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ON SPECIALTY DEBTS HMRC has unilaterally declared that a specialty debt is situated in the jurisdiction where the debtor resides, rather than the jurisdiction of the deed itself, as was the established view. The decision is of particular importance for UK-resident non-

domiciliaries, especially if HMRC tries to impose it retrospectively. A loan by a non- resident trust to a UK-resident beneficiary is traditionally used to protect assets from UK inheritance tax. Practitioners are likely to challenge

HMRC’s new opinion, which was formed without any consultation, as wrong in law. Ray McCann, a tax expert at Pinsent Masons, says a debt created by a deed is located in the deed’s jurisdiction, if it is not secured on UK assets.


NAME BENEFICIAL OWNERS THE EUROPEAN COMMISSION has adopted new proposals to amend the Third Anti-Money Laundering Directive. The changes are based on February

2012 recommendations from the Financial Action Task Force (FATF). They require companies, legal entities and trustees to keep records of their beneficial owners, beneficiaries, settlors, trustees and protectors. These must be available to those conducting due diligence checks, and to law enforcement

officers, though not necessarily in a public register. Conditions for ‘politically exposed

persons’ (typically politicians or officials in a position to siphon off government money) will be extended to EU member states and international organisations, as well as non-EU jurisdictions. The amended directive will also halve the cash payment reporting threshold of EUR15,000 to EUR7,500. This goes well beyond the FATF requirements.


TO BE RESTRICTED AFTER ALL THE LEGAL SERVICES BOARD (LSB) has recommended that will-writing in England and Wales be restricted to qualified professionals, as in Scotland. On estate administration, however, the LSB has unexpectedly changed its mind. Last year it provisionally announced that this activity should also be reserved. But in its February recommendation to the Lord Chancellor, it said there was no evidence of systemic dishonesty in the unregulated sector, and regulation would not, in practice, prevent fraud anyway. Moreover, unregulated estate administration companies have only a small market share, which is likely

20 APRIL 2013

to decrease once will-writing requires a licence, said the LSB. The Institute of Chartered

Accountants in England and Wales applauded the LSB’s reversal, but was opposed by other professional bodies, including STEP, the Law Society and the Institute of Professional Willwriters. ‘The LSB has missed a big opportunity to protect the public from rogue operators in a market which the evidence clearly suggests is in need of statutory regulation,’ said STEP Chief Executive David Harvey. The government is not certain to accept the LSB’s conclusions, and legislation will take time even if it does.


TO BE CUT AGAIN THE FRENCH GOVERNMENT has published a new anti-fraud strategy that will sharply reduce the limits on cash transactions. The current EUR3,000 maximum permitted for residents is to be cut to EUR1,000 by the end of this year, while the EUR15,000 allowed for non-residents will be reduced to EUR10,000. The government also plans to create a compulsory register of life assurance policies and their beneficiaries.



FOR HOLIDAY LETS HMRC has successfully appealed the Pawson case concerning business property relief (BPR) from inheritance tax on a holiday lettings business. The First-Tier Tax Tribunal originally ruled that

a holiday let was too active an operation to be an investment and should be regarded as a business asset entitled to BPR. But the Upper Tribunal has now reversed this, accepting HMRC’s contention that the business was ‘mainly’ one of holding the property as an investment, and is thus disqualified from BPR. The Pawson estate’s executors have now launched a fighting fund to take their case to the England and Wales Court of Appeal, on behalf of the many taxpayers affected by the outcome. More on this case at


PROPERTY COMPANIES THE GOVERNMENT is to apply capital gains tax to sales of high-value residential properties owned by UK-resident envelope companies. The CGT charge on ‘non-natural’ property owners, to be introduced in the Finance Act 2013, was originally

intended to apply only to non-resident corporate entities. Considerations of compatibility with EU law have forced the Treasury to rethink that plan. The charge will replace corporation tax for all gains accrued after 6 April 2013.


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