News archive

I received my annotated copy of this year’s UK Finance Act this morning from the Association of Taxation Technicians.

The introduction provides further evidence of just how complicated the UK’s tax system has become notwithstanding recent simplification efforts.

The Act comprises 93 sections, 26 schedules and 398 pages.

“The added pages far exceed those that can be deleted from tax legislation as a result of the repeal of redundant relieifs …, even if one were to include the further 36 reliefs on which the [UK] Government is consulting.”

The schedule on “disguised remuneration” alone adds 69 pages.  The “bank levy” schedule adds a further 52 pages.

Time for a Scottish Exchequer?

The Borders first crematorium will begin operations by the end of this year.  The crematorium will be located next to Wairds cemetery just outside Melrose and in the shadow of the Eildon Hills.  A picture perfect postcard location.

The good news does not end there.  Work has started work on a second crematorium at Houndwood Church in Berwickshire.

The facility at Wairds will be run by Westerleigh, the UK’s second largest crematorium operator, and costs approximately £2.6 million.  The building will contain an 84 seat chapel with standing room for 100 outside.   The expected annual number of cremations is 500.  It is estimated that this will rise to 900 within 10 years of operation.

Why might you ask is this such good news.  The answer is a simple one.  Until now if you live in the Borders and you wanted to be cremated your family, friends and colleagues had to travel to either Edinburgh or Newcastle.  A journey that was often long and stressful and in the winter might not even be possible.  I suspect that this is an issue that affects many other communities in Scotland.

I am originally from Galashiels and still split my time between the Borders and Edinburgh.   The main road to Edinburgh is the A7.  A road that is best described as bendy with few overtaking opportunities, congested during the main commuting times and in the winter hazardous.  So little has changed that my great grandparents, if still alive, would have little trouble recognising this road today.

It is often the case that after a church service in Galashiels the body is taken to Mortonhall crematorium in Edinburgh.  Those attending the crematorium would then have to head back to Galashiels.  As is likely to be case the family will have invited everyone to a venue in Galashiels for a cup of tea, sometimes something a little stronger, and a bite to eat.  This is also a chance to pay your respects to the family.  That often meant a round trip of 80 miles and having to take a full day off work.  The opening of these crematoria will, for large numbers of people, mean not having to make journeys such as this.

As we know a time of bereavement is a difficult enough time without having added a stressful journey.  That is why this is such good news for the Borders and why I would like to note my thanks to all those who made this happen.

This article was published in the latest edition of Age Scotland’s quarterly magazine, Advantage.

Back to the grind!

Highlight of the week for me was the publication of Reform Scotland’s latest fiscal powers paper “Devolution Plus”.  I do though have to declare an interest as I am one of the authors of this paper.  The paper outlines a possible third option, if there are to be three options put to the Scottish people instead of a straight yes or no to independence.  The paper can be found here.

The debate over the top rate of income tax also continued.  What was interesting was the claim by the Institute for Fiscal Studies that the 50p tax rate may not raise any extra revenue for HM Treasury and could actually reduce it due to high earners using avoidance measures.   HM Treasury has already revised downwards its predictions of the amount that could be raised from the 50% rate from £7 billion a year to about £2.4 billion.

Excellent article in the Herald on Tax Increment Financing.  It appears that nearly half of Scotland’s councils have made applications to the Scottish Futures Trust for permission to pilot TIF schemes.  TIF involves mortgaging the future income from local business rates to borrow money from HM Treasury’s public works loan board.   The Scottish Government has already been working with Edinburgh, Glasgow and North Lanarkshire councils for several years to set up TIF schemes for Leith Harbour, Buchanan Galleries shopping centre and Ravenscraig.  The article can be found here.

A word of caution on TIF.  I first came across TIF when working as an attorney in Chicago.  One issue that has arisen in Chicago is that if too many TIF schemes are approved the benefits are diluted.

I find myself agreeing with the comments made by Everhseds LLP on the Institute for Fiscal Studies’ Mirrlees Review of the UK’s tax system.  The problem with such a major reform is that we are not starting with a blank sheet of paper.  Making such radical changes would require a huge amount of resources and even more political will.  Neither of which appears to be present just now.

The Scottish perspective is slightly different as we will have a sheet of paper that even if not blank at least has numerous blank spaces in it when tax and fiscal powers are devolved to the Scottish Parliament.  This is in fact an opportunity, possibly a once in a generation opportunity, to do something different.  Hopefully this is a point that those on, and those giving evidence to, the Scottish Parliament’s Scotland Bill Committee will consider.   The Eversheds comments can be found here.

Mrs SC for Judicial Review of a decision of the Service Personnel and Veterans Agency of the Ministry of Defence  Outer House, Court of Session, [2011] CSOH 124

The background to this case is a family dispute.  In this case the dispute is over where the body of Private Mark Connolly (MC) will be buried.   MC’s mother wishes to have him buried in Methil.  His widow wishes him to be buried in Forfar.

The petitioner in this matter is the widow of MC.  MC died on 14 May 2011 whilst on a training course in Germany.   MC named his mother and brother as his executors in his will.  MC’s widow is the sole beneficiary.

It appears that the MOD initially wished to release MC’s body to MC’s widow.  It was only when MC’s mother disputed the funeral arrangements, and after looking at MC’s will, that the MOD indicated that they would now release the body to MC’s mother.   At that point the Forfar funeral arrangements were almost complete.

MC’s widow maintained that although MC did not leave written instructions regarding his funeral he made his wishes known to her.   MC told her that he wished to be buried but not in Methil.  He wished to be buried wherever he and his wife were settled.   They had settled in Forfar.

The MOD indicated its change of mind in a letter to MC’s widow dated 6 June 2011.  It is respect of this letter that MC’s widow sought judicial review.

 Lord Brodie began by looking at the issue of competency. 

“Critically, nothing in the letter of 6 June 2011 affects the rights or interests of anyone and indeed it does not purport to do so.  It neither constitutes nor expresses a decision.  All that there is in the letter is a statement of intention to transfer custody of the body to the other party that the writer of the letter understands is entitled to its custody as a matter of law.  Whether or not that understanding is correct, neither the writing of the letter nor the implement of the intention expressed in any way alters parties’ respective rights or interests.  Were it to be the case that the petitioner is entitled as a matter of law to demand custody of the body, neither the letter nor a transfer to the second respondent in implement of the intention expressed in the letter would affect that.  Put shortly, in my opinion there is nothing here to judicially review.  I recognise that in similar circumstances in England that courts may take an approach to applications for judicial review which is more pragmatic and closer to what parties would have wished me to do here …, but the nature of the equivalent English jurisdiction is different from that in Scotland.”

Although Lord Brodie decided to dismiss the petition as incompetent he decided to address the petitioner’s claim that the decision of the MOD contravenes her rights under article 8 of the European Convention of Human Rights.  Indeed Lord Brodie went as far as to say that: “I may be wrong on my conclusion as to competency.”

Article 8 claim

Article 8 of the Convention provides:

1. Everyone has the right to respect for his private and family life, his home and his correspondence.
2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

MC’s widow contends that her article 8.1 rights are engaged because the decision of which she complains deprives her of the opportunity of taking custody of her husband’s body, arranging his funeral and determining where he is interred.

Lord Brodie split his analysis into three parts.  (1) Whether there had been interference with the petitioner’s rights under article 8.1, (2) whether any interference was according to law and (3) whether such interference was justified by any of the other provisions of article 8.2

Interference

On the question of whether there had been interference, Lord Brodie proceeded “upon the basis that transfer of the deceased’s body would amount to an interference with [MC's widow's] article 8.1 right to respect for family life.”

According to law

Lord Brodie then discussed what he thought was the position under both English and Scots law.

Under English law the executor has priority when it comes to funeral arrangements but that this right may be restricted by the courts.   Lord Brodie noted that there is no direct authority on this point under Scots law.

The case of Evans v McIntyre was though discussed and Lord Brodie noted  some of Sheriff Scott’s comments in that case:

“On the basis of the authorities to which I was referred and the submissions I heard, I would see that there is no question but that a confirmed executor or someone who entitled to be confirmed as an executor and who intends to seek confirmation (the prospective executor) is a lawful custodier of the body of a deceased for the purpose of burial.”

Lord Brodie, however, did not feel “that matters are as cut-and-dried” as in Evans and noted:

“The fact that he [the executor] pays does not make him responsible for arranging the funeral.  It is the surviving spouse and next of kin (not the executor) who have rights to solatium for unauthorised interference with the dead body.”

“Thus, in Scots law, I would see near relatives as well as the executor or prospective executor as having rights and interests in respect of the body of the deceased.  The nature of these rights is not the same.”

“Determining what are appropriate funeral arrangements by reference to the quality of relationships within a family appears to me a task for which the court is quite unsuited.”

The “intends to seek confirmation” comment from the Evans case, see above, is also important as interestingly Lord Brodie was not certain that MC’s mother would be appointed as executor due to her answer to his question on her being confirmed as executor.  MC’s mother said she would take legal advice before deciding.

Other provisions of Article 8.2

“To respect the rights of both the [the MOD] cannot avoid favouring one.“  Lord Brodie felt that the MOD were in an impossible position and that its actions were justified under Article 8.2.

In summing up Lord Brodie said:

“The first respondent [the MOD] may therefore lawfully transfer the body of the deceased to the second respondent [MC’s mother] but he may also lawfully transfer the body to the petitioner [MC’s widow].  Nothing in this decision should be construed as an expression of preference of my part of the position of the second respondent [MC’s mother] over that of the petitioner [MC’s widow].”

Conclusion

Although Lord Brodie held the petition to be incompetent he helpfully continued with his analysis of the matter.  Lord Brodie saw that the MOD were in an almost impossible position here.  Whatever it did the other party would feel aggrieved.

One final point.  I was surprised that more was not made on the fact that MC did not appoint his widow as an executor because of erroneous advice from the army.  The army it was claimed had told MC that it was not appropriate to appoint the same person as executor and beneficiary.

The full case report can be found here.

Given the amount of coverage this Bill receives on the various news outlets you might be excused for thinking that this Bill applied to Scotland as well.  It does not.  That said, it is still of interest and relevance to us here in Scotland as it shows the way that the debate is moving in other parts of the UK.

The Bill passed its third reading in the House of Commons last week and is due to move to the Lords in October.

These articles, firstly from the BBC and also from the Guardian, outline the main points of debate including within the UK coalition government.

The Bill and a summary of the key points can also be found here.

Always nice to get away from things for a while.  Islay gives you a different perspective.

Tax has only featured in three conversations here and as each also mentioned whisky I felt that made it acceptable.  The general sentiment seemed to be: “Islay gives a lot to the UK Exchequer every year and we get very little back in return”.

One person I spoke to told me that: “Islay’s whisky industry contributes approximately £100 million a year to the UK government in excise duty and value-added tax.”  To put that into context, and if that figure is correct,  that is about £30,000 for every man, woman and child on the island.

The main tax stories of the past week have a familiar feel to them.

The debate over devolving complete control over corporation tax to the Scottish Parliament has continued.  This week saw HM Treasury predicting doom and gloom if such a thing were to come to pass.  More ammunition for those wanting to see a Scottish Exchequer.

In a connected issue, Scotland’s First Minister said that the oil industry should be consulted on any new changes to offshore taxation.  The background to this is the proposal by the UK government to increase the supplementary charge on oil production from 20 to 32 per cent.

The other major political tax debate also rumbles on.  That being the top rate of income tax.  This still feels like a “phoney war” but you also get the feeling that a formal start to hostilities might just be round the corner.  The main warring parties in this case being the coalition partners of the UK Government.

This week saw twenty economists (makes you wonder what a group of economists is called), in a letter to the Financial Times, urging the UK Government to drop the top 50p tax rate.  They claim it is doing “lasting damage” to the UK economy.   The top rate is paid at 50p for each pound earned over £150,000 and affects around 310,000 people.  Opponents say cutting the top rate at a time of cuts would be “monstrously unfair” and “phenomenally immoral”.  UK Government Ministers continue to hedge their bets by saying that the 50p rate is temporary and that their policy is to first increase the income tax threshold to £10,000.

Although not as widely reported as the two issues above, I did like the council tax news item from the Courier.  The report explained how funds raised by increasing the council tax on second homes had helped to pay for affordable housing projects across the Perth and Kinross Council area.

In February 2005 Perth and Kinross Council agreed that additional money collected by reducing the council tax discount on second homes and long-term empty properties could be used to support the development of affordable housing.   The Council  reduced the 50% second home discount to 10%.  The reduction covers around 1,800 properties.

Back to the mainland tomorrow!

The Scottish Government’s legislative programme for 2011-12 includes as priorities the Registration Bill and Long Leases Bill (which is being re-introduced after it ran out of time in the last parliament).

The Registration Bill aims to improve land registration in Scotland includes provision for:

• an improved system for handling inaccuracies;
• the introduction of a system of advance notices to protect buyers from last-minute adverse entries in the Land Register which would bring about an end to the current practice of the use of letters of obligation;
• a new procedure for dealing with title to common areas in new housing developments;
• ensuring that electronic conveyancing is competent in all cases including missives; and
• speeding up the transfer of properties onto into the Land Register from the Register of Sasines.

The Long Leases Bill allows conversion of the rights of tenants under ultra-long leases (175 years or more with more than 100 years to run) into ownership.

The facts
Outer House case in which a trustee in bankruptcy sought declarators and reductions relating to a series of conveyancing transactions which followed an alleged fraud on the part of a bankrupt (Mr Pocock).

The transactions related to the sale of a property at Queen’s Gardens in Aberdeen. The trustee discovered that a disposition of the property by Skene Investments in favour of Mr Pocock had not been registered and that a second disposition in favour of Howemoss Properties Limited had been lodged with the Keeper.  Various transactions had then taken place in reliance on the Howemoss disposition. However, the trustee contended that Skene had not executed the Howemoss disposition and believed it to be an unauthorised alteration of the original disposition, the price and purchaser having been altered without Skene’s consent.  (Although he did not know the purpose of the alteration, the trustee believed that it may have been altered to avoid payment of stamp duty.)

The Trustee sought declarator that the Howemoss disposition and various dispositions and standard securities based on it were a non domino (i.e. by someone who is not the owner).  He also sought declarator of the tenor of the first disposition which be believed to have been lost or destroyed.

Proving the tenor of the original disposition
It was argued by the parties who transacted on the strength of the Howemoss disposition (the third parties) that it was not open to the trustee to prove the tenor of the first disposition as, rather like tearing up a will, the act of destroying the deed meant the rights created by it were lost and the trustee was in no better a position than Mr Pocock. That argument was rejected by Lord Uist who found that, in such circumstances, whether a person was precluded from proving the tenor of a deed would depend on, the nature of the deed, by whom it was destroyed and for what purpose.  In this case Lord Uist saw no reason why there should be any legal bar to the trustee proving the tenor of a disposition in favour of Mr Pocock.  Mr Pocock had paid a purchase price of £207,125 and the trustee claimed Mr Pocock had deliberately destroyed the deed order to conceal the fact that he had purchased the property.  It would be a denial of justice if the trustee were not allowed to prove the tenor of the original disposition.

The tantum et tale principle
The third parties also argued that, as a result of the tantum et tale principle, the trustee took Mr Pocock’s estate exactly as it stood in Mr Pocock’s hands at the time of the sequestration. Thus, if Mr Pocock were unable to prove the tenor of the original disposition or reduce the subsequent writs (as a result of personal bar or by the effect of his own fraud), then so too would the trustee.

However, after considering the terms of the Bankruptcy (Scotland) Act 1985 and Burnett’s Trustee v Grainger (2004), Lord Uist found that the tantum et tale argument has been discredited. Applying Burnett’s Trustee to the present case:

“the relevant picture is not of the permanent trustee stepping into the shoes of the bankrupt, but of the bankrupt’s estate being taken from him and placed in the hands of a completely different individual, the trustee for the bankrupt’s creditors, which suggests that in so far as the bankrupt himself may be subject to personal obligations, those obligations do not affect this new person, the permanent trustee.”

And with regard to fraud:

“the cases show that a trustee in bankruptcy cannot benefit from the fraud of the debtor which enlarges the estate for distribution, but that is patently not the case here. If anything, it is the contrary: the trustee’s position is that Mr Pocock fraudulently alienated part of his estate and he now seeks to reclaim, for the benefit of the whole body of creditors, the property so alienated. What the trustee is seeking to do is to annul a fraud which has wrongfully diminished the bankrupt’s estate, not benefit from the bankrupt’s fraud in order to enlarge the estate.”

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.

A week that saw HMRC step up pressure on Rangers FC, calls for a tax on “junk food” in The Lancet and reports on how Bonn uses a  meter to tax its prostitutes.  I did like the argument put forward against the use of this meter by a prostitutes’ rights activist: “double taxation”.

The Liberal Democrats are making almost all of the running on tax ideas and policy just now.  The debate, for debate read argument, over whether to retain the present top rate of income tax and/or introduce a “mansion tax” continues between the partners in the UK coalition government.  In addition the Liberals are calling for a proper examination of how a “land tax” might work.

Attendees of last night’s annual CBI Scotland dinner heard, in between the odd constitutional reference, its UK President Sir Roger Carr, criticise the UK’s “punitive” tax regime and HM Treasury’s “misguided” levy on North Sea oil production.

Not surprised to hear of HMRC’s role in the “Mortgage Verification Scheme” and that it is to start scaling back its “time to pay policy”.  That is a scheme that allows a businesses additional time to pay its tax bill.

Surprised that those calling for a reduced rate of VAT on home repairs and renovations are not making more use of the fact that the Isle of Man has negotiated such an agreement with HM Treasury.

Not a dull week.