I have just read a very interesting article in the latest STEP magazine titled: “Dawn of the iPhone will”.  The article outlines the development of informal wills in Australia and in particular how the Supreme Court of Queensland held that an electronic will saved on to a smartphone should be admitted to probate (confirmation).

As the article states, we are likely to have to increasingly deal with informal wills of the electronic nature in years to come.   This is an issue that we will also have to do deal with here in Scotland.

More generally, a recent talk I gave on “What happens to digital assets on death?” can be found here.

The average person it is claimed now has more than 10 online accounts, including social media, shopping and bank accounts.  These obviously contain a great deal of personal information and have value whether it is financial or sentimental.

What though happens to these assets on death?  If you would like to find out more about this issue please contact: james@legalknowledgescotland.com

The First-tier Tax Tribunal has allowed a claim for principal private residence relief (PPR) in which a couple bought their mother’s flat subject to her right to continue occupying it.  The tribunal decided this was an interest in settled property, i.e. trust property under s.68 of the Taxation of Chargeable Gains Act 1992.

This is from the case report and outlines the background to this matter:

6. The Flat was purchased by Mr Wagstaff’s mother (“Mrs Barbara Wagstaff”), in
1990. On 6 February 1996 she sold and transferred the Flat to the Appellants for
30 £45,000. The price was based on a valuation report of 14 October 1994. The report
was not before us and we heard no evidence regarding the valuation either at the time
that it was given or in respect of the sale which took place some 15 months later.
HMRC had nevertheless accepted the price as an arm’s length price.

7. The sale was subject to the terms of an agreement of 6 February 1996 (“the
35 Agreement”) between the parties under which Mrs Barbara Wagstaff was entitled to
continue living at the flat at no cost for the remainder of her life or until her
remarriage, subject to payment of £5,000.

8. Mrs Barbara Wagstaff continued to occupy the property until 2005. In August
2005 she had knee replacement surgery, following which she returned to the Flat.
40 Within a week, however, she fell down stairs, seriously injuring the replacement joint, 3
and had to be returned to hospital. She was not released from hospital until
November 2005 when she went to live with the Appellants pending the arrangement
of more suitable long term accommodation. The Flat remained available for her use
with her furniture and belongings in situ until she moved into a new single storey,
5 stair-free home in June 2006. Thereafter the Flat remained empty until it was sold (by
way of an arm’s length third party sale) with her agreement on 16 March 2007.”

The taxpayers submitted a claim under section 225 of TCGA 1992 on the basis that their ownership of the flat was subject to a trust and the flat was settled property which qualified for PPR.   HMRC refused the taxpayers’ claim for PPR.

The full report can be found here. 

The Scottish courts can authorise a solicitor to execute a will on behalf of an adult who lost capacity after expressing his or her testamentary intention.  Appropriate evidence must also be produced to justify such an intervention order.

This is from the judgement:

“The views formed by the Sheriff Principal on the main issues raised by this appeal (heard without a contradictor) may be summarised as follows:-

(i) An intervention order authorising the execution on behalf of a WI person of a will may competently be granted by the court under the Adults with Incapacity Act 2000 in appropriate circumstances.

(ii) The sheriff was correct in thinking that he could not proceed to grant such an intervention order solely by reference to the principles set forth in section 1 of the said Act but that he had to consider also whether the WI adult had capacity to give instructions regarding preparation of a will.

(iii) The sheriff was incorrect in determining the question before him solely (or almost solely) by reference to an oral submission made to him by a mental health officer at the bar of the court.

(iv) In order to justify the granting of an intervention order such as that sought here by the pursuer the court has to be satisfied on appropriate evidence that the WI adult had testamentary capacity when he expressed a testamentary intention which remains the same at the time of granting that order.”

An article on this matter from the Law Society of Scotland journal can be found here.

The full judgement can be found here.

“Power of Attorney (PoA) Update – Manual Submissions

There is currently a 15 week waiting period before your PoA can be processed and returned to you. This week we will be working on PoAs received on and around 2nd October 2013.

If there is a genuine urgency, we will expedite the registration of a PoA ‘on cause shown’. We ask that people respect this service and only use it in cases of true urgency to avoid defeating its purpose.”

“Turnaround Time for Annual Reviews

There is currently a 14 – 16 week waiting period for annual accounts to be reviewed. We apologise for any inconvenience the delay may cause financial guardians

The Annual Review Team are currently working with accounts received on and around 30th September 2013. Financial guardians who have queries regarding their accounts or the waiting time may contact opgreviewteam@scotcourts.gov.uk.”

More on this can be found here.

The England and Wales Court of Appeal has unanimously rejected HMRC’s assertion that a mother’s gift of a leasehold flat to her sons was a “gift with reservation of benefit” because the underlease contained covenants in her favour.

This ruling overturns the decisions of both lower tribunals.

“On 5 June 1996, Parkside Knightsbridge Limited, the superior landlord, granted Mrs Kamhi a lease, the Headlease, for a term of 100 years less one day, from 25 March 1994, of a flat in Knightsbridge, London at a premium of £250,000. The Headlease contained a term for payment of rent and a service charge of 3%. The tenant, Mrs Kamhi, covenanted to pay rent and, as additional rent, the service charge and advance service charge. There were other covenants, such as to keep the property in repair, to clean the premises and its windows, to indemnify the landlord against outgoings, to keep the flat decorated and to repay a proportion of the cost in relation to maintenance and cleaning of common areas.”

In 1997 she created a trust for her two sons and granted the trustees an underlease to the flat for their benefit for the remainder of the headlease term. The only trust property was the underlease.  Like the headlease, the underlease imposed covenants on the leaseholders to pay ground rent and service charges and to keep the flat in good condition.

“This appeal turns on the question whether those Tribunals were correct to conclude that the Underlease was not enjoyed to the entire exclusion, or virtually entire exclusion, of a benefit to the donor, by reason of positive covenants entered into by [the trust company] with Mrs Kamhi, which mirrored the covenants into which she had entered in her Head Lease.”

The case report can be found here.

In this case Mr Moore moved into a property that had previously been let out following his separation from his wife.  Several months later he purchased a property with his new partner and sold the property he had been living in since the separation.

HMRC denied CGT Principal Private Residence (PPR) relief.  PPR relief applies where a person has at any time lived in the property as their sole/main residence. The gain attributable to the last 36 months of ownership will automatically be exempt from CGT.  From April 2014, this will be reduced to 18 months.

The question was whether his occupation of the property he had sold had the necessary degree of permanence, continuity or expectation of continuity.  The tax tribunal held that it did not.

In making their decision the tribunal made particular reference to the lack of evidence, other than council tax bills, regarding the taxpayer’s occupation. Other correspondence went to both his former home and the home of his new partner.  Whilst the tribunal accepted that he had lived in the property, they felt that the lack of evidence suggested that he did not intend to live in the property permanently.

The full judgement can be found here.

A daughter’s decision to move her 88-year-old mother from England into a Scottish care home gave rise to a complex dispute between her children about the jurisdiction of England’s Court of Protection and our Sheriff Court and also a judicial analysis of the meaning of habitual residence in the light of the 2000 Hague Convention on the International Protection of Adults.

It was agreed between the parties that the mother did not have capacity to decide where to live.

Two statements stand out in the decision:

“Habitual residence is, in essence, a question of fact to be determined having regard to all the circumstances of the particular case.  Habitual residence can in principle be lost and another habitual residence acquired on the same day: … “

“In the case of an adult who lacks the capacity to decide where to live, the habitual residence can in principle be lost and another habitual residence acquired without the need for any court order or other formal process, such as the appointment of an attorney or deputy.”

The court found that the mother was not “habitually resident” in England and Wales and therefore in favour of the jurisdiction of the Sheriff Court.

The full judgement can be found here.

HMRC are planning to launch an online inheritance tax service during the 2015-16 tax year. This will allow executors and their representatives to submit IHT accounts via the internet. Interestingly the announcement also refers to “probate” but not “confirmation”. That may mean that it simply did not occur to those making the announcement to consider the situation in Scotland, or as confirmation is primarily a devolved matter that part of the announcement does not apply to Scotland.

That said this is a positive development. More detail will hopefully follow soon and this may mean the beginning of the end for paper inheritance tax forms.

The announcement can be found here (need to scroll down to the the bottom of the page).

The average person it is claimed now has more than 10 online accounts, including social media, shopping and bank accounts.  These obviously contain a great deal of personal information and have value whether it is financial or sentimental.

What though happens to these assets on death?  If you would like to find out more about this issue please contact: james@legalknowledgescotland.com 

Rumbelow & Rumbelow v Revenue & Customs [2013] UKFTT 637 (TC)

In the first case Mr and Mrs Rumbelow left the UK to set up home in Belgium, as a prelude to semi-retirement and with a view to becoming non-resident in order to shelter their UK property from Capital Gains Tax (CGT).   The issue was whether in the tax years in question they remained resident in the UK and were therefore subject to UK CGT.  Mr and Mrs Rumbelow lost because of the ties they retained with the UK.  This tribunal used evidence of cash withdrawals, debit card purchases and records of their business transactions to track their movements during this time.  These showed that their visits to the UK were more frequent and extensive than they had described.  They also kept a taxed and insured car at their fully furnished Cheshire property where they stayed on their UK visits.  The Rumbelows lack of detailed records also hindered their attempts at showing they were non-UK resident during the years in question. The full decision can be found here.

Gibson v Revenue & Customs [2013] UKFTT 636 (TC)

In the second case Mr Gibson demolished his home and built a new house on the site.  HMRC denied principal private residence relief on its disposal.  Even though Mr Gibson had been “camping” for several months in his new house while the building works were going on the Tax Tribunal ruled that this did not amount to residence.  The full decision can be found here.