Taxation and trusts update: The 2020 statement; OTS CGT review and more

• The 2020 Summer Statement
• OTS CGT review 
• Chargeable event gains, top-slicing relief and the personal allowance – An important update
• The FCA’s recent work on overdrafts – An update
• UK high court inheritance disputes hit all-time high
• Switching to a more affordable mortgage – FCA calls for help from mortgage intermediaries
• The latest UK tax gap figures
• HM Land Registry to accept e-signatures on deeds
• Summer Statement 2020: Eat out to help out scheme
• Managing access to cash: Update on FCA proposals
• Financial Services and Brexit - FCA confirms MoUs will apply from 1 January

 

The 2020 summer statement

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

Introduction

Not many Chancellors begin their tenure in the way that Rishi Sunak has. His first Budget arrived within a month of his appointment. Ever since he has been in the unusual position for an occupant of 11 Downing Street of handing out seemingly limitless amounts of cash – ‘whatever it takes’, to use his (borrowed) term. Just consider where he - and we - are now:

• Government borrowing in the first two months of 2020/21 has already exceeded £100bn and, on most estimates, is heading towards £300bn by the end of the financial year. Look back to the March Budget and the estimate for the current financial year was under £55bn.

• Total Government debt has jumped to over 100% of GDP for the first time since 1963. As the Office for National Statistics (ONS) recently put it, public sector net debt is ‘just under £2.0 trillion’.

• The UK economy contracted by 2.2% in the first quarter months of 2020. The ONS reckons that in April alone it fell by a further 20%.

• So far, the ONS unemployment numbers show only a minimal increase, although the Claimant Count (which principally covers unemployment benefits) rose to 2.8m in May from 1.6m in March. The Bank of England forecasts that unemployment could rise to 10% this year while the OECD has said UK unemployment could hit 15% in the event of a second wave of infections.

• One reason the ONS unemployment numbers have moved little to date is the Coronavirus Job Retention Scheme (CJRS) which, at 5 July, was covering4m jobs offered by 1.1m employers. Total claims made under the CJRS are already £27.4bn, with about 3½ months of the scheme left to run. However, from August a growing proportion of the scheme’s cost will be passed onto employers. As a result, announcements of large scale redundancies have started to appear, such as those at Rolls Royce, Jaguar Land Rover and Centrica.

The corresponding figures for the Self-Employment Income Support Scheme (SEISS) were 2.7m claims totalling £7.7bn.

The Summer Statement marked the beginning of a transition for the Chancellor from spending on survival support for businesses and individuals to a more traditional Treasury role of encouraging employment and economic growth. The measures announced still involve a significant outlay of Government money – up to £30bn – and cover a wide range of areas as follows:-

• Job Retention Bonus

In his speech, Mr Sunak underlined his intention not to extend the CJRS for a third time beyond October. However, as a bridge to work, a new incentive for employers, the Job Retention Bonus, will be introduced.

This will pay £1,000 to UK employers for every furloughed employee who remains continuously employed from the closure of the CJRS until the end of January 2021. Employees must earn on average more than the Lower Earnings Limit (£520 per month) in that period, with payments made to employers from February 2021. More information will emerge by the end of July.

• Kickstart Scheme

This is a new scheme, which covers England, Wales and Scotland, but not Northern Ireland. Its goal is to create ‘hundreds of thousands’ of six-month work placements to be offered to anyone aged 16-24 who is on Universal Credit and deemed to be at risk of long-term unemployment.

The Government will provide funding for each job at the level of 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions. For a 21-24 year old, whose National Minimum Wage rate is £8.20 an hour, that equates to a payment of around £6,500.

• Traineeships

Employers will receive a payment of £1,000 for each 16-24 year old trainee to whom they provide work experience. The Government says that it will improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, ensuring more young people will have access to training.

• Temporary VAT cut for food, non-alcoholic drinks, accommodation and attractions

A 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from UK restaurants, pubs, etc; and accommodation and admission to attractions across the UK.

In both instances the temporary rate will operate from 15 July 2020 through to 12 January 2021.

It will be interesting to see the extent to which the saving (worth 12.5% off the without-alcohol bill) will be passed on to customers, given that some businesses have just finished working out a set of increased prices prior to re-opening. 

• Temporary Stamp Duty Land Tax cut

Stamp Duty Land Tax receipts have dropped sharply in the wake of COVID-19: in the month of May 2020 they were 46% of the previous year’s level. As had been widely trailed, the Chancellor announced that the nil rate band threshold for residential SDLT will increase from £125,000 to £500,000 with immediate effect until 31 March 2021. That offers a maximum saving of £15,000. For second homes, the 3% additional rate will continue to apply. The new rate table is shown below:

Slice of Residential Property Value	SDLT Rate %
Up to £500,000	0
£500,001 - £925,000	5
£925,001 - £1,500,000	10
Over £1,500,000	12

The Scottish government has announced it would increase the Land and Buildings Transaction Tax (LBTT) nil rate band threshold from £145,000 to £250,000 from 15 July for all purchasers. The Welsh government has also announced an increase in its Land Taxation Tax (LTT) nil rate band threshold to £250,000 (from £180,000) from 27 July, but this will not apply to those buying second homes or buy-to-let investors. 

• Green Homes Grant

A £2 billion Green Homes Grant is to be introduced. This will provide at least £2 for every £1 spent up to £5,000 per household to homeowners and landlords making their properties more energy efficient. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.

• Financial projections

There were no financial projections from the Office for Budget Responsibility (OBR) published alongside the Chancellor’s statement. However, the Treasury did provide broad costings for its measures, set out below:

Policy decision	£bn
Job Retention Bonus	Up to 9.4
Kickstart Scheme	2.1
Boosting work search, skills and apprenticeships	1.6
Reduced rate of VAT for hospitality, etc	4.1
Eat Out to Help Out	0.5
Infrastructure package	5.6
Public sector and social housing decarbonisation	1.1
Green Homes Grant	2.0
SDLT temporary cut	3.8
Total	Up to 30.0

And next… 

The Chancellor confirmed that there will be a Budget and a Spending Review in the Autumn. In his speech, he also remarked that “Over the medium-term, we must, and we will, put our public finances back on a sustainable footing”.

OTS CGT review  
(AF1, AF2, JO3, RO3)

On 14 July it emerged that the Chancellor had written a letter to the Office of Tax Simplification (OTS) requesting it ‘undertake a review of Capital Gains Tax’. Curiously, there was no announcement of the letter on the Treasury website. The tone of the correspondence is distinctly different from Mr Hammond’s letter requesting a simplification review of IHT. Although Mr Sunak gives a nod to ‘opportunities to simplify the taxation of chargeable gains’ his letter also refers to:

• ‘areas where the present rules can distort behaviour or do not meet their policy intent’; and

• ‘any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income’.

The OTS has already responded with a scoping document, a call for evidence and, as it did with inheritance tax (IHT), an online survey for individual taxpayers. Together these make clear that the review will be wide-ranging, covering areas including:

• ‘the overall scope of the tax and the various rates which can apply’;
• ‘stand-alone owner-managed trading or investment companies’;
• ‘interactions with other parts of the tax system’;
• ‘the practical operation of principal private residence relief’; and
• ‘consideration of the issues arising from the boundary between income tax and capital gains tax in relation to employees’.

As was the case with IHT, the OTS has access to HMRC data that is not publicly available.

The issue of how to treat capital gains for tax purposes has been rattling around almost since the tax was originally introduced in April 1965. Of late a number of think tanks, such as the Institute for Public Policy Research and the Resolution Foundation, have called for gains to be taxed as income. Ironically, that idea was originally put into practice by a Conservative Chancellor (Nigel Lawson) in 1988 and survived for 20 years, albeit with various complicating tweaks along the way (remember taper relief?).

At the last election, both the Liberal Democrats and Labour called for gains to be taxed as income and for the annual exemption to be reduced to £1,000 (Liberal Democrats) or scrapped completely (Labour). The Conservative manifesto made no comment on capital gains tax. Doubtless the Government could argue that, to the extent it has any post-Coronavirus relevance, the Conservative manifesto pledge not to increase income tax rates did not stretch to gains taxed as income.

Capital gains tax ‘is a modest source of revenue for the Exchequer’, to quote the OTS. The latest Office for Budget Responsibility (OBR) projections are that it will raise £10.5bn in 2020/21 (on gains realised in 2019/20) and £7.6bn in 2021/22. Set against a 2020/21 deficit heading above £350bn, doubling capital gains tax revenue would make only a minor dent. However, from a political viewpoint capital gains tax has similar advantages to a wealth tax in that capital gains tax is perceived as a tax on the rich which will not affect most people (fewer than 300,000 taxpayers paid capital gains tax in 2017/18). It also has the benefit of being an existing tax, so would not require new infrastructure. Having said that, there is an argument that with IHT already in the simplification pot, a case could be made for some rationalisation of capital gains tax and IHT into a single capital tax.

The call for evidence is divided into two parts: ‘principles of CGT’ with a response deadline of 10 August and ‘technical details and practical operation’ with a deadline of 12 October. Those dates leave a short timescale for any feed into the Autumn Budget. Interestingly, the OTS says that it ‘may publish more than one report on its findings’. It is worth remembering that capital gains tax rates have been changed mid-year in the past (June 2010 by George Osborne).  

Chargeable event gains, top-slicing relief and the personal allowance – An important update

(AF1, RO3) 

The position on chargeable events that arose before 11 March 2020 was still far from clear following HMRC’s decision to withdraw its appeal in the Silver case. However, HMRC has now confirmed the position for the whole of the 2019/20 tax year.

The Budget 2020 confirmed that, when calculating top-slicing relief on chargeable event gains on life policies arising after 10 March 2020, only the top-sliced gain will be included as part of adjusted net income for the purposes of determining entitlement to the personal allowance in the second part of the top-slicing relief calculation. The position on all chargeable events gains arising in 2019/20 has now been clarified.

As is generally well known for income tax purposes, when a person’s adjusted net income exceeds £100,000, the personal allowance is gradually eroded by £1 for every £2 of excess income. So, on the basis of a personal allowance of £12,500, entitlement to the personal allowance is totally lost when adjusted net income is £125,000 or more.

In the past, in calculating top-slicing relief under a life policy (say an investment bond) HMRC has always taken the view that it is the full chargeable event gain that is included in adjusted net income – and not the top-sliced gain. This view was challenged in the Silver case where Mrs Silver maintained that only the top-sliced gain should be taken into account for the purposes of determining whether the personal allowance applies in calculating the tax on the top-sliced gain, in the second part of the top-slicing relief calculation.  The First-tier Tribunal (FTT) upheld her claim and HMRC appealed this decision to the Upper Tribunal but subsequently withdrew its appeal.

Proposals in the Budget, in effect, brought in provisions that mean that in future it will be only the top-sliced gain that is taken into account as adjusted net income (ANI) for the purposes of entitlement to a personal allowance in the second part of the top-slicing relief calculation. Originally, in general terms, this only applied to chargeable event gains that arise on or after 11 March 2020. However, HMRC has now said that this will apply to all gains arising in the 2019/20 tax year.

Here’s what HMRC has said in its Agent Update for June and July:

“…These new rules will apply to gains arising on or after 11 March 2020, however, we will also apply these new rules to all gains arising in 2019-20 as a concessionary treatment. …The Insurance Policyholder Taxation Manual (IPTM) chapters 3820-3850 will be updated to reflect these changes and provide additional examples of how the relief is calculated in practice.   An exclusion will be included on the e-filing exclusion list for 2019-20 to reflect these changes. This means that for 2019-20, affected customers will receive a correction calculation from HMRC applying the new basis. No customer will receive less relief than was previously calculated by HMRC.   For returns submitted for 2020-21 onwards, the calculation for Top Slicing Relief will be calculated automatically as part of the self-assessment process.   We are aware that the calculation for TSR has created some uncertainty for you and your customers, and we thank you for your patience and ongoing support.”

Those gains realised before the 2019/20 tax year will still be dealt with on the “old” basis.

The FCA’s recent work on overdrafts – An update

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

The Financial Conduct Authority (FCA)’s recent work on overdrafts found that fees paid for unarranged overdrafts were regularly 10 times as high as fees for payday loans.

New FCA rules, published in June 2019, were intended to address both how much the most vulnerable were being charged for unarranged overdrafts, and the level of fees and charges that many arranged overdraft customers were paying on top of interest rates. According to the FCA, some firms were charging some of the most vulnerable customers an effective interest rate of more than 80% a year on their arranged overdraft.

As a result of the FCA’s intervention, new overdraft rates came into force between November 2019 and April 2020.

In January 2020, the FCA wrote to firms to ask them to explain how they reached their new overdraft rates.

In its letter, the FCA also asked banks for details of how they would be complying with rules to provide support to those who will be worse off once the new rates are in place. This could include providing forbearance for customers in financial difficulty, offering a personal loan at a lower rate or reducing their overdraft limit in phases alongside other support, such as budgeting advice. The FCA says it has asked senior executives at firms to take personal accountability for ensuring that consumers get the help they are entitled to.

In January, the FCA had estimated that seven out of 10 overdraft users would be better off, or see no change in cost, once its new rules came into force. And, in their response to the FCA’s letter, most banks estimated that these pricing changes would reduce their total overdraft revenue by between a quarter and a third. In total, this amounts to over half a billion pounds across these banks.

The FCA has now published a statement providing an update following the letter that was sent to firms in January.

The FCA believes that its changes have forced firms to make their overdraft prices transparent and easy to compare to other products, making it easier for consumers to shop around to find the best deals. While many of the banks’ new rates were similar, the FCA says that it has seen a range of pricing structures – both risk-based pricing and flat rates – and price points, and it has seen some challenger firms offering lower overdraft rates. So, despite banks increasing headline interest rates, the FCA believes that the cost of borrowing will go down or remain unchanged for most people.

In April, the FCA asked all firms to temporarily ensure all overdraft customers were no worse off on price when compared to the prices they were charged before the recent overdraft rule changes came into force. As was previously the case, firms will be able to set their prices, but overdraft customers who are financially impacted by coronavirus will continue to be able to request support on any additional borrowing in excess of £500.

The FCA has now also confirmed proposals to ensure this support is focused on those customers financially affected by coronavirus and that they can continue to ask for a reduced interest rate on any additional borrowing over £500 - see the FCA’s latest publication here.

The FCA’s guidance came into force on 3 July 2020 and only applies to credit cards (and other retail revolving credit, such as store cards and catalogue credit), personal loans and overdrafts. It does not apply to other consumer credit products, such as motor finance, high-cost short-term credit, rent-to-own, pawnbroking and buy-now pay-later, which are covered by separate guidance which will, say the FCA, be updated soon.

Firms that do choose to increase their charges from this temporary level should give customers impacted by coronavirus an opportunity to seek extra support before any changes take effect.

Next steps

Overdraft charges are still higher than other mainstream borrowing products like credit cards and personal loans, so the FCA appears to be relying on these forms of credit to create more competitive pressure on overdraft charges as consumers respond to the pricing changes and greater transparency. The FCA warns, however, that consumers using overdrafts should think about whether that is the right product for them, as other products may well be cheaper or more suitable.

The FCA says that it will be keeping a close watch on how prices develop, particularly during and after the coronavirus pandemic. It requires firms to publish information on their overdraft pricing alongside the information they already publish about current account services. This information is due to be published in August for the first time and will cover the quarter from 1 April to 30 June 2020. The FCA will also carry out a post-implementation evaluation of its overall package of overdraft remedies around 12 months after the full package of remedies is implemented. So, its evaluation will start after April 2021.

Source: FCA News: FCA News: FCA gives update on banks’ overdraft pricing decisions and plans to support consumers - dated 1 July 2020.

UK high court inheritance disputes hit all-time high

(AF1, RO3)

More people are trying to claim a bigger share of estates in UK High Court disputes.  According to Ministry of Justice data, the High Court saw 188 cases issued in 2019 by individuals claiming to be entitled to a share, or a larger share, of a deceased’s estate.

Due to high profile cases reported in the press, and the fact that the average size of estates has increased over recent years, challenging the size of an inheritance is now more appealing.

Some of the most common factors which add to the rise in disputes are:

• The complexity of modern family structures – the increase in cohabitation, civil partnerships and multiple marriages, for example – is thought to be a contributing factor to the increase in claims. For instance, with multiple marriages, it’s suggested tensions may arise among the children the deceased has left behind, especially between children who are from different marriages.

Moreover, with the increase in cohabitation, a problem arises when one of the individuals pass away without leaving a Will. At this point, the intestacy rules apply which means that the cohabitee won’t benefit from the estate. It’s argued this problem will not be overcome until the intestacy rules are updated to meet the changes in the wider society.

• Property prices - it has also been suggested that the increase in property prices has contributed to the rise in claims being issued. This has the effect of increasing the value of the average net estate.
• Increased knowledge and accessibility to the law are also possible factors.
• Post-coronavirus rise - people have been facing unprecedented difficulties and some decisions may have been made in haste due to COVID-19. This means that there may be future increases in disputes due to decisions being made in a rush where they have not been thought through properly, for example, homemade Wills being created which could be challenged.

COVID-19 may add to the number of disputes that will arise in the future. Homemade Wills and hasty decisions taken may lead to disappointed family members challenging these in Court. Clients should review any measures put in place in haste as soon as possible to ensure their Will properly reflects their wishes and to determine whether or not trust planning should be considered.

Source: https://international-adviser.com/uk-high-court-inheritance-disputes-hit-all-time- high/#:~:text=According%20to%20Ministry%20of%20Justice,is%20an%20all%2Dtime%20high.

International Adviser: UK High Court inheritance disputes hit all-time high – dated 7 July 2020 

Switching to a more affordable mortgage – FCA calls for help from mortgage intermediaries 

(ER1, LP2, RO7)

The Financial Conduct Authority (FCA) says it wants to hear from mortgage intermediaries who will work with mortgage prisoners to help them identify and move to an active lender where this is possible, or signpost them to additional support such as debt advice.

The FCA has been working for some time to support mortgage prisoners.

The FCA’s previous research, published in January 2020, showed that around 170,000 borrowers, with mortgages in closed books or owned by unregulated entities, were up-to-date with payments and would be eligible to switch mortgages because of its new rules.

These rules allow lenders to assess affordability based on a borrower’s track record of making mortgage payments. 

Lenders may also offer other forms of flexibility that could help these borrowers to remortgage. The FCA previously estimated that around 14,000 borrowers should be both likely to meet firms’ commercial lending criteria and stand to make a meaningful saving.

Expected customer journey

Mortgage administrators are required to contact eligible customers by 1 December 2020. Typically, this will involve sending out letters that encourage customers to seek more information from the Money Advice Service provided by the Money and Pensions Service, so that customers will be able to assess any options available to them.

Customers who may be able to remortgage will then be able to access a list of mortgage intermediaries who will work with them and provide the support that they may need, or they can approach mortgage intermediaries not on this list.

The list will also allow lenders to see which intermediaries need to be kept up-to-date with any bespoke offerings for mortgage prisoners and any changes to their criteria or underwriting.

How to apply

Intermediaries who wish to apply to be on the list must:

1. be able to access mortgage options that represent the whole of the market;

2. be able to advise on later life options or have a relevant referral route;

3. be able to advise on debt consolidation or have a relevant referral route;

4. not charge a fee until an application is submitted to a lender (the fee may be added to the loan);

5. collect and share with the FCA relevant data on the support they have provided.

Where firms have a relevant referral route, this must be to another intermediary. This second intermediary must:

1. be able to access mortgage options that represent the whole of the later life or debt consolidation markets;

2. not charge a fee until an application is submitted to a lender (the fee may be added to the loan);

3. collect relevant data on the support they have provided, in conjunction with the original intermediary.

The FCA says that the data collected by intermediaries will help it to monitor outcomes for mortgage prisoners. The FCA is still finalising the details needed, but expects it, as a minimum, to cover:

• number of inbound calls from mortgage prisoners who have received communications about the modified affordability assessment from their administrator;

• number of mortgage prisoner cases where fact find is completed;

• number of applications submitted to lenders on behalf of mortgage prisoners; 

• number of mortgage prisoner applications that subsequently complete;

• number of mortgage prisoners signposted to other solutions, which may include debt advice.

Interested intermediaries are asked to submit an expression of interest confirming that they meet the five criteria. This should be sent to: IntermediarylistEOI@maps.org.uk by 6 August 2020.

Intermediaries will be notified by 11 August 2020 that they will appear on the alphabetical list of mortgage intermediaries held on the Money Advice Service website.

If interested intermediaries want to submit an expression of interest after 6 August 2020, they can also do so at any time by contacting: IntermediarylistEOI@maps.org.uk.

If intermediaries do not meet the above five criteria but would still like to be included in the list, they can contact the FCA via: MortgagePolicycorrespondence@fca.org.uk to discuss this further. 

More information on the above, what’s needed before submitting an expression of interest, and on the switching options that may be available for mortgage prisoners, can be found here.

Source: FCA News: Call for mortgage intermediaries willing to help mortgage prisoners– dated 9 July 2020

The latest UK tax gap figures

(AF1, AF2, JO3, RO3)

HMRC has confirmed in its latest statistical report that the tax gap for 2018/19 was £31 billion, down £4 billion from 2017/18.

Official statistics published by HMRC show that the difference between the tax due and that collected by HMRC – known as the tax gap – fell to a record low of 4.7% in 2018/19, from 5.6% in 2017/18. This means that HMRC collected more than 95% of all the tax due under the law in 2018/19. In total, HMRC collected £628 billion in tax revenue in 2018/19, including a record £34.1 billion through tackling tax avoidance, evasion and non-compliance.

Nevertheless, the current tax gap remains a weighty figure, estimated at £31 billion in 2018/19.

The biggest share of the total tax gap in 2018/19 came from income tax, National Insurance contributions and capital gains tax, at £12.1 billion, whilst corporation tax accounted for £4.4 billion of it. Inheritance tax only accounted for £500,000 of the total tax gap in 2018/19.

HMRC points out that the Self Assessment tax gap for wealthy taxpayers stood at £1.7 billion, and that the “wealthy tax gap” was the smallest proportion of the total tax gap by taxpayer group, making up 6% of the total tax gap in 2018/19. Taxpayers in Self Assessment are defined as wealthy by HMRC where their income is greater than £200,000 or they have assets in excess of £2 million.

It will remain to be seen what effect the current coronavirus crisis will have on the tax gap. HMRC notes that “…any impact of COVID-19 on the tax gap is likely to be first seen in the tax year 2020/21.”

However, there will no doubt be increased pressure from the Treasury to close the current tax gap further, and, particularly, to ensure that any future tax increases/new taxes (likely to be needed to help fund the rising Government debt) are actually collected.

You can read HMRC’s full report at: ‘Measuring tax gaps - 2020 edition’ published 9 July 2020.

HM Land Registry to accept e-signatures on deeds

(ER1, LP2, RO7) 

On 9 July there was an announcement that HM Land Registry “will soon start accepting witnessed electronic signatures on things like a deed transferring land”

The above message was posted in a blog from the HM Land Registry (HMLR) Deputy Chief Land Registrar, apparently in response to numerous requests they have  received from customers since the beginning of lockdown as to whether e-signatures would be accepted on a deed  instead of it being signed with a pen – a ‘wet-ink’ signature. As the blog pointed out, at a time when most of us are working from home, printing, posting and scanning can be a pain.

Although digital signatures in land transactions have been enabled since the Land Registration Act 2002 and were endorsed by the Law Commission last year, Land Registry has held back from accepting the technology, i.e. it has required wet ink signed documents up until now. This meant that hard copy documents had to be circulated for registrable dispositions (primarily transfers, registrable leases and charges). HMLR also recently started accepting scanned copies of a wet ink signature in limited circumstances.

For the new development no particular signing platform is preferred as long as HMLR's requirements are met. Essentially these are:

• The parties have agreed to use electronic signatures.

• All parties have a conveyancer acting for them.

• A specific process is followed when setting up the document for signature (including witness details being entered beforethe document is circulated for signature and the witness being physically present to witness the electronic signature).

Two factor authentication must be used when signing (through the use of a one-time password issued by the signature platform).

Draft practice guidance has been issued and comments from conveyancers were invited by 18 July.

HMLR's announcement also confirms future adoption of "qualified electronic signatures" - essentially signing without a witness, where the signatory's identity is verified electronically at the point of signing. This is considered more secure (particularly for individuals) but is likely to take longer to implement.

Undoubtedly, completion of house purchases could be significantly speeded-up with this development.  The move will be most welcome by the real estate market although it has to be said, there are some concerns amongst conveyancers about the risk of fraudulent transactions.

Source: HM Land Registry has announced it will soon accept e-signatures on deeds – dated 9 July 2020

Summer Statement 2020: Eat out to help out scheme

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

HMRC has provided further details, promotional material and registration information for the new Eat Out to Help Out Scheme, due to start on 3 August

The Eat Out to Help Out Scheme can be used to offer a 50% discount, up to a maximum of £10 per person, to diners for food or non-alcoholic drinks to eat or drink in, all day, every Monday, Tuesday and Wednesday from 3 to 31 August 2020.

It is expected that a registered business will offer the discount during the whole of their opening hours on all the eligible days that they are open and on all qualifying sales of food or drink.

If a customer purchases a meal with the intention of eating it but then takes it away and leaves the premises, the business can still apply the discount.

There is no limit to the number of times customers can use the offer during the period of the scheme. Customers cannot get a discount for someone who is not eating or drinking. Alcohol and service charges are excluded from the offer.

A business can register if their establishment:

• sells food for immediate consumption on the premises;
• provides its own dining area or shares a dining area with another establishment for eat-in meals;
• was registered as a food business with the relevant local authority on or before 7 July.

It’s not possible to register:

• an establishment that only offers takeaway food or drink;
• catering services for private functions;
• a hotel that provides room service only;
• dining services (such as packaged dinner cruises);
• mobile food vans or trailers.

Registration, which will be instant, requires the relevant Government Gateway user ID and password. A registration reference number will be supplied, which will be needed to claim the reimbursement from Government. Registrations will close on 31 August.

Businesses can download promotional materials to help them promote the scheme and let their customers know that they’re taking part.

The name, address and website URL of their establishment will be added to a list of participating establishments that will be available to the public. The list of registered establishments is not available yet.

Businesses that have more than one establishment are encouraged to register all establishments that are eligible to offer the scheme. Whilst it may be possible to add new establishments, businesses will have to contact HMRC again and this may delay the establishment being included in the scheme.

Record keeping

For each day that a business is using the scheme, they must keep records of the:

• total number of people who have used the scheme in their establishment;
• total value of transactions under the scheme;
• total amount of discounts they’ve given;

If they are using the scheme for more than one establishment, they must keep these records for each.

Making a claim

The service to claim reimbursements will be available on 7 August 2020 and will close on 30 September.

A business will be able to submit claims on a weekly basis, but must wait seven days from registration to make their first claim. HMRC will pay eligible claims within five working days.

HMRC will provide more guidance on how to make a claim when the registration service is open.

Taxation

The business will still need to pay VAT based on the full amount of their customers’ bills.

Any money the business receives through the scheme will be treated as taxable income.

Sources: HMRC/Department for Business, Energy & Industrial Strategy Collection: Financial support for businesses during coronavirus / HMRC Guidance: Register your establishment for the Eat Out to Help Out Scheme – dated 15 July 2020.

Managing access to cash: Update on FCA proposals

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8) 

The FCA has published draft guidance setting out its expectations for banks, building societies and credit unions when they are considering closing branches or ATMs, or converting a free to use ATM to pay to use.

The Financial Conduct Authority (FCA) draft guidance sets out its expectation that firms should carefully consider the impact of a planned closure or conversion on their customers’ everyday banking and cash access needs, including withdrawals, deposits and other cash-related branch services such as cheque cashing.

This guidance applies to FCA-regulated firms that operate physical sites like bank branches, building society branches, credit union offices or cashpoints.

This guidance also sets out the FCA’s expectation that firms consider providing, and put in place, alternative access arrangements where it is reasonable to do so, such as:

• sharing services with other providers;
• providing mobile banking hubs or cash delivery services;
• commissioning a free-to-use ATM;
• supporting customers to use digital channels. 

The FCA says that it has also made it clear that although closures or conversions are decisions for firms to take, firms should inform the FCA at an early stage of any plans to close or convert branches or ATMs, and continue to engage with the FCA through any process.

As part of developing proposals for decision, the FCA expect firms to conduct analysis of the needs of customers currently using the sites, the impact of the proposals, and alternatives that could be put in place if they implement the proposals. The FCA expects to be provided with a clear summary of the results of this analysis.

If the firm decides to progress with the proposals, the FCA expects firms to clearly communicate information about proposed closures or conversions to their customers no less than 12 weeks before a proposed closure or conversion would be implemented, as well as communicating existing alternative ways to access services or ways the firm proposes to make alternative access available.

The FCA says that it would also expect firms to keep their analysis of customer impact and potential alternatives under review during the period between the proposals being announced and implemented, and to keep them informed of changes to its plans. 

If the firm decides to implement some or all of the proposals, the FCA says that it expects firms to clearly communicate the alternatives that its customers can use, whether these are existing services or new alternatives the firm is making available.

The FCA says that it will continue to work closely with the Payment Systems Regulator (PSR) on access to cash, including the closures of ATMs and other cash access services as outlined in their joint statement of 16 June on the approach to access to cash.

Consultation on the FCA’s draft guidance closes on Thursday 30 July, after which the FCA says that, depending on the feedback it receives to this consultation, the above measures will start to come into force later in the year.

However, the 2020 Budget also included an announcement that the Government would “…bring forward legislation to protect access to cash and ensure that the UK’s cash infrastructure is sustainable in the long-term.”

It remains to be seen if any of this will resolve issues around access to cash and the ongoing availability of access to free-to-use ATMs for UK consumers.

Source: FCA Press Release dated 16 July 2020

Financial Services and Brexit - FCA confirms MoUs will apply from 1 January

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8) 

The FCA has confirmed that Memoranda of Understanding (MoUs) with the European Securities and Markets Authority (ESMA) and EU regulators, which were intended to apply in the event of a no-deal Brexit, will now come into effect at the end of the transition period.

On 1 February 2019, the Financial Conduct Authority (FCA) announced the agreement of MoUs with ESMA and EU regulators, covering cooperation and exchange of information, in the event the UK left the EU without a withdrawal agreement.

The MoUs are:

1. a multilateral MoU with EU and EEA National Competent Authorities (NCAs) covering supervisory cooperation, enforcement and information exchange; and
2. an MoU with the European Securities and Markets Authority (ESMA) covering supervision of Credit Rating Agencies and Trade Repositories.

These MoUs support cross border supervision of firms and allow the FCA to share information with their EU counterparts.

Under EU legislation it is possible for fund managers to delegate portfolio management services to a third party in another country, including countries outside the EU. In relation to funds and managers authorised under the relevant EU legislation, there are requirements for cooperation agreements between the supervisory authorities in the relevant EU member state and the non-EU country concerned.

The MoUs also include provisions to allow cross-border delegation of portfolio management between the UK and the EEA. This was intended to provide the asset management industry with certainty that portfolio delegation services between themselves and clients in the EEA could continue in any exit scenario.

As the UK left the EU with a withdrawal agreement in place on 31 January and entered into a transition period these MoUs were not required to take effect, as EU law continues to apply in the transition period.

However, the FCA, ESMA, and EU national securities regulators, have now confirmed that these MoUs remain relevant and appropriate to ensure continued good cooperation and exchange of information. Therefore, the MoUs will come into effect at the end of the transition period, which is currently set to expire on 31 December 2020.

The FCA’s Brexit pages provide more information.