertain about what Brexit means for the estate administration industry at the end of the year as we were at the start of the year.
Looking forward: After the general election last month, the UK is still scheduled to leave the EU on the 31st of January. We expect to hear more about how the government is working towards this deadline in the coming weeks and what changes we could expect within the industry post-Brexit.
A look back: Throughout 2019, we awaited the implementation of a significant change in probate fees that would have led to an increase of the fees. Instead of the fixed fee structure of £215 for all personal probate applications (and £155 for applications made by professionals) the fees were expected to change to a banded range starting from £250 up to £6,000!
However, this idea was scrapped by the Ministry of Justice in October 2019.
Looking forward: We don’t have a crystal ball for confirmation, but we are not convinced that an increase to probate fees is off the table in 2020. This can have a substantial impact on probate applications so we will keep an eye on any potential developments in this area.
Probate Registry delays
A look back: Starting in March 2019, there have been substantial delays in the processing of Grant of Probate and Grant of Letter of Administration applications by the Probate Registries in England and Wales. This was due to the potential increase in fees that was expected and that announcement caused an influx of applications. At the same time, a major systems upgrade was in progress at the Probate Registries and the implementation did not go smoothly. This combination of unfortunate events resulted in fewer grants being issued for several months.
The impact of these delays caused families added anxiety and concern and the backlog was still being felt by the end of 2019.
Looking forward: We expected processing to be back to normal by the end of 2019 and, while there have been improvements with the processing times, we are still very aware of ongoing delays. However, we're hopeful for improvements over the coming months.
Capital Gains Tax
A look back: As you’re likely aware, when selling a property that is not one’s primary residence, the property owner would be responsible for paying Capital Gains Tax (CGT) on any profit gained upon the sale. These taxes have always been due at the end of the tax year in January.
Looking forward: Changes are likely coming… First, there is a proposal to reduce the tax-free Private Residence Relief period. This means that taxpayers who lived in their property as their main residence at some point can only claim this relief for the period(s) of residence plus the final 9 months of ownership. This period is currently the final 18 months.
Next, Lettings Relief may soon only be available to property owners who shared occupancy with a tenant during the entire letting period. Currently, up to £40,000 of exemption (£80,000 per couple) is available to landlords who rent out a property that was their main residence at some point, so this has the potential for significant impact to landlords.
Additionally, CGT payments will now be due sooner than usual – within 30 days. As a result, landlords and owners of more than one property can no longer wait until the end of the tax year to calculate and report any taxes owed otherwise interest and/or penalties may apply. Interestingly, this 30-day deadline will still apply if no cash is exchanged (i.e. if the property is transferred to a family member or put into Trust).
Although still under consideration, these changes are expected to take effect as of April 2020, so there will likely be a rush to sell properties before this tax year ends to take advantage of the current thresholds and conditions.
Trusts & registration with HMRC
A look back: The 5th Anti-Money Laundering Directive was announced by the European Parliament in April 2018, with the deadline to be transposed into UK law of the 10th of January 2020 (And yes, this will happen irrespective of Brexit). The directive specified stricter requirements for registering Trusts and Trustees with government bodies, resulting in all Trusts and Trustees being registered with HMRC for clearer identification purposes.
Looking forward: Starting in January, at the point of death, there will now be additional work required when a Trust is involved in an estate so we will work with our partners through the new process.