Seeking professional advice for probate – understanding valuations and tax liabilities

Irrespective of how straightforward an estate may seem, using inheritance tax solicitors in London can prevent you from unnecessarily losing more money in the long-term. This post elaborates on some of the typical questions asked by clients seeking professional probate advice while exploring the probate valuation process more.

The system allows for a layperson to handle such matters themselves, without using any solicitors to manage things on their behalf. However, although an individual can get through the process relatively smoothly, we frequently, as North London Solicitors, are called upon to pick up the pieces. This process can be sectioned into three-stages:

Stage 1 – Valuation

The initial stage involves ascertaining the value of any assets and liabilities. While this sounds relatively simple, if you are dealing with jointly held properties or company shares, there are many things that the law will allow you to do when valuing such items. From an inheritance tax perspective, the difference between getting the valuation correct vs. getting it somewhere near to where you believe it should be, could be substantial.

Getting things right from the beginning and having the correct valuation could potentially save you more than the cost of taking professional probate advice in the first place.

Stage 2 – Tax Return

The complexities of the tax return, and by having a comprehensive understanding of what the rules allow you to do or not, can end up with a client seeing sizeable savings here. As trusted Finchley probate solicitors, we are experts in knowing the right way to structure these returns for the best possible outcome.

When handling all aspects of this for a client, we can ensure the valuation and tax returns are completed correctly and with the right information. This saves our clients both time and money.

Stage 3 – Court Application

Following an application to the court, or for a will, it would be after a grant of probate; the court could potentially revert with questions. These questions must be answered correctly and, in a time-efficient manner. If tax is applicable, then you must be able to show that any tax has been paid. Additionally, it’s imperative to know the correct period you have to pay the tax.

Many people aren’t aware that certain assets lend themselves to having tax paid over a 10-year-period instead of straight away. This knowledge alone can save a significant amount of stress and alleviative the immediate need to source those funds.  

In Conclusion

When people seek out help with probate-related matters, understanding valuations and tax liabilities can make a critical difference to the process and outcome. There are specific situations, particularly with tax allowances and the residential nil rate band; the rules around which are highly complex; particularly if someone’s moved out of the property or they downsize a property that may still allow you to claim those rules.

While people often believe that seeking professional probate advice from any North London solicitor will cost money; it may help clients save money while alleviating much time and stress in the process

Probate Valuation FAQs

What does a probate valuation mean? Probate valuation is a system that helps to establish the value of a person’s assets should they die.

How long should probate take? In the U.K, the average time probate takes may vary between 1-9 months. The complexity of the estate, its size, and the volume of applications to the local probate office can impact the processing time.

What is the difference between a probate valuation and a market valuation? Market value is usually a broad estimate obtained by looking at sales of other similar properties. In contrast, the probate valuation is obtained so that HMRC will accept it to establish the amount of inheritance tax that is due to be paid.

What happens if the sale price is higher than the Probate value? If a property sells shortly after probate is granted, and the final selling price is more than the value submitted for probate; then HMRC could either substitute the sale price and recalculate the Inheritance Tax Liability, or they may look at the increase as a gain, meaning that Capital Gains Tax becomes payable.

What happens if the sale price is lower than the Probate value? Where a sale price is below the figure provided for probate, and the property is sold within four years of the date of death, a claim with HMRC could give you a refund for overpaying inheritance tax.

If you would like to arrange a consultation or have questions about probate advice, please email me or speak with a team member directly on (0)20 8349 5500.

Stamp Duty exemption for UK home buyers

The COVID-19 pandemic has turned many industries upside down by virtually shutting off their customer base, and the Government has resorted to a variety of extreme measures in order to limit the damage that the businesses in these industries suffer. Of all these measures, one of the biggest is the Stamp Duty holiday, which could exempt home buyers from tens of thousands of pounds in costs. So how does the holiday work, who does it affect, and how can we help? Let’s take a look.

What is the Stamp Duty holiday?

Chancellor Rishi Sunak implemented the Stamp Duty holiday to revive the flagging housing market, as the residential property market clamped up in response to the economic situation. The measures mean that Stamp Duty only has to be paid on properties worth more than £500,000, rather than the £300,000 limit under the old rules. This measure actually doesn’t mean much for first time home buyers, because the average new house only costs £208,000, but to professional landlords and investors, it can mean a huge boost to their profits.

What are the potential savings?

For property dealers who regularly transact in homes worth more than £500,000 the old SDLT regime would have seen them pay in excess of £30,000 in Stamp Duty alone, paying 3% on the first £125,000, 5% on the next £125,000 and 8% on the last £250,000. Now, as a result of these changes they will only pay the minimum rate of 3% on the sale, so a £500,000 property will only cost them £15,000 in tax. Clearly it’s well worth considering investing during this holiday, which ends in March 2021, due to the level of potential savings.

How can we help?

If you’re an existing landlord or investor hoping to capitalise on the holiday, or you’re a new starter looking to dip your toes in the water, it pays to get expert advice in these unprecedented times. While this is a potentially golden opportunity to make a life-changing investment, the difficult economy also makes it a serious risk, and to go about it without the best help could have serious consequences. Thanks to our years of conveyancing experience, and our down to earth and no-nonsense advice, we can help you make the best investment with your money and to ensure you make the most out of the SDLT holiday. If you’ve got your eye on a property, and you’d like to make your move during this time, get in touch with us on (0)20 8349 5501.

Redundancy fears as the Furlough Scheme comes to an end

In March 2020, Chancellor Rishi Sunak announced an unprecedented government-sponsored furlough scheme designed to protect jobs during the pandemic. The scheme meant that the UK government would pay the 80% salaries of furloughed workers up to a maximum of £2,500 a month, in a bid to prevent job losses while lockdown restrictions meant that companies across the country couldn’t operate as usual.

As restrictions are lifted, the scheme is set to come to an end on October 31st. Without the government’s furlough pay, many people in the UK worry that businesses will start cutting jobs in the weeks leading up to this date. If companies either aren’t operating at full capacity or aren’t making the same income they were before the pandemic, it’s easy to see why job losses might be the likely outcome.

How has the UK fared so far?

2020 has already taken a toll on the UK’s employment levels. Since March, the number of employers in the UK planning 20 or more redundancies has consistently been at least twice as many as in the same month in 2019. 695,000 UK workers have been cut from the payrolls of UK companies since lockdown hit, and many more could be set to join them once the furlough scheme ends.

Sunak has repeatedly ruled out an extension of the furlough scheme beyond October, but what does this mean for the coming months? The Trades Union Congress general secretary Frances O’Grady thinks government intervention is the only way out, saying: “If the government doesn’t act, we face a tsunami of job losses”, which was backed by governor of the Bank of England Andrew Bailey who suggested some sectors would benefit from further help, having previously backed the decision end the scheme in August.

Does employment law offer any protection from redundancy?

It’s possible to challenge a redundancy with proper legal advice, although if your employer is making you redundant alongside many other employees as part of Covid-19 cuts, it’s unlikely your appeal will be upheld. However, some protections are in place: you are still entitled to the full 45 days redundancy notice, and the government has recently brought in a new law to ensure that furloughed employees receive redundancy payments based on their full salaries, rather than their furloughed salaries.

For help and advice on matters relating to employment law, please get in touch with our employment team today

HM Revenue & Customs confirms first arrest in connection with furlough fraud

HM Revenue & Customs (HMRC) has revealed that a 57-year-old man from Solihull in the West Midlands was arrested on 8 July on suspicion of a £495,000 furlough fraud relating to claims from the Coronavirus Job Retention Scheme (CJRS).

HMRC says he is the first person to have been arrested in connection with fraudulent claims from the scheme.

As of 12 July, more than £28.7 billion had been claimed from the scheme by 1.2 million employers in respect of 9.4 million jobs.

HMRC says that the CJRS has four lines of defence against fraud, which it describes as:

  • Employees have to have been on a payroll on or before 19 March – preventing the use of fake employees
  • Claims are only accepted from employers known – and authenticated – by HMRC
  • All claims are assessed by a specialist team within a 72-hour window
  • Proportionate and reasonable interventions with customers after money has been paid.

Richard Las, the Acting Director at HMRC’s Fraud Investigation Service, said: “The CJRS is part of the collective national effort to protect jobs. The vast majority of employers will have used the CJRS responsibly, but we will not hesitate to act on reports of abuse of the scheme.

“This is taxpayers’ money and any claim that proves to be fraudulent limits our ability to support people and deprives public services of essential funding.”

He called on people to report suspected furlough fraud via HMRC’s online fraud reporting page here.

Coronavirus apprenticeships guidance updated

Updated guidance from the Department for Education on apprenticeships during the Coronavirus crisis has been published and contains a number of announcements relating to employment arrangements for apprentices.

These updates include confirmation that:

  • Apprentices aged 19 and older can begin to resume on-site training;
  • Apprentices who are made redundant but continue their study element can claim Universal Credit if they meet all eligibility criteria;
  • A dedicated service for redundant apprentices will be launched shortly; and
  • Temporary flexibility suspending the requirement that level two apprentices study and attempt level two functional skills assessment has been extended until 31 December 2020.

Full details of these updates can be read here.

The announcements come shortly after the Chancellor announced additional funding for apprenticeships at the Summer Economic Update on Wednesday 8 July 2020.

The apprenticeships funding will provide £2,000 to employers in England for every apprentice hired under the age of 25 and £1,500 for each newly-hired apprentice aged 25 or older.

The new funding is in addition to schemes already in place to support employers in taking on apprentices.

Government publishes detailed guidance on SDLT holiday

During his Plan for Jobs announcement the Chancellor Rishi Sunak announced a temporary eight month cut in Stamp Duty Land Tax (SDLT) that ensures there is not a charge on ‘any’ residential property transactions with a value under £500,000.

The Government has achieved this by immediately lifting the lower SDLT nil rate band from £125,000 to £500,000, which it claims will mean that nine out of 10 main home buyers will not pay SDLT until the thresholds revert in March 2021 to their previous levels.

In its latest guidance, the Government has confirmed that the SDLT holiday only relates to residential property transactions up to £500,000 – above which the original rates continue to apply.

The guidance also confirms that the additional homes surcharge of three per cent will continue to be charged.

However, this applies across the newly outlined threshold meaning that those subject to the surcharge will now pay three per cent on the first £500,000, rather than the first £125,000, which represents a significant discount on the previous SDLT rate.

Companies also benefit from this increase to the threshold, including businesses that buy residential property of any value above £500,000 where they meet the relief conditions from the corporate 15 per cent SDLT charge.

The nil rate band which applies to the ‘net present value’ of any rents payable for residential property on new leasehold sales and transfers is also increased to £500,000.

To help you visualise what this change means, we have prepared a helpful table below:

SDLT Holiday – First Time Buyer Rates SDLT Holiday – Non-First Time Buyer Rates (no additional properties) SDLT Holiday – Additional Homes Buyer Rates
£0 – £500,000 – 0% £0 – £500,000 – 0% £0 – £500,000 – 3%
£500,001 –£925,000 – 5% £500,001 –£925,000 – 5% £500,001 –£925,000 – 8%
£925,001 – £1.5 million – 10% £925,001 – £1.5 million – 10% £925,001 – £1.5 million – 13%
£1.5m+ – 12% £1.5m+ – 12% £1.5m+ – 15%

On the 1 April 2021, the reduced rates shown in the above tables will revert to the normal rates of SDLT that were in place prior to 8 July 2020.

England to make face coverings compulsory in shops

From 24 July 2020 it will be a legal requirement to wear a face covering, such as a mask, in shops and supermarkets in England.

The move will be enforced by the police via fines of up to £100, which will be reduced to £50 if the fine is paid within 14 days.

The move also allows shops to refuse entry to a customer who is not complying with the requirement to wear a face covering.

Children under 11 and those with certain disabilities will be exempt from the new rule, however, members of the public of all ages have been advised to wear coverings in enclosed public spaces since May.

The move comes after data showed that the death rate of sales and retail assistants is 75 per cent higher amongst men and 60 per cent higher amongst women than in the general population.

While many employers in the retail sector have taken steps to protect employees, such as providing PPE, offering contactless payments and installing screens, it is thought that the new measures will offer additional safety and security to retail workers and customers.

At the moment, it is only compulsory to wear face coverings on public transport in England, but other nations such as Scotland, Spain and Germany already have rules on face coverings in shops.

Government to bring forward an amendment to the Domestic Abuse Bill

The Government is bringing forward an amendment to the Domestic Abuse Bill inserting a new clause that would ensure that victims of domestic abuse are automatically eligible for access to special measures in family proceedings without the need for any determination of the victim’s vulnerability

This includes a new clause  given the Court the power to give a direction prohibiting cross-examination in person.

The direction will be given where such cross examination is likely to diminish the quality of the victim’s evidence or would cause significant distress to the witness

The court would have the power to appoint a legal representative to conduct cross examination on behalf of the perpetrator with payment made from central funds.

Further guidance is awaited.

This news is welcome. For too long, victims have been subject to cross examination by perpetrators. Currently, the Judge has limited powers only to prevent direct questioning, but this has the effect of making the process longer and more difficult.

The family courts make decision with lifelong consequences for children and it is essential that evidence is given that ensure a safe, lasting and satisfactory outcome for the child to ensure justice is done for all involved.

Graeme Fraser, Partner & Head of Family comments as follows:

This is welcome news, particularly at a time when domestic abuse has manifestly increased as a result of the Covid19 disruption and lockdown. We hope that these measures can be brought into force imminently so that justice can be done to all those affected.

 For information and advice in relation to domestic abuse issues, please contact the OGR Stock Denton Family Team.

Pensions and financial planning on divorce – the impact of COVID-19

OGR Stock Denton LLP would like to invite you to join our live webinar on Pensions and financial planning on divorce – the impact of COVID-19 

4.30pm, Tuesday 14th July 2020

Zoom webinars

This timely webinar considers the impact of the COVID-19 disruption on divorce settlements already reached, those that are being negotiated now, and what to look for in the new landscape when society returns to a new “normal”.

Chaired and co-hosted by Graeme Fraser, Head of Family and Partner at OGR Stock Denton LLP, this webinar combines analysis and application of legal principles against the backdrop of changing markets.

Guest speaker Mark Penston Bsc AFPS, Chartered Financial Planner with Bluesky and accredited specialist Resolution member sets out tips and potential pitfalls for pensions and financial planning at a time when trusted advice has never been needed more.

If you would like to join this webinar, please email Ali Kabani:

akabani@ogrstockdenton.com

 020 8349 5514

Employers given 30 days to confess to furlough fraud

Employers will be given 30 days to ‘confess’ to furlough abuses, with legislation being fast-tracked to allow HM Revenue & Customs (HMRC) to reclaim any furlough grant that is overpaid to employers, or that is not spent on wages as intended.

More than 2000 employers have already been accused of furlough fraud by whistle-blowers, with HMRC expected to follow up targeted investigations with random compliance checks.

The draft legislation mentions ‘deliberately’ making an incorrect claim or ‘deliberately’ not using the money to pay furloughed employee costs, which should give some reassurance to any businesses that may have inadvertently submitted a claim incorrectly.

The recent update to the Coronavirus Job Retention Scheme (CJRS) also stated that the claims portal will allow employers to declare mistakes made in previous claims, and offset the over-claim against their next claim.

Guidance to the CJRS has been updated by the Government regularly, but it has always been made clear that if employers are using the scheme, then the furloughed employee must not do any work for them, which remains the case until the new Flexible Furlough rules are introduced on 1 July.

If an employer has asked an employee to carry out any work, then they will need to prove that whatever they asked them to do was neither;

  • Making money for them or any other businesses that may be linked, or;
  • Providing services to them

HMRC may find it difficult to determine the employers who have submitted inaccurate claims accidentally, through negligence or a misjudgement.

This is why it is important that all employers that have used the CJRS now review the claims that they have made to ensure that they have submitted the correct claims for each individual.