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Whats New? / Winter Newsletter 2010
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The Economic Climate
This year has been difficult for many of our clients but we have seen a steady recovery since about May. Our policy of not borrowing and of keeping cash in reserve helped us a great deal. As usual, we have reviewed our charging rates: see bottom of this page for details.
Recent tax changes
Last year we were concerned about the 45% tax rate for trusts. Now many enquiries concern the impact of the 50% rate. It will apply from 6th April 2010. The income of trusts will be taxed at 50% except where the “settlor-interested” rules apply, when the rate will be the settlor’s top tax rate (which might also be 50%).
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If income is paid out to a beneficiary who is not liable at 50% there will normally be a repayment of the tax that has been paid by the trustees. However, as at present, there will be no recovery of tax on dividends other than the xtop upx tax that has actually been paid over by the trustees.
Offshore Trusts
A particular feature of this year has been interest in repatriating offshore trusts. In part this may have been a result of the opportunities for clients with offshore accounts and interests to disclose them. Offshore trusts can still benefit from ‘dribbling out’ gains to as many beneficiaries as possible to avoid a tax charge.
What our clients have been doing to save tax
Capital Gains Tax
Like many commentators, we cannot believe that the present 18% rate will continue beyond the next Budget. Some of our clients are taking advantage of the current low tax rate, even to the point of making gains that will trigger a tax liability, rather than risk a higher tax bill later. Trusts that have held shares for a very long time and have been restricted in movement by inbuilt gains may now decide to diversify their holdings, even at some tax cost. We are using trusts to capture Entrepreneur relief.
Inheritance Tax
The news that the nil rate band will not, after all, be increased on 6th April 2010 was sad but perhaps understandable. No government will have much to give away for some years to come! The transferable nil rate band, even without increase, has released many clients from worry about tax on the family home. Clients who have not reviewed their Wills in the last year or so should seriously think about doing so now.
‘Use it or lose it’ is the motto for tax planning just now: if you do not use your annual allowance by 5th April, your chance to save IHT will be restricted. Remember the ‘normal expenditure out of income’ allowance. It can be very effective when used in conjunction with the Child Trust Fund (which might be taken away, so use it while you can) or a pension fund to benefit very young children.
We have been busy setting up family trusts: IHT is not a problem for gifts below £325,000 (or £650,000 for equal and joint gifts).
Income Tax
In view of the spectre of the 50% rate, our clients are keeping up their pension contributions and paying close attention to the special rules for those of us who do not make regular payments.
Trusts and Estates
A deed of variation can still help a family to keep down the burden of IHT and CGT. It is often simple but effective.
Penalties
Last year we warned that taxpayers would have to be more punctilious in observing their obligations. We have not yet had to argue a case purely on whether our client has exercised due care in completing a return but it is only a matter of time.
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Publications and training etc
Iris continues to help the profession by training the next generation of trust and estate practitioner.
The Bloomsbury Professional Tax Annuals, to which Iris and Toby both contribute, are now part of the core tax library of most professional firms. A new edition of Ray & McLaughlin’s Inheritance Tax Planning will be ready soon. Trust Drafting and Precedents continues, also for Bloomsbury Professional. Iris and Toby continue to work on the trust and estate sections of British Tax Reporter, a top-level work published by CCH for specialists. New projects for LexisNexis include writing for Tolley’s Tax Partner and (a work to rival the British Tax Reporter in intellectual standing) Simon’s Taxes.
Iris and Toby are still working on the 5th edition of Business and Agricultural Property Relief and hope to have the manuscript ready soon for publication by Bloomsbury Professional. |
Toby is closely involved with work for the professions that might lead to the establishment of the first high-level qualification in England & Wales in Will Writing. It is strange that anyone, however ill-informed, can set up as a willwriter; there is a move afoot to press for regulation. If this becomes a regulated activity, the work Toby is doing may become the industry standard.
Our position in the market place
We were short-listed for the STEP Private Clients Awards in the ‘Boutique Firm’ category. We did not win, but the actual ceremony was a splendid affair – even though Toby came in for extensive ribbing at the hands of Gyles Brandreth, presenter – as if he had really known us! Later Toby did pick up an award, the George Tasker medal for exceptional service to STEP, one of our professional organisations. Penny and Toby went up to London to collect it. It was really nice to have our voluntary work recognised in this way.
Charging rates for 2010
In the last few months there has been an increase in highly technical work. Partly this reflects the fact that Iris and Toby are becoming better known in the profession; also firms may decide to carry out simple tax research ‘in house’ to control costs. We match the rates that are charged by our main competitors in each market, though our rates are usually much lower than those charged in London. When the complexity of the work justifies it, we may wish to negotiate a premium.
We still feel that, in our home county of Norfolk and in one or two other areas where we practise, our clients are still not really benefiting from any recovery in the economy. Where the work is not excessively technical we are therefore keeping our discounted rates on hold.
For 2010 the normal hourly charging rates will be as set out below. VAT is added in each case, at the new rate of 17.5%.
Geoff Clark £170.00;
Iris Wünschmann-Lyall £230.00; and
Toby Harris £230.00.
The discounted rates, where they apply, will be (plus VAT in each case):
Geoff Clark £160.00;
Iris Wünschmann-Lyall £200.00; and
Toby Harris £200.00.
The Small Print : Anti Money Laundering and Terms and Conditions
We are registered with H M Revenue & Customs. During the coming year, as soon as resources allow, we may invite you to renew your business relationship with us on terms that are probably no more onerous, but a good deal more precise, than the old. We hope that you will not object to this: many of the changes are merely stating what we already probably assumed was the case.
Pictures © Holly Grand 2010 |
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