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Draft regulations have been published that could see individuals and their tax advisers having to disclose participation in all but the most basic of inheritance tax (IHT) planning.
The draft regulations could, says law firm Boodle Hatfield, require even straightforward arrangements to be disclosed, swamping HMRC with information that they do not want or need.
The draft regulations were published on 16 July 2015 and are out for consultation until 10 September 2015.
Geoffrey Todd, a Partner in the Private Client and Tax team at Boodle Hatfield said: “The Disclosure of Tax Avoidance Schemes, DOTAS, regime requires individuals and their advisers to notify HMRC of any tax avoidance schemes within a set time scale. It has been in existence for some time but currently only applies to IHT to the extent that a scheme seeks to avoid an IHT entry charge on a lifetime transfer into a trust.
“However from later this year, DOTAS will be extended to any arrangements that aim to avoid IHT either on death or on lifetime transfers.”
The draft regulations state that disclosure will be required of all arrangements the main purpose of which might reasonably be expected to secure an IHT advantage where either the arrangements involve one or more contrived or abnormal steps without which it may not be possible to obtain the IHT advantage, or where a person would be unlikely to enter into one or more elements of the arrangements other than to obtain an IHT advantage.
Geoffrey adds: “The latter condition is particularly unclear and potentially very wide. There are specific exceptions, most notably for planning by means of a Will, but these are in contrast fairly narrow. A great range of lifetime IHT planning arrangements could potentially be caught.”
Geoffrey concludes: “These proposals have largely gone un-noticed, perhaps overshadowed by the Government’s more newsworthy Budget announcements. They have been consulted on before and in response the Government suggested that it would clarify the scope of the draft regulations, but this has not yet happened. We will be responding to the consultation and would encourage others to do the same.”
The new Lasting Power of Attorney (LPA) process, provided by the Office of the Public Guardian last month, removes certain safeguards that could lead to abuse of the system, warns solicitors Moore Blatch.
The new process is intended to increase take-up of LPAs, which is woefully low, with only around 15% of people aged over 75 having one. However, because of the simplification, critical consumer safeguards have been lost.
Of greatest concern is the fact a certification page exists where a third party certificate provider signs to say that the donor understands what is being signed and that no one has pressurised them into signing it. However, there is now no way of checking whether the person who is signing this part of the form has the relevant qualifications to do so.
Second, is the removal of the need to notify third parties of the fact that a LPA has been registered, thus removing a safety net whereby coercion or fraud may be identified.
According to Moore Blatch, there are a number of reasons why the take-up of LPAs remains low, including a general lack of awareness of LPAs, a lack of willingness to accept that one might need an LPA, and the perceived and actual complexity of putting one in place.
Common issues with the incorrect completion of a Lasting Power of Attorney include:
Fiona Heald, Head of the Court of Protection team at Moore Blatch solicitors, comments; “We welcome any initiative that encourages people to put in place an LPA; however, simplification must not mean greater scope for fraud or abuse. Given the nature of an LPA, such abuse may never be discovered, especially where it is enacted for mental health reasons as the ‘applicant’ may never be in a position to expose the fraud.”
“LPAs are complex and many people still require legal advice as it is really very easy to get them wrong and many people do. The Office of Public Guardian does not have the resources to check if the Power will work; they only police those that are not made in accordance with the legislation, so if someone makes an LPA with incorrect provisions which make it useless, it will still be registered. Unfortunately, people think if the LPA is registered it is all OK, but that is not the case, and they often find this out when it’s too late.”
King & Wood Mallesons has harnessed its global capability, bringing together teams in London and Hong Kong to advise Chinese travel group HK CTS Metropark Hotels Co Ltd (CTS) on the acquisition of the entire issued share capital of UK based Kew Green Hotels from previous owners Goldman Sachs and TPG Special Situations Partners.
Kew Green, founded in 2001, has 54 hotels in the UK, more than 40 of which are operated under the Holiday or Holiday Inn Express brands, making it the brand’s largest franchisee in Europe. With operations including the five-star Grand in Brighton, five Ramada hotels, a Crowne Plaza at Liverpool’s John Lennon airport, and a Courtyard by Marriott at Gatwick airport, as well as managing a further 10 UK hotels for other owners, Kew Green is one of the most respected hotel owner operators in the market.
CTS, a wholly-owned subsidiary of China National Travel Service (HK) Group Corporation, operates hotels throughout China, Hong Kong and Macau, and features a portfolio of five-star luxury Grand Metropark hotels to Traveller Inn Express budget sites.
The current portfolio provides the Chinese hotels company with a spread of franchised hotels across the UK. The relationship with the existing franchise partners will remain unchanged and the senior management of Kew Green will be retained to ensure the continued stewardship and growth of the business across the UK and into Europe.
Steven Cowins, Funds and Indirect Real Estate partner at King & Wood Mallesons, said: “This is a strategic acquisition for CTS as they take advantage of the expansion and rapid growth of Chinese tourism in Europe, which is an exciting development in the European hotels market. As direct investment from China into the hotel sector looks set to increase, CTS will be able to fully establish their presence in the UK and Europe at the beginning of this growing trend. We were pleased CTS chose to instruct KWM for its Asian inbound investment and hotels abilities.”
Helena Huang, M&A and Private Equity partner at King & Wood Mallesons, said: “We are delighted to have been able to employ our transactional cross border capabilities to support CTS to diversify its geographic footprint. Our enhanced global reach, alongside our strength and depth in Asia and Europe, allows us to represent Chinese clients in their overseas acquisitions and help them to connect with opportunities in Europe in a meaningful way.”
The full cross-border team at King & Wood Mallesons was led by Funds and Indirect Real Estate partner Steven Cowins in London and M&A and Private Equity partner Helena Huang in Hong Kong.
Clifford Chance advised The Coca-Cola Company with regards to German law aspects on the combination of its three operations Coca-Cola Enterprises, Coca-Cola Iberian Partners and the German Coca-Cola Erfrischungsgetränke AG into the world's largest independent Coca-Cola bottler based on net revenues.
The company's name will be Coca-Cola European Partners. As a combined company it is expected to realize on a pro forma basis annual net revenues of approximately $ 12.6 billion. The proposed merger is subject to approval by CCE's shareowners, receipt of regulatory clearances and other customary conditions.
With more than 50 bottling plants and approximately 27,000 associates, Coca-Cola European Partners will serve an consumer population of over 300 million in 13 countries across Western Europe. With 48% the Coca-Cola Enterprises' shareowners will hold the biggest amount of shares in the company. The shares will be publicly traded on the Euronext Amsterdam, the New York Stock Exchange and the Madrid Stock Exchange.
The Clifford Chance team was led by partner Dr. Andreas Dietzel and comprised partner Dr. Jörg Rhiel, of counsel Prof. Dr. Thomas Gasteyer, counsel Nele Gorny, senior associate Afroditi Tsobanelis-Görgen, senior associate Dr. Lars Laeger and transaction lawyer Moritz Erdmann (all Corporate, Frankfurt).
In response to comments made today (Aug 6) by the Governor of the Bank of England and publication of the Inflation Report, Eddie Goldsmith Chairman of the Conveyancing Association said:
“There is still a concern that home-owners across the UK have grown dangerously accustomed to low interest rates, and any sudden rate rise compounded with the tougher mortgage rules and continuing economic uncertainty abroad, could have a serious impact.
“I welcome the fact that the Monetary Policy Committee, by an overwhelming majority, has recognised this potential danger of raising interest rates too quickly. While rates are to go up, I’m pleased that the Bank is opting for an increasingly cautious approach which will see rates rise more slowly and over a longer period of time. It’s absolutely the right approach, despite rising wages, holding the key rate for the time being will ensure that the housing market remains on an even keel.
“We must also be mindful that a rise in interest rates, whenever it comes, will inevitably hit first-time buyers the hardest. In a world of higher rates they are going to have to lean even more on their parents to help them raise enough money to put down a deposit. This is going to be especially problematic for those situated in London and the South East.”
Blake Morgan’s merger with Piper Smith Watton, the Westminster based firm, went live on 1st August, just over a year after the merger of Blake Lapthorn with Morgan Cole.
The merger boosts Blake Morgan’s national presence with the addition of 12 partners, taking the total number of partners to 130, a workforce of circa 1,000, and an annual turnover of £78 million. It is already one of the largest law firms across southern England and Wales.
Blake Morgan's London practice is now a £15 million plus practice in its own right with an increased workforce of around 150 including 30 partners. In London, both teams are now working collaboratively out of Blake Morgan’s offices in Watchmaker Court. This office now has a significantly enhanced presence in the entrepreneurial private client and corporate market plus a doubling in size of its real estate and litigation practice.
Walter Cha, managing partner of Blake Morgan, said “We are proud of the progression Blake Morgan has seen since the merger of Blake Lapthorn and Morgan Cole. The Piper Smith Watton team are a valuable asset to us as they make us a stronger player in the market. The merger also ensures we have the resources to handle larger, more complex work, particularly for entrepreneurial private clients, to include commercial real estate and high end residential property. Our enhanced London offering provides a stronger platform for growth into the regions and sectors where our clients need us to be.”
Mark Spash, senior partner of Piper Smith Watton, said “We are excited by the complementary skills and expansion of resources the merger brings. We can now offer a comprehensive service for our high net worth and entrepreneurial clients in London, nationally and internationally. Blake Morgan is a firm with clear ambitions and we are delighted to be a part of them.”
Maria Peyman has joined the commercial litigation team at top 100 law firm Birketts as a senior associate.
Maria specialises in advising clients in relation to disputes arising from or in connection with various intellectual property rights, including copyright, trade marks, and design rights. She also advises in relation to passing off and breach of confidence, and the exploitation and protection of intellectual property generally.
Commenting on her appointment, Maria said: “Birketts is regularly listed in the top bandings in the leading legal directories for commercial litigation and has more ranked contentious lawyers than any other firm in East Anglia. I’m thrilled to be joining a team and firm with a reputation for excellence that represents a large number of national and international businesses, organisations and individuals in a wide range of cases.”
Matthew Atkins, partner at Birketts, said: “Birketts fields a team of over 50 lawyers engaged in litigation and the management of commercial disputes of one kind or another and Maria will be a fantastic addition to the team. The recruitment of such a highly qualified member of the team will help ensure that the team continues to offer our clients a premier legal offering when advising on the legal aspects of intellectual property disputes.”
Maria is based at the firm’s Cambridge office but supports colleagues across Birketts’ four offices: Ipswich, Chelmsford, Cambridge and Norwich.
Leading offshore law firm Appleby acted as Bermuda and BVI counsels to China Orient Asset Management (International) Holding Limited (COAMI) in relation to a HK$560 million term loan facility granted by Ample Mark Enterprises Ltd. (Ample Mark), a wholly-owned subsidiary of COAMI, to Skyfame Realty (Holdings) Limited (Skyfame). Ample Mark also agreed to subscribe and pay for the Convertible Bonds issued by Skyfame in an aggregate principal amount of HK$40 million.
The Appleby team was led by Frances Woo (pictured), group chairman and managing partner, and Associate Vincent Chan, in Appleby’s Hong Kong office. Morrison & Foerster and Sidley Austin advised COAMI and Skyfame respectively on Hong Kong laws.
COAMI is an indirect wholly-owned subsidiary of China Orient Asset Management Corporation (COAMC), a state-owned non-banking financial institution in China which has a national service network of 25 branches and a business department across the country. Skyfame is an investment holding company focused on property development, property investment, hotel operation and property management.
SUMMER BUDGET: INHERITANCE TAX PERKS, BUT HIGHEST EARNERS SET TO BE HIT BY CHANGES TO PENSION TAX RELIEF
“It is excellent news for millions that the inheritance tax threshold has effectively been raised to £1m for couples who are homeowners, with the policy coming into full effect by April 2020.
“The inheritance tax personal threshold has been pegged at £325,000 since 2009, with an average 26%¹ rise in the property market in the meantime pushing many people – perhaps unwittingly – into larger IHT bills. There are, however, steps people can take to mitigate their potential IHT liability above the new allowances – including putting money into tax-efficient trusts, and gifting to charities and/or loved ones.
“Even at the new eventual higher threshold of £1m, one in ten UK households are sitting on assets totalling at least that amount², but they could at least now see their inheritance tax bill greatly reduced. Inter-generational wealth transfer is key – given the increased challenges the younger generation will face to fund their own retirement, many will be relying on gifts made through their inheritance.
“Those people who already have plans in place for passing on their assets should now be reviewing these plans in the light of the changes, including potentially amending their wills.”
Pensions tax relief restriction
“From a future planning perspective, the other major announcement of note was the restriction of pensions tax relief for those with income in excess of £150,000, meaning higher-earners will no longer receive some of the tax advantages around pensions that they previously enjoyed.
“While a consultation period will take place to determine a wider reform of pensions tax relief, the fact is that over £50bn is saved by taxpayers via tax relief on pensions, more than total government expenditure on defence³. On the flipside, tax relief encourages savers to build a healthier personal pension pot, which ought to mitigate the State’s financial burden for those in retirement.
“The area of legally and safely mitigating one’s tax bill is complex, and people should always seek financial advice as to how to plan their finances accordingly.”
A disorderly Grexit accompanied by contagion through international financial markets would cost the global economy up to $1.4 trillion in lost mergers and acquisitions activity alone.
Such a scenario would have significant repercussions due to the impact on global financial markets, which would be vastly disproportionate relative to the size of the Greek economy.
Financial modelling to account for Grexit scenarios for Baker & McKenzie's Global Transactions Forecast by Oxford Economics shows the potential scale of the damage a disorderly exit could do to markets and deal making activity.
A worst-case scenario of M&A activity in Europe (ex-UK) being around 45% (US$250bn) lower than expected in 2016 and that volumes would struggle to recover in subsequent years. Over the period 2015-20, the cumulative decline in transactional activity would amount to around 15% (US$510bn).
In a disorderly Grexit scenario, financial contagion would stretch across the Atlantic; resulting in a significant impact on US transactional activity, which would be 27% (US$356bn) lower than expected in 2016. Cumulative losses over the entire period 2015-20 would amount to 8% (US$639bn).
The UK's close ties to the Eurozone means transactional activity would be 39% (US$84bn) lower than expected in 2016 with cumulative losses over the entire period 2015-20 amounting to 13% (US$169bn).
Even as far as China transactional activity would be 12% (US$30bn) lower in 2016. With activity picking up in subsequent years, the cumulative loss in deal activity in China over the period 2015-20 would amount to around 4% (US$60bn).
An orderly solution: a fraction of the cost
If Grexit is achieved in an orderly and coordinated manner, then financial contagion should be contained, avoiding substantial disruption outside of Greece.
In this scenario, M&A activity in Europe(ex-UK) would be around 11% lower than expected in 2016 (US$60bn), but activity would recover in subsequent years. Over the period 2015-20, the cumulative decline in transactional activity would only amount to around 2% (US$48bn.
In the case of an orderly Grexit, the decline in M&A activity would be constrained to around 8% (US$18bn) in 2016 (compared to baseline forecast). Over the period 2015-20, the cumulative decline in transactional activity would only amount to around 1% (US$10bn).
The impact of an orderly Grexit on the US would be more muted than in Europe, with M&A activity to be around 6% (US$85bn) lower than expected in 2016. But dealmaking would quickly bounce back in subsequent years so the cumulative decline in activity over the period 2015-20 would be less than 1% (US$47bn).
An orderly Grexit would still have some impact on financial markets in Asia; it would feed through to a 2% (US$5bn) loss of transactional activity in China next year. But activity would quickly recover so that there would be no significant loss of transactional activity when looking at cumulative flows over the period 2015-20.
