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Issue 25 – February 2008

Contents

Cases
Statutory instruments
Features

Articles
News

Events

Offers (how to claim book discounts)

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Cases

1. Olins v Walters

Citation: [2007] All ER (D) 291 (Dec)
Court: Chancery Division
Judge: Norris J
Hearing date: 19 December 2007
Summary: will – mutual wills – requirements for enforceable mutual wills – defendant and deceased wife executing wills and codicil in near identical terms – clause in codicil referring to “mutual testamentary disposition” – whether defendant and wife executing mutual wills

The claimant was a solicitor and the grandson of the defendant, who relied upon him for legal advice. In 2006, the defendant's wife (the deceased) died. On 11 March 1988, the deceased and the defendant executed wills in almost identical terms. Clause 6 of the deceased's will provided that the residue of her estate was to be left to the defendant if he survived her by a specified number of days. In the event that he failed to so survive her, the residue was to have been divided into three equal shares – one each for their two daughters and one for their grandchildren.

On 18 May 1998, a codicil was apparently executed by the deceased. Clause 2 of the codicil provided: “This codicil is made pursuant to an agreement made between my husband and me for the disposal of our property in a similar way by mutual testamentary disposition.” The codicil revoked clause 6 of the 1988 will. The new clause 6 still provided for the entirety of the residue to pass to the defendant, however, the residuary interests of the daughters became life interests, their interests to pass to their surviving children or remoter issue upon their deaths. A mirror codicil was apparently executed by the defendant. The papers relating to the codicil were prepared by the claimant. On 21 March 1998, he sent them to the deceased and the defendant under cover of a letter explaining the effect of clause 2 and confirming that the codicils had been drafted to reflect their instructions. Subsequently, a dispute arose between the parties in relation to the nature and effect of the testamentary instruments.

The claimant submitted, inter alia, that the 1988 wills and the mirror codicils constituted effective and validly executed mutual wills entered into by the defendant and the deceased. The defendant submitted, inter alia, that the testamentary instruments did not have the effect contended for by the claimant. Furthermore, he issued a counterclaim alleging that he and the deceased had been negligently advised by the claimant.

The claim would be allowed and the cross-claim would be dismissed.

On the evidence, the effect of the 1988 will and the codicil had been to create effective mutual wills. Those wills had been prepared in accordance with the wishes of the defendant and the deceased, as expressed to the claimant, and the testamentary documents had been properly executed. Moreover, the conduct of the claimant in advising, and subsequently preparing documents, had not been negligent or improper.

Dale, Re, Proctor v Dale [1993] 4 All ER 129 applied.
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2. Ogden and another v Trustees of the RHS Griffiths 2003 Settlement and others

Citation: [2008] All ER (D) 267 (Jan)
Hearing date: 25 January 2008
Court: Chancery Division
Judge: Lewison J
Representation: Robert Grierson (instructed by Laceys Solicitors) for the claimants; Paul Burton (instructed by Laceys Solicitors) for the seventh, eighth and ninth defendants
Summary:  mistake – mistake of fact – equity – deceased transferring assets pursuant to tax planning advice – deceased dying of cancer less than three years following transfers – deceased's executors applying to set aside transfer on basis of mistake by deceased regarding state of health – whether circumstances amounting to mistake – whether individual disposing of own property required to show would, or merely might, have acted differently had mistake not been made

In January 2003, the 73-year-old deceased and his wife obtained tax planning advice to protect against the effect of inheritance tax. On 7 April, pursuant to that advice, he transferred his shares in a company, I, into a newly created trust called the RHS Griffiths 2003 Settlement. The settlement provided for discretionary trusts of the income from the shares for a period of ten months from the date of the transfer. On 8 April, he and his wife jointly granted a deferred lease of their matrimonial home to themselves and their two children to be held on the terms of a trust embodied in another settlement. Shortly before the expiry of the discretionary trust period, on 3 February 2004, the deceased transferred his reversionary interest in the shareholding of I to the the trustees of a newly created family trust. In the autumn, the deceased was diagnosed with cancer. He died on 17 April 2005. Since he had not survived for more than three years following the transfers, they constituted chargeable transfers for inheritance tax purposes, the tax payable exceeding £1m. The deceased's executors applied to set aside the transfers. Medical evidence indicated that it was likely that the deceased had been suffering from cancer in February 2004.

The executors submitted, inter alia, that the transfers had been made under a mistake by the deceased, namely that his state of health had been such that there was a real chance that he would survive for seven years. It was submitted that equity would set aside a voluntary transfer in such circumstances. Issues arose as to (i) whether the circumstances of the instant case amounted to a mistake, and, if so, (ii) whether the court should exercise its discretion to set the transfers aside. In relation to the latter, it fell to be determined whether, where an individual was disposing of his own property, it was necessary to show that, had the mistake not been made, he would have acted differently, or merely that he might have acted differently.

The court ruled:
(1) A mistake about an existing or pre-existing fact, if sufficiently serious, was enough to bring the equitable jurisdiction into play.

The first two transactions had taken place in April 2003 at a time when the deceased had not had lung cancer. Therefore, he had made no mistake about the state of his health. Accordingly, neither of the transactions entered into in April 2003 would be set aside. The assignment of the reversionary interest in February 2004 was a different matter. By that time, the deceased had been suffering from lung cancer about which he had been unaware. He had, therefore, made a mistake about the state of his health.

(2) In a case where an individual was disposing of his own property, the donor had to show that if he had been aware of the true facts he would not have acted as he had.

Had the deceased known in February 2004 that he had been suffering from lung cancer, he would have also known that his chance of surviving for three years, let alone seven years, had been remote. In those circumstances, he would not have acted as he had by transferring his reversionary interest in the shares to trustees. Therefore, the conditions allowing the equitable jurisdiction to be exercised had been established in relation to that transfer. The assignment of the reversionary interest was therefore voidable. It was unjust for the donees to retain the gift in circumstances which imposed upon the donor an unintended liability to a very substantial amount of inheritance tax. There was no reason why the court should refrain from exercising its discretion to set it aside.
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3. Knowlden v Tehrani and others

Citation: [2008] All ER (D) 148 (Jan)
Hearing date: 23 January 2008
Court: Chancery Division
Judge: Henderson J
Representation: Michael McParland and Emmet Coldrick (instructed by Irvine & Partners) for the claimant; Nigel Meares (instructed by Staple Inn Partnership) for the first and third defendants
Summary: deed – trust deed – equitable interest in property – claimant legal owner of property transferring equitable interest in property to third defendant company – whether deed founded on fraud by first defendant – whether claimant entitled to be registered as proprietor

The claimant and first defendant began a relationship in December 1992. After the claimant separated from his wife the first defendant began managing his financial affairs. It was the claimant's case that between 1993 and 2002, the first defendant had acted in breach of her fiduciary duty and/or in breach of contract in relation to various property and asset dealings, including her obtaining, by fraud, the freehold title to the property in issue. The claimant acquired the property on 1 March 1996 in his sole name. The first defendant provided the deposit. Shortly after its purchase, the claimant exercised a trust deed transferring to the third defendant, an Isle of Man company incorporated by the parties, the equitable interest in the property. It was the claimant's case that the company was created with the intention that it would be equally beneficially owned by him and the first defendant. After the relationship ended, the claimant issued proceedings against, inter alia, the first defendant and the company alleging that the first defendant had defrauded him of the legal ownership of real and personal property and the company had been used as a vehicle to receive, hold and deal with assets belonging to him. Shortly before trial, the first defendant withdrew her defence and indicated that she would not give evidence or seek to rely on any of the documents that she had previously filed in support of her case.

The majority of the issues fell away with the first defendant's defence, however she maintained that she had a beneficial interest in the property. The claimant contended, inter alia, that the declaration of trust had been obtained fraudulently, founded on the mistaken belief that they had an equal share in the company to which he had assigned the equitable interest in the property. He further argued that he had been responsible for the purchase of, and subsequent outgoings in relation to, the property.

The court ruled:
Where parties had spelled out their beneficial interests in a property in a declaration of trust, the declaration was in the normal way conclusive. Even an express declaration of trust would not be conclusive, however, if it was the product of fraud.

On the evidence, it was only on the claimant's understanding that he had had equal beneficial interest in the company that he signed the trust deed relating to the property. As such he was not bound by the deed and he was entitled to extricate any property that he had transferred into the structure, and was entitled to be placed as far as possible in the same position as if the fraud had never been perpetrated. The property in issue had been acquired by the claimant in his sole name, the deposit, though provided by the first defendant, had been derived indirectly by the claimant through various property transactions, and the claimant had paid all other outgoings in relation to the property.

There were no grounds for differentiating between the legal and beneficial ownership of the property and the claimant was entitled to be registered as the proprietor.

Goodman v Gallant [1986] 1 All ER 311 applied.
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Statutory instruments

1. Damages for Bereavement (Variation of Sum) (England and Wales) Order 2007

Number: 2007/3489
Enabling power: Fatal Accidents Act 1976, section 1A(5)
Commencement: 1 January 2008
Summary: This Order increases the level of the award of bereavement damages in civil proceedings in England and Wales under the Fatal Accidents Act 1976 and in Northern Ireland under the Fatal Accidents (Northern Ireland) Order 1977 from £10,000 to £11,800 in respect of causes of action that arise on or after 1 January 2008. The Act and Order 1977 contain provisions in relation to actions for damages in which death has been caused as a result of another person’s wrongful act, neglect or default. Among other provisions, the legislation provides for a fixed award of bereavement damages and gives a power to the Lord Chancellor to vary the level of this award. Bereavement damages are currently available to the deceased’s spouse or civil partner, or, if the deceased was under 18 and had never been married, to the deceased’s parents.
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Features

1. STEP: Advice on transferable nil-rate bands in the light of the Pre-Budget Report 2007

Issuing department: STEP

How should the Society of Trust and Estate Practitioners (STEP) members advise clients on inheritance tax (IHT) in light of the Pre-Budget Report 2007? What guidance can STEP give? Toby Harris, a member of STEP Technical Committee, suggested the following principles.
 
1. The proposals are not yet law and might change. It is not safe to rely on them, though many will want to do so. There is no increase of the nil-rate band (NRB) until the second death of spouses or civil partners.
2. Taxpayers must be vigilant to keep their wills up to date.
3. Finance Bill 2008 is unlikely to be law before around 31 July 2008, but claims to the new relief should be made meanwhile.
4. In most cases, there is no need to panic. Just keep adequate records of use of the NRB for the later claim.
5. Where the "first" death occurred after around 1 September 2006, it may be safest to wait until the enactment of FA2008 and to decide whether to appoint funds out of an existing NRB discretionary trust to the spouse.
6. When the "first" death was more than two years ago, stay with the existing NRB structure. Do not compromise it.
7. Discretionary trusts can still be helpful when there is property qualifying for agricultural property relief or business property relief, to shelter property from care fees or when an asset might appreciate in value faster than the NRB.
8. In many cases, spouses will no longer need NRB trusts in wills but need not remove existing ones; merely remember to consider at the right time whether to appoint the fund to the spouse, so as to preserve the NRB of the first spouse to die.
9. Before remarriage, elderly widows and widowers should take into account the available NRB of the "first" spouse of one of them that will be lost on marriage.

While this statement is believed to be correct at the time of writing, neither STEP nor any member of Technical Committee accepts any responsibility for the opinions expressed herein. Members should make their own researches into the law before advising.
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2. Inheritance in Europe

Similarly to the United Kingdom, European countries have inheritance tax, and appeal issues arise on double taxation. Neil Fanning talks to Jon Golding of Golding Taxation Services.

In light of the European case of Theodor Jager v Finanzamt Kusel-Landstuhl (Case-256/06), Golding indicates how it is not only aspects of British society who consider the area of law concerning inheritance tax uncertain, as he states: "Our European cousins also consider their inheritance tax rules questionable!"

In Theodor Jager v Finanzamt Kusel-Landstuhl (Case-256/06) an individual who was resident in France was the sole heir of his mother, whose last place of residence was in Germany. In addition to assets in Germany, the estate contained French land used for agriculture and forestry. The land was valued at a fair market value and was subject to inheritance tax in France.

In a decision on 3 January 2000, the German tax department calculated the inheritance tax payable by the applicant. The German tax was calculated to include land situated in France, as well as the assets in Germany, after a deduction of a personal tax-free amount. However, the individual was refused the benefit of a favourable assessment and other tax advantages due to the fact that he had acquired by inheritance the agricultural or forestry holding, which was not situated within the national territory. The individual entered an objection against that decision and initially brought an unsuccessful action before the national court.

The applicant appealed on a point of law. The national court decided to stay the proceedings and referred a question to the Court of Justice of the European Communities for a preliminary ruling.

The European Court of Justice decided that the fact that the grant of tax advantages in relation to inheritance tax imposed by these governments was made subject to the condition that the asset acquired be situated in the national territory constituted a restriction on the free movement of capital contrary to EU law. Article 73b(1) EC (now 56(1) EC), read in conjunction with art 73d EC(now 58 EC), had to be interpreted as precluding legislation of a member state which provides that account be taken of the fair market value of the assets in that other member state, whereas a special valuation procedure exists for identical domestic assets (10 per cent of fair market value) and a tax-free amount (taxing 60 per cent) to domestic agricultural land and forestry in relation to those assets.

Golding says: "The two governments had not demonstrated a need to refuse the benefit of a favourable assessment and other tax advantages to this heir who acquired by inheritance an agricultural or forestry holding which was not situated within German territory. Clearly, in this case, a ‘pick and mix’ attitude to tax legislation does not work."
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3. In their own words: Recent updates to the inheritance tax manual

This manual has been updated to reflect current legislation concerning surveillance activities and the use of human intelligence sources. Some of this guidance is still in the process of being rewritten by the inheritance tax (IHT) Regulation of Investigatory Powers Act (RIPA) and HumInt portfolio holder. In addition, some further examples have been added to this page to show situations where a donor's benefit from an item they have given away is considered to be too insignificant for them to have made a gift with reservation (GWR).

John Barnett, chartered tax advisor, who is a partner at Burges Salmon LLP and chairman of the Chartered Institute of Taxation's (CIOT) capital gains tax and investment income sub-committee, said:

Are the changes in IHTM02000 and IHTM09000 significant?
The changes to do with surveillance activities and the use of human intelligence sources aren't very easy to determine, as we only have the updated wording, not the previous wording to compare it against. However, I suspect that – for most practitioners – they are unlikely to be of any practical significance.

Are the changes in IHTM14333 significant?
The changes to IHTM 14333 are of more relevance to practitioners, but – as it happens – merely incorporate into the manuals material, which was previously available elsewhere. In this case, examples 1 to 7 were not previously included in the manuals but were included in Tax Bulletin 9 (November 1993 – IRInt 1001). So all that's happened is they have amalgamated material (verbatim) into one place.
Overall it's sensible to amalgamate material in this way.

Do practitioners like yourself find the HMRC manuals helpful?
These changes do reiterate the more general point, which is that changes to HMRC's manuals are very difficult indeed to track. Had it not been for you alerting me to these, then I wouldn't have known that the manuals had changed. Fortunately I still have an out-of-date copy of the old manuals on CD so that I can check back, but within a month, the CD would have been updated and there would be no way of my telling what had changed. The update section merely tells you which sections have changed, not how.
The point has been made previously, but it really ought to be incumbent on HMRC to provide a full history of their manuals so that changes like this can be properly tracked.

The views represented by John Barnett are his personal views and not those of CIOT or of Burges Salmon LLP.
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4. In their own words: Theodor Jager v Finanzamt Kusel-Landstuhl (case-256/06)

The European Court of Justice decided that the fact that the grant of tax advantages in relation to inheritance tax was made subject to the condition that the asset acquired by inheritance be situated in the national territory constituted a restriction on the free movement of capital contrary to EU law. David Elu asks John Barnett to comment.

The facts:
The applicant, who was resident in France, was the sole heir of his mother, whose last place of residence was Germany. In addition to assets in Germany, the estate contained land in France used for agriculture and forestry. The land was valued at a fair market value and was subject to inheritance tax in that member state. By decision of 3 January 2000, the Finanzamt calculated the inheritance tax payable by the applicant. That tax was calculated to include land situated in France and assets in Germany and with a deduction of a personal tax-free amount. However, the applicant was refused the benefit of a favourable assessment and other tax advantages due to the fact that he had acquired by inheritance the agricultural or forestry holding, which was not situated within the national territory. The Finanzamt set the inheritance tax payable by the applicant at DEM 17, 405. The applicant entered an objection against that decision and brought an action before the national court. He was unsuccessful. The applicant appealed on a point of law. The national court decided to stay the proceedings and referred a question to the Court of Justice of the European Communities for a preliminary ruling.

The conclusion(s):
Article 73b(1) EC, read in conjunction with article 73d EC, had to be interpreted as precluding legislation of a member state which, for the purposes of calculating the tax on an inheritance consisting of assets situated in that state and agricultural land and forestry situated in another member state, provided that account be taken of the fair market value of the assets in that other member state, whereas a special valuation procedure existed for identical domestic assets, the results of which amount on average to only 10 per cent of that fair market value, and reserved application of a tax-free amount to domestic agricultural land and forestry in relation to those assets and took account of their remaining value in the amount of only 60 per cent thereof.

In the instant case, the fact that the grant of tax advantages in relation to inheritance tax was made subject to the condition that the asset acquired by inheritance be situated in the national territory constituted a restriction on the free movement of capital prohibited, in principle, by art 73b(1) EC. The arguments put forward by the French and the German government had not demonstrated a need to refuse the benefit of a favourable assessment and other tax advantages to any heir who acquired by inheritance an agricultural or forestry holding which was not situated within German territory.


John Barnett, CTA, who is a partner at Burges Salmon LLP and chairman of the Chartered Institute of Taxation's capital gains tax and investment income sub-committee says:

What is the impact on the UK's inheritance tax framework as a result of the decision?
Practitioners have been saying for some time that s115(5) IHTA 1984 – which provides that agricultural property relief (APR) only applies to land in the UK, the Channel Islands and the Isle of Man – is almost certainly contrary to European law. This case confirms this.

What do you think should be a logical next step as a result of the decision?
It is to be hoped that the government amend section 115(5) in the next Finance Act to ensure that it applies to land anywhere in the European Free Trade Area, or potentially to repeal section 115(5) altogether. In the meantime, anyone faced with this situation should probably be advised to complete the relevant IHT forms on the basis that section 115(5) is unlawful.

What does this decision illustrate in respect to the jurisprudence of strasbourg?
The case is interesting because it is one of an increasing number of European cases, which are starting to look at personal rather than corporate taxes. There are a large number of aspects of personal tax which are potentially subject to such challenge – an obvious example being the restriction of spouse exemption to £55,000 between non-domiciled spouses.

Is there anything that you are not happy with in regards to the issues surrounding this decision?
What is, perhaps, disappointing is that the government do not seem willing to legislate properly to remove these anomalies, instead forcing taxpayers to engage in lengthy and potentially expensive litigation to resolve the points.

The views represented by John Barnett are his personal views and not those of CIOT or of Burges Salmon LLP.
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5. Only three months left to change your trust, warns Standard Life

Issuing department: Standard Life

With the start of the new tax year just more than three months away, Standard Life is highlighting that those with certain types of trust have just three months left to consider making changes to them.

Budget 2006 introduced significant changes to the inheritance tax (IHT) treatment of gifts to certain trusts. The two main types of trust affected were interest in possession trusts (IIP) and accumulation and maintenance trusts (A&M). To allow the trustees of those trusts some time to consider their options, a two-year transitional period was created which expires on 5 April 2008. The transitional rules are very different for IIP and A&M trusts.

Flexible trusts (interest in possession trusts)
In the financial services sector, it was predominantly IIP trusts that were used to hold investment bonds and insurance policies and were often called "flexible trusts". The opportunity available for only three more months is for the trustees of flexible, or IIP, trusts to consider who is to be the named beneficiary (the technical name for this is the "interest in possession beneficiary").

Commenting on the opportunity that is fast running out, Julie Hutchison, estate planning specialist at Standard Life Assurance Limited, said: "There is now a three-month window left for dealing with this. The great opportunity is for trusts where the trust interest can now be passed down to the next generation. This would be ideal where, for example, the existing IIP beneficiary has no requirement for the trust assets and wants his / her own children to benefit instead. Taking action to change the beneficiaries before 5 April 2008 means that the trust is not brought into the new regime."

The new regime is one that could involve ten-yearly charges and exit charges for IHT. All gifts to flexible trusts since 22 March 2006 have fallen under this more complex IHT regime.

Ms Hutchison continued: "My impression is that many trustees have been taking a 'wait and see' approach, to leave the decision to the end of the transition period so as to allow changing family circumstances to be taken into account. This means the pressure is now on to take action before 5 April 2008. This area is rather technical, and the trustees should take legal advice before acting. Some changes of beneficiary would not be well advised where, for example, the new gift with reservation rules would apply. There are both great opportunities and pitfalls here."

A&M TRUSTS
A&M trusts were more heavily affected by the Budget 2006 changes since, if they are not altered in a certain way prior to 5 April 2008, then the new regime will apply to them from 6 April 2008 onwards. The main choices for the trustees include the following:

  • change the age at which the beneficiaries receive capital to age 18 (to escape the new regime and avoid any IHT charge);
  • change the age at which the beneficiaries receive capital to age 25 (a halfway house concession created during parliamentary revision of the Finance Bill 2006, which creates a maximum IHT charge of 4.2 per cent);
  • do nothing (since the value of the trust means no IHT will arise anyway); or
  • do nothing (since the value of the trust is significant and it would be inappropriate to reduce the age at which beneficiaries receive funds. The trustees are, therefore, deciding here that it is better to pay the maximum six per cent IHT liability and for the beneficiaries to enjoy the asset protection which the trust gives, with assets not to be paid out until a much older birthday).

Commenting on A&M trusts Ms Hutchison said: "A&M trusts were normally bespoke trusts written by a law firm, and these were not mainstream trusts for life offices to offer. However, trustees of A&M trusts should keep their eye on the calendar, as they only have three months left to consider whether to alter the capital vesting age of the beneficiaries."

Ms. Hutchison continued: "Trustees of A&M trusts should take legal advice now, since there is a variety of options and the wording of the trust might create restrictions on what can be done."
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6. HM Revenue and Customs interest rates

Issuing department: HM Revenue and Customs

Income tax, national insurance contributions, capital gains tax, stamp duties, etc.
The rate of interest charged on income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax paid late, tax credits overpayments in cases of fraud, neglect and on penalties charged, and on tax charged by an assessment for the purpose of making good to the Crown a loss of tax wholly or partly attributable to failure or error by the taxpayer changes from 8.5 per cent to 7.5 per cent.
The rate of interest on overpaid income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax (repayment supplement) changes from four per cent to three per cent.

Petroleum revenue tax, advance corporation tax etc.
The rate of interest for development land tax, petroleum revenue tax (including supplementary petroleum duty and advance petroleum revenue tax), and on advance corporation tax and income tax on company payments which became due on or before 13 October 1999 paid late or overpaid changes from 6.5 per cent to 5.75 per cent.

Income tax on company payments that became due on or after 14 October 1999
The rate of interest on late payment of income tax on company payments that became due on or after 14 October 1999 changes from 8.5 per cent to 7.5 per cent.

Inheritance tax, etc.
The rate of interest for late payments or repayments of inheritance tax, capital transfer tax and estate duty changes from five per cent to four per cent.

Corporation tax
The rate of interest for either late payments or repayment of corporation tax for accounting periods ended on or before 30 September 1993 (pre CT (pay and file)), changes from 6.5 per cent to 5.75 per cent.
The rate of interest charged on unpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT (pay and file)) changes from 6.75 per cent to six per cent.
The rate of interest paid on overpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT (pay and file)) changes from 3.5 per cent to 2.75 per cent.
The rate of interest on unpaid corporation tax for accounting periods ending on or after 1 July 1999 (other than underpaid CT instalments) changes from 8.5 per cent to 7.5 per cent.
The rate of interest on overpaid corporation tax for accounting periods ending after 1 July 1999, in respect of periods after the normal due date, changes from five per cent to four per cent.

Customs duty, environmental levies and tax, excise duties, insurance premium tax and VAT
The rate of default interest charged on:

  • under declared VAT, air passenger duty, insurance premium tax, landfill tax, climate change levy, aggregates levy;
  • excessive repayments of VAT, insurance premium tax, land fill tax, climate change levy, aggregates levy and customs duties recovered by assessment;
  • late payment of customs duty; and
  • changes from 8.5 per cent to 7.5 per cent.

The rate of statutory interest paid:

  • where an official error has caused an overpayment, a failure to claim credit, or a delay in certain repayments of VAT, insurance premium tax, land fill tax, climate change levy, aggregates levy and excise duties;
  • where there has been undue delay in processing a claim for repayment of excise duty and customs duty; or
  • changes from five per cent to four per cent.

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7. The North /South divide

The government will increase financial compensation for dependants and family members of victims of fatal accidents, however, Thompsons Solicitors partner Ian McFall says it is not enough.

Compensation payable for bereavement under the Fatal Accidents Act 1976 has risen by nearly one-fifth from 1 January 2008.

The increase is the first since 2002, when the level rose from £7,500 to £10,000. From now on bereavement damages will rise every three years in line with the Retail Price Index. However, lawyers including the influential Association of Personal Injury Lawyers and trade union firm Thompsons Solicitors have hit out at the disparity in treatment between victims in Scotland and the rest of the UK.

Under the Act, which does not apply to Scotland, certain family members and dependants of people who have suffered a fatal injury or disease as the result of the wrongful or negligent act of another person, are eligible for up to £10,000 compensation. This figure will now rise to £11,800.

Incidents that give rise to the compensation could include, for example, a road accident, a death in the workplace, a death due to the asbestos–related cancer mesothelioma or a death due to medical negligence. Eligible family members and dependants include a surviving spouse or parent of a child under 18 years of age. They can claim for loss of financial support.

McFall, head of asbestos policy at Thompsons Solicitors, calls the £1,800 increase in England, Wales and Northern Ireland "an insult". "This increase in bereavement compensation, announced by the government, is just not good enough," he says.

"It fails to address the widening gap between the way the law treats asbestos victims compared to the more humanitarian approach of the law in Scotland. Here widows and widowers are still only entitled to a fraction of the compensation for bereavement that would be paid in Scotland, while the grief and sorrow of other family members in England and Wales is not recognised at all."

In Scotland, by contrast, widows and widowers of mesothelioma victims receive up to £30,000 compensation for bereavement. Other family members in Scotland can receive bereavement compensation of between £10,000 to £15,000 each. Eligible family members and dependants include a surviving spouse or same gender cohabitee of more than two years, children, parents, grandchildren and grandparents.

Thompsons has campaigned for parity of treatment of families affected by asbestos across the UK. Blaydon MP David Anderson laid down an Early Day Motion supporting their campaign in the summer, calling for the injustice in the way compensation for berevament is awarded to families who have lost a relative to mesothelioma, to be resolved.

McFall says: "The government had the opportunity to bring bereavement compensation in England and Wales in line with Scotland, but has instead announced a paltry £1,800 increase. This achieves nothing more than index linking an unfair and unjust system."

Mesothelioma is an incurable cancer of the lining of the lung caused by exposure to asbestos. Almost 2,000 people are diagnosed with the condition each year in the UK.
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Articles

1. The Pre-Budget Report announced fundamental changes to the world of taxation

Journal name: Solicitors Journal
Author: Richard Bunker
Citation: 152 SJ 1, 18
Issue date: 8 January 2008
This article examines the changes that have affected taxation including capital gains tax, domicile and the proposed draft legislation, raising the thresholds on inheritance tax, income shifting in light of the Arctic Systems case and UK residential status.
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2. Back to the bad old days?

Journal name: New Law Journal
Author: Sarah Greer
Citation: 158 NLJ 174
Issue date: 01 February 2008
Relevant cases: James v Thomas [2007] EWCA Civ 1212, [2007] All ER (D) 373 (Nov)
This article examines James v Thomas: constructive trust and proprietary estoppel in the context of relationship breakdown. In recent months the Court of Appeal has been required to grapple with the thorny issue of constructive trust and proprietary estoppel in the context of the family home. Once again, its decision demonstrates the difficulty for the courts in consistently applying well-established legal principles in circumstances where even the parties themselves struggle to identify their intention or expectations with any degree of clarity. Law Commission proposals, published in 2007, aim to balance out the "pluses and minuses" of a relationship to ensure greater equality. If the commission's proposals are accepted this will go some way to bringing certainty (and equity) back into this important but fundamentally flawed area of law.
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3. Update: Probate, wills and trusts

Journal name: Solicitors Journal
Author: Catherine McAleavey and Catherine Sanders
Citation: 152 SJ 2, 24
Issue date: 15 January 2008
This article examines the proposed changes to the tax status of non-UK domiciles and explores two high-profile cases concerning the validity of wills.
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Please note subscribers can go to LexisNexis Butterworths for further details about all the above articles. Non-subscribers can sign up for a free trial of the online service.

Books

1. How to book and claim discounts
  • Law Society Publishing: quote “Probate Section” to receive a 20 per cent discount off related titles (excluding directories) via Prolog at The Law Society, PO Box 99, Sudbury Suffolk CO10 2SN, telephone 0870 850 1422, fax 01787 313 995 or email lawsociety@prolog.uk.com.
  • LexisNexis Butterworths: quote “Law Society Section discount offer” when ordering via www.lexisnexis.co.uk, customer.services@lexisnexis.co.uk or 020 8662 2000.

This e-alert is not intended to provide comprehensive records of information concerning the probate sector. If you have any feedback or suggestions, please email probatesection@lawsociety.org.uk. This e-alert was created in conjunction with LexisNexis UK Legal Updater Service. For further information about any of the articles, please contact claire.melvin@lexisnexis.co.uk. The views expressed by the Legal Analysis interviewees are not necessarily those of the proprietor.
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