News archive

The latest HMRC Trusts & Estates newsletter can be found here.

Outer House case in which Mr and Mrs Motion sought interdict to prevent their neighbours, Mr and Mrs Binnie from encroaching on, or interfering with their property (consisting of two cottages, a paddock and a strip of land) and from interfering with or obstructing servitude rights of access (over farm roads) to that property. The Motions’ titles to the property and servitude rights were registered (and defined on plans) in the Land Register without exclusion of indemnity.

In their defence, the Binnies argued that the Motions did not have a vehicular right of access over part of the access route, contending that to exercise a vehicular right would involve them driving over part of the Binnies’ property. This, they argued, was not a challenge to the Motions’ title but a challenge to the physical extent of the servitude rights.

However, in the view of Lord Bannatyne, it was impossible to read the Binnies’ arguments as anything other than a challenge to the Motions’ title. The Motions’ rights were set out clearly on plans and registered in the land register but the Binnies did not seek to rectify the register. As such, the Binnies’ defences were found to be irrelevant. In coming to his conclusion Lord Bannatyne quoted from the Scottish Law Commission’s Report on Land Registration (SLC Report No. 222) which states:

“Rights in land are what the Register says they are and the Register says what the Keeper decides it should say. The Keeper giveth and the Keeper taketh away.”; and

“Everything that the Keeper touches turns to valid.”

 The full judgement is available from Scottish Courts here.

 All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

The prices of all of our property styles have been reduced by 50% for the month of August. You can see our range of styles here.

“HMRC has published updated forms and guidance notes:

• C1 – Confirmation Inventory
• C2 – Inventory continued
• C5(2006) – Return of estate information
• C5(OUK)(2006) – Return of estate information(Person domiciled abroad & their UK assets consisted of cash/and or quoted stocks & shares only, gross value less than £150,000)
• C5(SE)(2006) – Information about small estates
• C3(2006) – Notes to help you fill in form C1 Confirmation Inventory and form C5(2006) HM Revenue & Customs return
• Integrated Inventory – contains form C1 confirmation and form C2 continuation

Forms C5(OUK)(2006) and C5(SE)(2006) are now online only forms.”

More on this can be found here.

The Land and Buildings Transaction Tax (Scotland) Act was passed on 25 June and received royal assent on 1 August 2013. Some points of note:

• The new tax will to come into effect in April 2015 (when SDLT ceases to apply in Scotland);
• the Act is the first of three- a Landfill Tax Act and Tax Management Act will follow;
• the Scottish Ministers are the tax authority (s54) but the authority can be changed by order (a new body, Revenue Scotland has been established for that purpose);
• the tax authority can delegate administration and collection of the tax to Registers of Scotland (s55) (an idea first suggested by my colleague James Aitken);
• the tax will be progressive, i.e. tax is charged on the proportion of the price exceeding the threshold (like income tax) rather than charging the higher rate of tax on the whole price (per SDLT)(ss24-26)
• like SDLT, LBTT will be charged on VAT (para 2, Schedule 2)
• the Act contains a number of targeted anti-avoidance rules applying to specific exemptions and reliefs. The Scottish Government has consulted on the introduction of a general anti-avoidance rule (“GAAR”) and it is likely that a GAAR will be included in the Tax Management Act;
• LBTT on commercial leases will (like SDLT) be based on net present value of the rent payable (s52 and Schedule 19) but the Act also makes provision for a return to be made every three years (and for additional payments or refunds) throughout the whole term of the lease so that the tax will reflect the actual rent paid;
• residential leases are exempt (s16 and para 3, Schedule 1);
• licences to occupy are exempt (s16 and para 3, Schedule 1) but “prescribed non-residential licences” which are to be prescribed in future regulations will be taxed; and
• the Act replicates existing SDLT provisions on partnerships (s49 and Schedule 17) & trusts (s50 and Schedule 18). However, the Scottish Government may make changes to these provisions (in the interests of greater clarity) before LBTT comes into effect.
• The rates and bands can be seen here.

The full Act is available here.

Ask yourself a simple question: what happens to your digital assets on your death or if you are incapacitated?

I suspect for most people it is not an issue that has even occurred to them.

Digital assets come in many forms: computer programs installed on a PC, laptop, tablet or mobile phone (along with related files and documents), music, photos and videos (taken with phones and digital and cameras), as well as email, tweets and other social media content.  The list is almost endless and is likely to increase.  From Twitter to Facebook from PayPal to Flickr.

Your assets may have an economic value but it is more likely that it is the sentimental value that you will want to protect.

Determining whether or even how you can control the inheritance of your digital estate will depend on the particular service and/or content provider. Unfortunately there is no consistency of approach.

If you would like to know more about the issues surrounding digital legacies please contact: james@legalknowledgescotland.com

This is a very helpful announcement from OPG Scotland.

“We are aware that difficulties have been encountered when trying to use a non-Scottish Power of Attorney (PoA) in Scotland, as Organisations have not accepted the authority given in a non-Scottish PoA.

The Adults with Incapacity (Scotland) Act 2000 suggests a non-Scottish PoA is automatically valid in Scotland. Consequently there is no arrangement under the law for having it formally endorsed.

In recognition of the difficulties experienced and to offer support we have devised a Certificate which can be printed and presented along with the PoA to an Organisation. This may assist in getting a non-Scottish PoA accepted in Scotland. If you need more information generally or about how best you might proceed in a given case please contact e-mail opg@scotcourts.gov.uk“

More on this can be found here.

Outer House case relating to a development at Rubislaw Quarry in Aberdeen. The developers sought the co-operation of those with interests (proprietors/tenants) in nearby office blocks (who were concerned that the new development would have a detrimental effect on the value of their properties) with respect to[1] access to the development site. An agreement was entered into between the developers and the proprietors/tenants which included a restriction on the office space available for rent within the new development in the following terms:

“The northern quarry proprietors undertake (to the relevant parties) that the maximum net lettable floor area of Office Space which may be provided within the northern quarry subjects at any given time shall not exceed 2,025.29 sq. m. (in total)”.

The court action involved successors to the original parties to the agreement. The developers sought declarator that the clause:

1. allowed the amount of office space in the development to exceed 2,025.29 sq. m but restricted the space actually available for let to 2,025.29 sq. m (i.e. they argued the figure did not include owner occupied or vacant office space); and
2. was not a real burden and, as such, bound only the original parties to the agreement and not their successors.

 Lord Malcolm rejected both of those arguments.

Meaning of the clause
After considering the whole terms of the contract “in the light of the general setting and purpose of the agreement”, Lord Malcolm found that the overall intention was to provide for a maximum floor area which was capable of being let for office use. In coming to this conclusion, account was taken of the preamble to the agreement, which required the developer “to accept certain restrictions with regard to office space within any development of the northern quarry subjects…”, and a further clause containing a requirement that developers exhibit floor plans and internal layout, which would have been irrelevant had the only restriction been on letting floor of space with no limit on the amount constructed.

Whether binding on successors
Whether the burden was real (i.e. binding on successors) depended on whether the restriction on office space was:

1. purely a trading condition, designed solely to protect the personal commercial interests of those  interested in the offices; or
2. whether it, in addition to any personal benefit, also conveyed a material benefit on the properties themselves.

The proximity of the development to the offices was an important consideration. The existing office blocks and the new development site presented a “distinct neighbourhood”. The proprietors/tenants were seeking protection against reductions in rental values arising from the introduction of additional competition within that neighbourhood. The restriction therefore benefited the offices as commercial properties by protecting their rental value. Also of relevance in coming to the judge’s conclusion that the burden was binding on successors, was the fact that the offices were specifically adapted for office use meaning future owners would be likely to use them for the same purpose and, consequently, the burden on the new development would be reflected in the value of the existing properties.

Title and Interest of the developers
Lord Malcolm also rejected an argument made on behalf of the proprietors/tenants to the effect that the developers did not have title and interest to bring the action as, although they had entered missives for the purchase of the site, they had not yet recorded title to it. The court would refuse to entertain declarators concerning purely academic, speculative or hypothetical issues, or where the pursuer has no practical interest in the outcome. However, in this case the developers had a good reason for discovering the correct legal position at the time they raised the action: they had entered into missives (with a view to developing the site) with the current owners who, as a result, had no interest in the matter.

The full judgement is available from Scottish Courts here.

(See appeal to the Inner House here.)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

There are signs that the quality of the Scottish independence debate is at last improving.  The ‘NO’ campaign’s relentless negativity is now being commented on and it is also being asked questions concerning what happens if Scotland votes ‘NO’.  The ‘YES’ campaign also seems to be finding its feet and the Scottish Government has published a number of detailed policy papers.  It is though it’s “White Paper” that is eagerly anticipated.    

Further evidence for this improvement comes from the Law Society of Scotland.  The Law Society published its paper titled: “Scotland’s Constitutional Future Views, opinions and questions” this week.  The paper can be found here.  This is an excellent contribution to the debate and asks questions of both sides.

In particular I liked its comments surrounding Scotland’s membership of the European Union.  It is quite obvious to anyone but the most one-eyed commentator that it is going to be very difficult to get more clarity on this issue without the cooperation of the UK Government.  It seems, and for purely political reasons, that the UK Government does not want clarity on this issue.

The following quote from the paper is also telling: “Scotland, as part of the United Kingdom, complies with the European Union treaties and the EU acquis ((all the EU laws, treaties, declarations and resolutions, international agreements and the decisions of the European Court of Justice, i.e. Europe as it is). Whether by way of accession or amendment to the treaties following negotiation, Scotland should be able to qualify, in legal terms, for EU membership in its own right.”  I was also pleased to see that Sir David Edward’s (a former judge of the European Court of Justice and one of the foremost European lawyers in Scotland) common sense analysis of this issue being quoted.

As someone who spent a great deal of time researching and writing about the options for the devolving of substantial tax and fiscal powers to the Scottish Parliament, I was also very pleased to see the ‘NO’ campaign being asked some basic questions such as “which powers” and “when” if Scotland votes ‘NO’.

Now to Wales.  It seems that the UK Government is going to consult again on whether control of SDLT is to be devolved to the Welsh Parliament.  The following story on this from the BBC website shows the increasing frustration at the UK Government’s continued delaying tactics.  The reality is that Westminster only devolves power as a matter of last resort.  All the usual tactics are being used here and in particular the need for yet another consultation.  The latest consultation can be found here and the report from the BBC news website can be found here.

Let’s now take a minute and compare and contrast the next few stories.

An independent Scotland would offer tax incentives to film and TV productions according to Scotland’s Culture Secretary Fiona Hyslop.  More on this can be found here.

The Scottish Government has condemned a High Court decision that ruled applying a cap on housing benefits for disabled people lawful.  Firstly it would be helpful if the news reports explained or clearly stated that this was the “High Court” of England & Wales.  That said, Scottish Housing Minister Margaret Burgess has demanded, and it seems has had some success, that Scotland gets a fair share of the £35m funding pot set aside for those hardest hit. 

Interestingly she also said:  “The bedroom tax will hit the poorest hardest and it is wrong that it applies to people in crisis such as those in temporary accommodation and some supported accommodation.”  “Scotland is disproportionately disadvantaged because much of Scotland’s temporary accommodation is affected by the bedroom tax, unlike in England. The majority of our temporary accommodation is local authority owned, which is not the case in England.”  That begs the question:  Would a Scottish court have come to a different decision?  More on this can be found here.

The UK Government has outlined plans to give tax breaks to companies involved in the UK’s nascent shale gas industry.  It has proposed cutting the tax on some of the income generated from producing shale gas – found in underground shale rock formations – from 62% to just 30%.  This proposal has been criticised by environmentalists, with Friends of the Earth calling them a “disgrace”.  Just how generous are these tax breaks? Gas production is typically taxed at 62% although in some parts of the North Sea long standing operations are taxed at up to 81%.  More on this from the BBC news website can be found here.

Sometimes you have to wonder if Scotland exists.  Will the so-called “Mansion Tax” apply to Scotland?  No.  Do almost all the news stories refer to “Britain”?  Of course they do.  See for example this one from the Independent which can be found here.

11 of the 22 high-value settlements reached by HMRC last year were considered inadequate by the Tax Assurance Commissioner’s office, according to its first annual report. The office was created in February 2012 in response to criticisms of HMRC’s handling of big-money tax disputes.  More on this from Pinsent Masons can be found here.

Now to matters slightly further afield. 

Jersey fights back?  A report commissioned by Jersey Finance has found that Jersey helps the UK generate £2.3bn in tax revenues each year and supports 180,000 UK jobs by channelling foreign investment into the UK. It estimates that losses to the UK Treasury through legal tax avoidance via Jersey are well under £480m a year, while annual evasion costs are less than £150m.  More on this can be found here.

The French Government is to extend the capital gains tax exemption for second homes to properties owned for 22 years, rather than the current 30 year requirement. The 30-year rule was introduced by the previous Sarkozy government in February 2012 to replace the previous qualifying ownership period of only 15 years, but it accelerated the slump in France’s residential property market.  More on this from the Telegraph can be found here.  A good example of the schizophrenic relationship that exists between certain parts of the UK and France.

Early data collected by Swiss banks from their UK clients under the UK-Swiss tax regularisation agreement suggest that it may reveal far less untaxed income than the UK Government has claimed.  More on this from STEP can be found here.

An Irish parliamentary committee has voted down calls for multinational companies to be grilled in Dublin about their tax affairs, in the wake of a string of controversies at firms such as Google and Apple which use the Irish tax regime. Some of Apple’s largest Irish subsidiaries were found not to be tax resident anywhere, prompting Carl Levin, chair of the US Senate subcommittee on investigations, to call Ireland a tax haven.  More on this from the Guardian can be found here.

The Australian Tax Office will next year conduct 680 reviews and 115 audits of people suspected of using ‘secrecy jurisdictions’ to avoid paying tax.  This is in addition to 1,500 income tax reviews and audits of wealthy individual taxpayers.  More on this can be found here.

The US Internal Revenue Service has begun a drive against multinational companies whose permanent establishment strategies result in some profits not being taxed in any country, so-called “stateless income”.  More on this from Reuters can be found here.

The Spanish government is threatening to open tax investigations into the 6,000 Gibraltar residents who own property in Spain.  This is seemingly in retaliation for the Gibraltar Government’s attempts to exclude Spanish fishing vessels from its waters.  Spain is also considering imposing a €50 tax on vehicles entering or leaving Gibraltar; restricting the use of Spanish airspace to planes bound for Gibraltar; and taxing the many Gibraltar-based Internet gambling companies.  More on this from the BBC website can be found here.

Outer House case in which HFD sought to challenge Aberdeen City Council’s decision to appoint Muse Development Limited as preferred bidders for the development of a site (the former Council headquarters) at Broad Street in Aberdeen.

HFD argued that:

1. there had been various quantitative errors in the scoring matrix used to assess the bids;
2. what had been advertised had been a sale of the site but the successful bid was made on the basis of a sale and leaseback; and
3. a revised version of the HFD bid (based on a sale and leaseback) submitted after the closing date should, if the Council considered themselves precluded from accepting it, have given rise to recommencement of the bidding procedure.

Lord Brailsford refused HFD’s petition.

Errors in the scoring matrix
The alleged errors in the scoring matrix were not sufficient to impugn the bidding process and did not affect the overall ranking of the bids.

Sale and leaseback
The language used in guidance documents (issued for potential bidders by the Council), which indicated that the Council would accept joint venture and partnership agreements, made it “tolerably clear” (having regard to the importance/value of the subjects and the fact that the bidders were commercial bodies with expertise in the property market and with access to skilled professional advice) that the Council were actively seeking and encouraging innovative proposals for what was a major commercial development. As such, the language of the documents was sufficiently wide to encompass a sale and leaseback arrangement.

Submission after the closing date
Lord Brailsford agreed with reasoning in a prior case[1] to the effect that, although a seller can accept higher bids after a closing date, the practice is not well regarded and would involve the seller departing from the competitive tendering process which may be seen as an act of bad faith by the bidders. It would put into question the reliability of any future tendering process and, if it were to be routinely sanctioned by the courts,  the degree of certainty which a bidding process is designed to achieve would be lost. That reasoning also applied to HFD’s suggestion that the bidding process should have been started afresh after receipt of the Muse’s offer.

The full judgement is available from Scottish Courts here.