1 Legislative framework

1.1 Which legislative provisions govern private client matters in your jurisdiction?

  • The Trustee Act 1925 and the Trustee Act 2000 govern trusts in England and Wales.
  • The Wills Act 1837 and the Wills Act 1963 govern wills in England and Wales.
  • The Inheritance (Provision for Family and Dependants) Act 1975 allows certain people to make a claim from a deceased person's estate.
  • The Mental Capacity Act 2005 applies to everyone involved in the care, treatment and support of people aged 16 and over living in England and Wales who are unable to make all or some decisions for themselves.
  • The principal legislation for inheritance tax is the Inheritance Act 1984.
  • The principal legislation for capital gains tax is the Taxation of Chargeable Gains Act 1992.
  • There are several acts covering the taxation of income, including the Income Tax Trading and Other Income Act 2005 and the Income Tax Act 2007.
  • The other taxes covered in this overview are found across a number of acts in the United Kingdom's extensive body of tax legislation.

1.2 Do any special regimes apply to specific individuals (eg, foreign nationals; temporary residents)?

Generally, an individual's exposure to income tax and capital gains tax depends on his or her residence and domicile status. The United Kingdom has a generous taxation regime available to non-UK domiciled individuals, known as the remittance basis. The remittance basis does not generally apply automatically; but when claimed, it enables an individual to shelter his or her foreign income and gains from UK tax, unless or until they are ‘remitted' to the United Kingdom. The remittance basis can be claimed without a charge until an individual has been resident in seven out of the previous nine tax years, when an annual £30,000 charge applies. The annual charge increases to £60,000 for non-UK domiciled individuals who have been resident in the United Kingdom for at least 12 of the previous 14 tax years. An individual who is deemed domiciled (by being resident in 15 out of the 20 previous tax years, or being a ‘formerly domiciled resident') or who becomes UK domiciled under common law cannot claim the remittance basis.

Foreign domiciliaries (who are not deemed domiciled) are also subject to a more favourable inheritance tax regime, as their exposure is generally limited to UK situs assets or foreign assets that derive their value from UK residential property, such as shares in a non-UK holding company.

The United Kingdom does not tax individuals based on their citizenship.

Special rules apply to ‘temporary non-residents' – broadly, individuals who are non-UK resident for a period of five years or less – which can affect their exposure to income tax and capital gains tax.

1.3 Which bilateral, multilateral and supranational instruments in effect in your jurisdiction are of relevance in the private client sphere?

There are numerous bilateral, multilateral and supranational instruments in effect in the United Kingdom which directly impact or touch upon the private client sphere. In fact, the United Kingdom has over 130 double tax agreements with other countries. As a general rule, these agreements do not cover UK inheritance tax (or equivalent foreign death taxes); however, some do (eg, the estate tax treaty with the United States), so it is always important to check the provisions of each treaty carefully.

Other important agreements to which the United Kingdom adheres and which affect private clients include:

  • the Foreign Account Tax Compliance Act;
  • the Common Reporting Standard;
  • the Fifth Anti-Money Laundering Directive; and
  • the Organisation for Economic Co-operation and Development rules in relation to tax transparency.

Even agreements which the United Kingdom has not ratified or signed up to can affect the private client sphere in that jurisdiction. For example, the EU Succession Regulation (Brussels IV) can sometimes have a significant bearing on the succession of assets within the United Kingdom, depending on the circumstances (see question 3.1).

Importantly, many of the treaties that govern UK laws now contain explicit provisions in relation to the enforcement of those treaties – specifically, in relation to where enforcement can be brought; and may also include broader wording relating, for instance, to the exchange of information.

2 Taxation

2.1 On what basis are individuals subject to tax in your jurisdiction (eg, residence/domicile/nationality)? How is this determined?

An individual's UK tax exposure is determined by his or her residence and domicile status. An individual's residence is determined under the statutory residence test, based on the number of days that he or she spends in the United Kingdom and his or her ties to the United Kingdom. There are three limbs to be considered, which provide that an individual may be:

  • conclusively non-UK resident;
  • conclusively UK resident; or
  • subject to the ‘sufficient ties' test.

In broad terms, a UK resident individual will be subject to UK tax on his or her worldwide income and gains (the ‘arising basis'), unless he or she is non-UK domiciled and the remittance basis of taxation applies. Under the remittance basis, foreign income and gains are generally subject to UK tax only if they are ‘remitted' to the United Kingdom. A ‘remittance' is widely defined and includes the individual (or a ‘relevant person', such as a close relative) bringing money into, or using money in, the United Kingdom.

An individual's domicile status affects his or her exposure to inheritance tax and his or her ability to claim the remittance basis of taxation. Generally, under English law, an individual is domiciled in the jurisdiction in which he or she has his or her permanent home. There are three types of domicile under common law: origin, dependence and choice. Since 6 April 2017, individuals who have been resident for 15 out of 20 of the previous tax years will be deemed domiciled for all UK tax purposes, so will be unable to claim the remittance basis. In addition, special rules apply to formerly domiciled residents.

2.2 When does the personal tax year start and end in your jurisdiction?

The UK personal tax year runs from 6 April to the following 5 April.

2.3 With regard to income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Various types of income are subject to income tax, including:

  • employment income;
  • self-employment or trading income;
  • investment income; and
  • rental income.

Investment income is considered separately in question 2.6.

Income tax is charged at different rates, depending on the individual's tax profile. The following rates in question 2 apply for the tax year 2021/22. If the personal allowance is available, the first £12,570 of income is charged at a zero rate. Income between £12,571 and £50,270 is charged at the basic rate of 20%. Income between £50,271 and £150,000 is charged at 40%; and income over £150,000 is charged at the additional rate of 45%.

(b) How is the taxable base determined?

The calculation of the taxable income depends on its nature.

An employee is generally taxable on all remuneration and benefits received in the relevant tax year, including benefits in kind such as health insurance and company cars. A company's contributions to an employee's UK-registered pension scheme are generally not taxable, but the annual allowance applies. Employee pension contributions are also not generally taxable, but detailed rules apply based on the employee's total income and the annual allowance. Company directors are also subject to income tax on their total salaries, fees and benefits in kind. UK resident remittance basis users who have a UK employment and one or more overseas employers will generally be taxable on the arising basis on all employment income, unless certain conditions are met.

Income tax is charged on the net profits from rental property after the deduction of qualifying expenses which were incurred wholly and exclusively for the property rental business. The types of expenses that can be deducted include:

  • general maintenance and repairs to the property (provided that they are not improvements);
  • utility costs;
  • insurance;
  • letting agent fees and management fees;
  • accountants' fees; and
  • ground rents.

Mortgage interest used to be fully deductible in respect of a mortgage used to acquire a residential property forming part of a rental business; but qualifying financing costs are now limited to a basic rate tax reduction.

Trading income is subject to separate rules as to deductions.

(c) What are the relevant tax return requirements?

The United Kingdom operates a self-assessment tax system. Individuals must submit a tax return by 31 January of the year following the end of the relevant tax year if necessary. Most employees pay tax on their earnings through the Pay as You Earn (PAYE) scheme, which requires an employer to deduct tax at source. If an individual only has employment earnings and benefits in kind fully taxed under PAYE, then there is not usually a requirement to submit a tax return. If the individual has other types of income outside of PAYE, is claiming tax relief for pensions contributions or charity donations, or claiming other reliefs or deductions, then he or she will usually need to complete a tax return.

Individuals who are a partner in a partnership or who earn over £100,000 in the relevant tax year are required to submit a tax return. Remittance basis users must usually claim the remittance basis in their tax return in order for it to apply.

Certain self-employed individuals and remittance basis users subject to the annual remittance basis charge (where it applies) must make ‘payments on account' in respect of their anticipated tax bill. Two payments are required, generally by 31 January and 31 July, unless an individual's last self-assessment tax bill was less than £1,000 or more than 80% of the tax owed has been deducted at source (eg, through PAYE).

(d) What exemptions, deductions and other forms of relief are available?

Most individuals benefit from an annual tax-free personal allowance, which is £12,570 in the 2021/22 tax year. The personal allowance is not available to individuals who claim the remittance basis. It goes down by £1 for every £2 that an individual's adjusted net income is above £100,000. This means that the allowance is zero if an individual's income is £125,140 or over.

Income tax relief is available on pension contributions. The rules are complex, but most individuals benefit from the standard annual allowance of £40,000. Income tax relief is generally available on pension contributions within the annual allowance, provided that they do not exceed the individual's annual earnings. The annual allowance is reduced if an individual's income exceeds certain limits. For every £2 of ‘adjusted income' over £240,000, an individual's annual allowance is reduced by £1. The minimum annual allowance is £4,000.

Income tax relief is also available on an individual's qualifying charity donations through Gift Aid. The basic rate of income tax paid on the donation can be reclaimed by the charity; and if the individual is a higher or additional rate taxpayer, he or she can also claim relief in excess of the basic rate amount reclaimed by the charity.

2.4 With regard to capital gains: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

UK resident individuals are subject to capital gains tax on gains realised on the disposal of their worldwide assets. A UK resident foreign domiciliary who claims the remittance basis of taxation in respect of the year of disposal is generally subject to capital gains tax on the disposal of non-UK situs assets only if the proceeds are remitted to the United Kingdom.

Non-UK residents are not generally subject to capital gains tax, but there are some exceptions relating to:

  • UK land, including the disposal of commercial or residential property; and
  • ‘property-rich companies', which include companies that derive 75% or more of their gross asset value from UK land.

Special rules apply to ‘temporary non-residents', which ensure that certain types of gains arising to, or remitted by, an individual who is temporarily non-resident in the United Kingdom will be taxable on their return. Generally, the rules apply where a period of non-residence is five years or less, subject to certain other conditions.

The rate of capital gains tax is generally 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. Gains on residential property and carried interest are subject to a higher rate of capital gains tax, which is 18% for basic rate taxpayers and 28% for higher and additional rate taxpayers.

(b) How is the taxable base determined?

For sales on arm's-length terms, the gain realised is generally calculated by deducting the transferor's acquisition cost and allowable deductions from the consideration received for the sale. If the transfer is a gift or sale at an undervalue to a ‘connected person' (including any relative of the transferor), the transfer will be deemed to take place at the market value of the asset on the date of the transfer. The gain is generally calculated by deducting from this the transferor's acquisition cost and allowable deductions.

Special rules apply to transfers between spouses and civil partners. Generally, transfers between them will not be subject to capital gains tax, as they will be treated as taking place for no gain and no loss. On a subsequent disposal by the transferee spouse, the base cost will be the value of the asset at the time it was originally acquired by the transferor spouse.

Allowable deductions include:

  • incidental costs of acquiring an asset;
  • costs spent enhancing the asset;
  • costs spent establishing, preserving or defending title to or rights over the asset; and
  • incidental costs of disposal of the asset.

Assets comprised in an individual's estate at the date of death are subject to an uplift to their market value as at that date. No capital gains tax is payable and the transferee will receive the asset with the benefit of the uplifted base cost. This includes assets transferred to a surviving spouse on death.

(c) What are the relevant tax return requirements?

Taxable gains should generally be included in the individual's tax return in the normal way, to be submitted by 31 January following the tax year of disposal.

Where full relief applies on the disposal of an individual's principal or sole residence, it is not necessary to file a tax return. However, if only partial relief applies, this must be claimed.

Since 6 April 2020, Her Majesty's Revenue and Customs (HMRC) has introduced an online service for reporting gains arising on the direct or indirect disposal of UK land, called the ‘capital gains tax on UK property' service. UK residents must use the service to report, and pay any tax due on, gains arising on UK property disposals within 30 days of the completion date. Non-UK residents must use the service to report any disposals within 30 days of completion, whether or not a gain arises.

(d) What exemptions, deductions and other forms of relief are available?

Several forms of relief are available for capital gains tax purposes. Full relief from capital gains tax is generally available on the disposal of an individual's only or main residence, known as private residence relief, subject to certain conditions being met, including in relation to the area of gardens or grounds eligible for relief.

Rollover relief is available to individuals disposing of assets used for the purposes of a trade if the proceeds are reinvested in other business assets, subject to certain conditions. If the relief applies, any gain is deferred until a subsequent disposal, as the base cost of the replacement asset is treated as the base cost of the original asset.

Holdover relief is another relief that enables any gain realised on the disposal of qualifying assets to be deferred until a subsequent disposal by the new owner. Disposals to which the relief may be available, subject to certain conditions being met, include lifetime gifts of business assets and chargeable lifetime transfers on which inheritance tax is immediately chargeable.

Business asset disposal relief, previously known as entrepreneurs' relief, reduces the rate of capital gains tax payable to 10% on all gains on qualifying assets, including interests in privately owned businesses that have been held for at least two years, subject to meeting certain other qualifying conditions.

Most individuals benefit from an annual exempt amount up to which gains are tax free, which is £12,300 in the 2021/22 tax year. The annual exempt amount is not available to remittance basis users.

2.5 With regard to inheritances: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Inheritance tax (IHT) is charged at up to 40% on the death of a UK domiciliary (including an individual deemed domiciled) on his or her worldwide estate. On the death of a non-UK domiciliary, IHT is charged on his or her UK estate, including ‘UK residential property interests' (eg, shares that derive their value from UK residential property, and certain loans and collateral relating to UK residential property held via non-UK structures). Generally, non-UK assets owned beneficially by a foreign domiciliary are outside the scope of IHT and are known as ‘excluded property'.

The United Kingdom does not operate a separate gift tax regime, but certain lifetime transfers of assets within a donor's taxable estate may be subject to IHT. Lifetime transfers are either:

  • chargeable lifetime transfers, such as transfers to a trust or to a company not wholly owned by the donor; or
  • potentially exempt transfers, such as outright transfers to another individual.

A chargeable lifetime transfer is subject to IHT at 20% above the individual's nil rate band, rising to 40% if the donor does not survive seven years from the date of the transfer. A potentially exempt transfer is exempt from IHT if the donor survives seven years from the date of the gift, but otherwise the value above the donor's nil rate band is subject to IHT at up to 40%. Taper relief applies to reduce the rate of IHT by 20% for every year the donor survives from the date of the gift, starting at the third anniversary.

(b) How is the taxable base determined?

For IHT purposes, transfers (both on death and inter vivos) are treated as taking place at their market value on the date of the transfer.

For the valuation of listed shares and securities, there are two possible valuation methods. The ‘quarter up' method involves adding the lowest recorded price of the share on the date of transfer to one-quarter of the lowest and highest recorded prices. Alternatively, the closing price of the share on the date of death can be used.

The value of joint property is generally equal to the deceased's share of the whole value of an asset. However, it is commonly accepted that a discount of up to around 15% can be applied to the value of jointly held property or land.

Generally, liabilities secured against an asset can reduce its value for IHT purposes. However, since 2013, there are certain exceptions to this relating to three categories of liabilities:

  • liabilities used to acquire ‘excluded property';
  • liabilities used to acquire assets that are subject to relief from IHT (eg, those qualifying for business property relief or agricultural property relief); and
  • liabilities that are not repaid from the estate following death.

(c) What are the relevant tax return requirements?

Form IHT400 must be submitted to HMRC with details of the deceased's taxable estate within 12 months of the end of the month of death. Any IHT due must be paid in most cases within six months of the end of the month in which the deceased died.

In respect of periodic and exit charges of trusts under the relevant property regime – a special IHT regime that applies to certain trusts – Form IHT100 must be submitted to HMRC within six months of the end of the month in which the charge arises.

Form IHT100 must usually be submitted to HMRC within one year of the date of a chargeable lifetime transfer.

(d) What exemptions, deductions and other forms of relief are available?

Each individual has a nil rate band, which is currently £325,000, up to which transfers during lifetime and on death are charged at a 0% rate of IHT. If the nil rate band is used during the individual's lifetime, it will not be available on death. An additional residence nil rate band of £175,000 is available to certain estates when a ‘qualifying residential interest' is ‘closely inherited'.

Each individual also has an annual exempt amount of £3,000, which can be applied to lifetime transfers. Certain other gifts are exempt, such as gifts out of surplus income if various conditions are met.

Spouses and civil partners benefit from the ‘spouse exemption' on transfers between them, which generally provides full relief from IHT. For transfers from a UK domiciled spouse to a non-UK domiciled transferee, the spouse exemption is limited to the value of the current nil rate band. The non-UK domiciled spouse can make an election to be treated as UK domiciled for IHT purposes in order to qualify for the full spouse exemption.

Business property relief and agricultural relief are available to transfers of certain qualifying assets at either 50% or 100%, subject to various conditions being met.

Transfers to a qualifying charity are exempt from IHT, whether made during lifetime or on death. In addition, the estate of an individual who leaves at least 10% of the value of his or her estate to qualifying charities will benefit from a reduced rate of IHT of 36% on the remaining estate.

2.6 With regard to investment income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

An annual dividend allowance is potentially available to individuals, so that up to a maximum of £2,000 of dividend income received in the relevant tax year is not subject to income tax. The tax rate applicable in excess of the allowance depends on the individual's marginal tax rate:

  • Basic rate taxpayers are subject to a rate of 7.5%;
  • Higher rate taxpayers are subject to a rate of 32.5%; and
  • Additional rate taxpayers are subject to a rate of 38.1%.

For other types of investment income, such as bank interest, a personal savings allowance may apply. Above this, the income is taxable at the individual's normal marginal tax rate of:

  • 20% for basic rate taxpayers;
  • 40% for higher rate taxpayers; and
  • 45% for additional rate taxpayers.

(b) How is the taxable base determined?

UK banks and buildings societies previously deducted basic rate tax from any interest income paid by them. Such interest is now paid gross.

(c) What are the relevant tax return requirements?

Any dividends received within the annual dividend allowance, or an individual's personal allowance, need not be reported to HMRC. If tax is payable on up to £10,000 in dividends, HMRC should be notified either in the individual's tax return or by contacting it to request that the individual's tax code be amended so that the dividends are taxed under PAYE.

To pay tax on dividends over £10,000, the individual must submit an annual tax return and register for self-assessment by 5 October following the tax year in which the dividends were received, if they are not already registered.

Interest income should also be reported in the individual's tax return if it exceeds £10,000 in the relevant tax year; but otherwise, taxable income should be reported to HMRC so that the individual's tax code can be amended.

(d) What exemptions, deductions and other forms of relief are available?

An annual tax-free personal savings allowance is potentially available, depending on the individual's marginal tax rate. The allowance is:

  • £1,000 for basic rate taxpayers;
  • £500 for higher rate taxpayers; and
  • £0 for additional rate taxpayers.

In addition, some individuals can benefit from up to £5,000 of interest that is not taxable, known as a starting rate for savings. Whether it is available depends on the amount of the individual's other income. An individual who receives other income of £17,570 or more is not eligible for the starting rate for savings. If an individual's other income is less that £17,570, the maximum starting rate for savings of £5,000 is reduced by £1 for every £1 of other income above the individual's personal allowance.

2.7 With regard to real estate: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Stamp duty land tax (SDLT) is charged to the purchaser on land transactions involving a chargeable interest in England and Northern Ireland. It can also apply to leases in certain circumstances. Generally, gifts of land are not subject to SDLT, provided that there is no mortgage. The rate of SDLT depends on whether the land is residential or commercial, its value and the profile of purchaser.

For residential property, the normal rates are banded based on the property's value. Reduced rates apply for individuals until 30 September 2021. These are:

  • zero up to £500,000;
  • 5% from £500,001 to £925,000;
  • 10% from £925,001 up to £1.5 million; and
  • 12% on the value above £1.5 million.

In addition, two potential surcharges apply. An additional rate of 3% is added to each band where a purchaser is buying an additional residential property which is not replacing his or her main residence. An additional 2% surcharge applies to each band where a purchaser is a ‘non-resident' (as defined in the SDLT legislation) on the effective date of the transaction. Companies are subject to different rates.

SDLT also applies to transactions involving commercial property, but at the maximum rate of 5% above £250,000.

An annual tax on enveloped dwellings (ATED) applies to companies that own residential properties valued at £500,000 or more. The chargeable period is 1 April–31 March and the annual charge ranges from:

  • £3,700 for properties valued at more than £500,000 up to £1 million; and
  • £237,400 for properties valued at more than £20 million.

(b) How is the taxable base determined?

SDLT is payable on the chargeable consideration for a transaction in which a chargeable interest is acquired. The ‘chargeable consideration' is defined as any money or money's worth given for the land in question, directly or indirectly, by the purchaser or a person connected with them. The term ‘money's worth' includes consideration in kind, the value of which is taken to be its market value at the effective date of the transaction. This includes consideration paid to another person other than the vendor.

Special rules apply to deem the chargeable consideration for a transaction to be the market value of the land, in certain circumstances, such as where the purchaser is a company connected to the vendor.

If consideration is provided for more than one transaction, or if only part of the consideration for a transaction is chargeable consideration, it is apportioned on a just and reasonable basis.

The ATED charge payable depends on the market value of the property at the relevant valuation date. The valuation date depends on when the property was acquired. The initial valuation date is the date that the property was acquired, and there are fixed revaluation dates at five-year intervals, with the latest revaluation date being 1 April 2017. For any chargeable period, the value of the property is the later of its initial valuation date and the revaluation date. If a property valuation falls within 10% of a banding threshold, it is possible to apply to HMRC for a pre-return banding check.

(c) What are the relevant tax return requirements?

A purchaser must submit an SDLT return to HMRC within 14 days of the effective date of a notifiable transaction. Conveyancers often deal with these requirements as part of the purchase.

Companies must file an ATED return by 30 April if they are within the scope of ATED on 1 April or within 30 days of acquisition if a property comes within the scope of ATED after 1 April.

(d) What exemptions, deductions and other forms of relief are available?

Various SDLT reliefs are available. For first-time purchasers buying a property where the purchase price is no more than £500,000, a nil rate of SDLT applies to the first £300,000 and 5% on the remainder up to £500,000. Multiple dwellings relief can be claimed when more than one dwelling is purchased in a transaction or a number of linked transactions. The total SDLT payable is calculated by dividing the total amount paid for the properties by the number of dwellings, working out the tax due on that figure and multiplying it by the number of dwellings. Due to the banded nature of SDLT, this can be a very valuable relief. The minimum rate of tax under the relief is 1% of the amount paid for the dwellings. SDLT is not generally payable when property is transferred because of divorce.

Various reliefs from ATED are available, including if the property:

  • is let to a third party on commercial terms and is not occupied (or available for occupation) by anyone connected with the owner;
  • is open to the public for at least 28 days a year; and
  • is being developed for resale by a property developer.

Relief does not apply automatically and must be claimed in an ATED relief declaration return.

There are also various exemptions from ATED, which apply automatically. These are available for charitable companies using a dwelling for charitable purposes and certain public bodies.

2.8 With regard to any other direct taxes levied in your jurisdiction: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What are they and what are the applicable rates?

Corporation tax is currently levied at 19% on the profits and gains of UK resident companies, or profits and gains attributable to UK permanent establishments of non-UK resident companies. From April 2023, a 25% rate will apply to profits exceeding £250,000, while the 19% rate will stay in place for profits below £50,000. A marginal relief will apply to businesses with profits between £50,000 and £250,000.

A 25% diverted profits tax (DPT) may also apply to such companies if they make non-arm's-length payments to related parties where:

  • the resulting increase in the related party's tax liability is less than 80% matched to the resulting reduction in the company's tax liability; and
  • the financial benefit of that tax reduction outweighs the non-tax benefits of the transaction.

DPT may also apply to non-UK resident companies that are found to have an ‘avoided' permanent establishment in the United Kingdom if certain criteria are met. From April 2023, the DPT rate will increase to 31%.

(b) How is the taxable base determined?

Corporation tax is imposed on all income and chargeable gains accruing to a company in a given accounting period. The starting point for calculating a company's liability to corporation tax is the profit before tax in the accounts, with:

  • add-backs for non-deductible items such as accounts depreciation and client entertainment; and
  • deductions for reliefs such as capital allowances.

This captures a company's trading income profits. Chargeable gains and other forms of (non-trading) income, such as interest income from loan relationships, are added separately.

(c) What are the relevant tax return requirements?

Corporation tax returns are generally filed within one year of the accounting period end. Corporation tax must be paid within nine months of the end of the accounting period, unless the company is required to pay its corporation tax in quarterly instalments.

(d) What exemptions, deductions and other forms of relief are available?

Expenses of a revenue nature are generally deductible from trading income for corporation tax purposes. Expenses of capital nature are not deductible, although a company may claim capital allowances in respect of certain types of capital expenditure for relief against trading income. Current year or brought-forward trading losses are commonly used to relieve trading profits. Pre-1 April 2017 brought-forward losses may be used to shelter the first £5 million of same-trade profits and thereafter against 50% of those same-trade profits; while post-1 April 2017 brought-forward losses may be used to shelter the first £5 million of total profits and thereafter against 50% of the excess. Group relief may also be claimed from other UK resident group members with trading losses to surrender.

Where gains are concerned, the substantial shareholding exemption may be available to shelter any gain realised by a UK resident company on a sale of shares if:

  • it has held a substantial shareholding (ie, 10% of the ordinary share capital) in an investee company for at least 12 months in the last six years; and
  • the investee company is either a trading company or holding company of a trading group or sub-group throughout the latest 12-month period during which the company held a substantial shareholding, and ending with the disposal date.

Assets may also be transferred between UK resident group members on a no gain, no loss basis.

2.9 With regard to any indirect taxes levied in your jurisdiction: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What are they and what are the applicable rates?

The most common indirect tax is value added tax (VAT), which applies to most goods and services supplied in the United Kingdom at various rates. The standard rate is 20%, which applies to most goods and services. A reduced rate of 5% applies to certain other goods and services, such as children's car seats and home energy; and a zero rate of VAT applies to zero-rated goods and services such as most food and children's clothes.

Other indirect taxes include:

  • aggregates levy;
  • air passenger duty;
  • alcohol duties;
  • betting, gaming and lottery duties;
  • customs duties;
  • climate change levy and carbon price floor;
  • hydrocarbon oils duties;
  • insurance premium tax;
  • landfill tax;
  • soft drinks industry levy; and
  • tobacco duty.

(b) How is the taxable base determined?

VAT, if applicable, is imposed on any consideration for goods or services supplied in the course of a business. The scope of VAT is determined according to ‘place of supply' rules. If the place of supply is in the United Kingdom, the goods or services being supplied will attract 20% VAT (output tax) on the consideration provided for them, unless a reduced rate, zero-rate or exemption applies. VAT incurred by a business on any costs attributable to VAT-able supplies made by that business, including reduced rate and zero-rate supplies, may be recovered as input tax. Special rules apply to imports into, and exports from, the United Kingdom, as well as cross-border supplies of services.

(c) What are the relevant tax return requirements?

VAT returns are generally submitted quarterly, though they may in some circumstances be submitted monthly. Input tax is claimed on same return as the output tax declared. As such, the net VAT due to HMRC effectively represents a tax on the ‘value add' element.

(d) What exemptions, deductions and other forms of relief are available?

See questions 2.9(a) and (b).

3 Succession

3.1 What laws govern succession in your jurisdiction? Can succession be governed by the laws of another jurisdiction?

In England and Wales, succession and intestacy are governed by various laws, including:

  • the Wills Act 1837;
  • the Administration of Estates Act 1925;
  • the Intestates' Estates Act 1952; and
  • the Inheritance and Trustees' Powers Act 2014.

These laws provide that individuals who die domiciled in England and Wales will have the freedom of testamentary disposition and may leave their assets to whomever they wish.

Succession can be governed by the laws of another jurisdiction only if the individual died domiciled in that jurisdiction under general law (as opposed to deemed domicile for tax purposes). In addition, under English law, succession to a person's immovable property is governed by the law of the country where it is located. However, if an individual dies owning assets in an EU member state that has adopted Brussels IV, and has not made an election for the law of his or her nationality to apply to his or her estate, then the law that will apply to his or her estate will be the law of the country in which he or she is habitually resident, unless it can be shown that he or she was "manifestly more closely connected with another country" on death. This may give rise to disputes if different beneficiaries under a will are seeking different succession laws to apply.

3.2 How is any conflict of laws resolved?

If a conflict of laws arises, according to England and Wales, a detailed analysis of how the ‘thing' should be classified (ie, movable or immovable), where the ‘thing' actually is and the domicile of the owner of the ‘thing' must be undertaken. A ‘thing' could be real property or, for example, a chose in action. The answers to these questions are important, as it is usually the law of the country where the ‘thing' is situated (lex situs), which determines how the ‘thing' should be classified. These concepts are relevant, particularly in matters of succession.

3.3 Do rules of forced heirship apply in your jurisdiction?

Forced heirship rules do not apply in England and Wales. However, where an individual dies domiciled in England and Wales, an heir may bring a claim under the Inheritance (Provision for Family and Dependents) Act 1975 for financial provision from the deceased's estate if he or she does not consider that reasonable financial provision has been made for him or her, under either the terms of the deceased's will or the intestacy rules.

3.4 Do the rules of succession rules apply if the deceased is intestate?

When a person dies intestate, the rules of intestacy decide how the estate will be shared out, even if the deceased left a will, albeit an invalid one. The intestacy rules apply:

  • equally to both spouses and civil partners (although not to ‘common law' couples – those couples not married or in a civil partnership); and
  • only to property that the deceased could have left by will.

The order of entitlement depends on the value of the intestate's estate and which members of the intestate's family survive the intestate.

For example, if a spouse/civil partner and two children are alive at the date of death, then the spouse/civil partner will inherit the first £270,000. The remainder will be divided into two – half for the spouse/civil partner outright and half to be shared equally between the children outright. If an individual dies without a spouse/civil partner or any children, then the deceased's parents will inherit; otherwise the deceased's siblings and so on in accordance with the rules.

3.5 Can the rules of succession be challenged? If so, how?

The rules of succession can be challenged by bringing a claim under the Inheritance (Provision for Family and Dependants) Act 1975. A claim under this act allows a common law spouse, cohabitee, child or dependant to bring a claim for financial provision, provided that the deceased was domiciled in England and Wales under the general law when he or she died.

There is an important distinction, however, between the type of claim that can be brought under the act and the category the individual falls in. For spouses and civil partners, financial provision is not limited to what is required for maintenance; whereas for all other applicants, provision must be reasonable in all circumstances of the case and is strictly limited to maintenance.

In determining whether reasonable financial provision has been made under a will, the court will look at a number of factors in considering whether to make an order. These include:

  • the financial needs and resources of the applicant and any other applicant now and in the future;
  • the financial needs and resources of any beneficiary of the estate;
  • obligations and responsibilities that the deceased had towards any applicant or any beneficiary; and
  • the size and nature of the estate.

The court will also consider other factors depending on the category into which the applicant falls – for example, for a spouse or civil partner, the court will consider:

  • age;
  • duration of relationship;
  • contribution to the welfare of the family; and
  • other relevant case-specific considerations.

4 Wills and probate

4.1 What laws govern wills in your jurisdiction? Can a will be governed by the laws of another jurisdiction?

Under Section 9 of the Wills Act 1837, a will is generally valid if:

  • it is in writing (signed by the testator or by someone else in his or her presence and by his or her direction);
  • the testator intended his or her signature to create a valid will; and
  • the testator signs in the presence of two (or more) witnesses who also sign in the presence of the testator.

As a result of the global pandemic, this clause has been modified to include a ‘virtual presence' (eg, by videoconference); however, this is not a permanent change and is currently in effect only until 31 January 2022.

Where an international element is present, a will may also be valid under Section 1 of the Wills Act 1963. This international element could relate to the testator, the assets of the estate or where the will is signed outside of England and Wales. This section states that: "A will shall be treated as properly executed if its execution conformed to the internal law in force in the territory where it was executed, or in the territory where, at the time of its execution or of the testator's death, he was domiciled or had his habitual residence, or in a state of which, at either of those times, he was a national."

All or part of a will prepared in the United Kingdom may become substantively invalid if, for example, it attempts to dispose of assets which the laws of another jurisdiction govern (eg, due to the existence of marital property or forced heirship regimes).

4.2 How is any conflict of laws resolved?

The will need only be valid under one of the possible jurisdictions permitted under either the 1837 or 1963 act, so any conflict is resolved in favour of validity.

Conflict as to whether a ‘thing' is governed by the succession laws of the situs of the asset or the law of the deceased domicile is determined by the classification of the asset as movable or immovable. It is usually the law of the country where the ‘thing' is situated (lex situs) which determines how the ‘thing' should be classified (ie, as movable or immovable).

4.3 Are foreign wills recognised in your jurisdiction? If so, what process is followed in this regard?

Foreign wills are recognised in England and Wales. The general process followed for domestic wills in applying for probate is also applicable to foreign wills – namely, that the personal representatives named in the will have authority to apply directly for the grant of representation, as their authority stems from the will itself. In the case of a foreign will, a notarised translation of the will into English (or Welsh, as the case may be) must be provided. It will also be likely that an affidavit of foreign law from the jurisdiction concerned will be required to confirm that the will is valid within that territory and/or outline the devolution of assets, according to the law of that foreign jurisdiction.

4.4 Beyond issues of succession discussed in question 3, are there any other limitations to testamentary freedom?

Complete testamentary freedom is encouraged and promoted. Please refer to questions 3.5 and 4.8 for more on the impact of the Inheritance (Provision for Family and Dependants) Act 1975 on testamentary freedom.

4.5 What formal requirements must be observed when drafting a will?

The only formal requirement that must be observed when drafting a will is that it be in writing. A will can be drafted in any form and using whatever wording the testator chooses, as long as he or she intends to make the will. See question 4.1 for the formal requirements for signing a will to ensure that it is valid.

4.6 What best practices should be observed when drafting a will to ensure its validity?

When drafting a will, it is best practice to take instructions from the testator on his or her own, in order to assess his or her testamentary capacity to make a will. This is important for all individuals, not only those who are elderly or infirm. The test is found in Banks v Goodfellow (1870) LR 5 QB 459, which requires the testator to:

  • have a certain level of understanding in relation to his or her assets;
  • comprehend the effect of making a will; and
  • appreciate any claims that a person may have against his or her estate.

It is also important to see the testator on his or her own to be satisfied that no undue influence is being exerted by another or others.

Wider details, such as family dynamics and finances, are usually collected, so that proper and comprehensive advice can be provided.

A careful file note should also be prepared, outlining the testator's instructions, the professional's advice and any overarching concerns. For example, if there is a genuine concern that a family member may bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975, then certain steps can be taken at the time of writing the will to help negate such future action.

In relation to the formal requirements for signing a will to ensure that it is valid, those set out in Section 9 of the Wills Act 1837 or Section 1 of the Wills Act 1963 must be strictly adhered to. Please see question 4.1.

4.7 Can a will be amended after the death of the testator?

England and Wales has freedom of testamentary disposition; however, there are instances where a will may be amended post death.

A deed of variation may be undertaken by a beneficiary (either by will or on intestacy) in writing and within two years of the date of death. This gives the beneficiary an opportunity to redirect his or her entitlement under the will to another person or persons, or to a trust. Any beneficiary affected by the variation must give his or her consent; and if the variation affects a minor (ie, a person under the age of 18), court approval must be sought. The effect is that the variation is read back into the will, as if the testator included those variations within the will. This can have retrospective inheritance tax and capital gains tax consequences, so specialist legal and tax advice should be sought.

It is also possible for a beneficiary to disclaim his or her inheritance. Again, this must be completed in writing within two years of the date of death. As with a deed of variation, there are tax consequences, so specialist legal and tax advice should be sought. Unlike with a deed of variation, it is not possible for the beneficiary to choose where the disclaimed inheritance is directed; rather, it will pass according to the will or the statutory rules of intestacy.

Certain classes of individuals can challenge a will by making a claim under the Inheritance (Provision for Family and Dependents) Act 1975. See questions 3.5 and 4.8.

4.8 How are wills challenged in your jurisdiction?

Certain classes of individuals (usually spouses, children or other individuals being maintained by the deceased) may bring a claim against an estate under the Inheritance (Provision for Family and Dependents) Act 1975. The basis of the claim is that the deceased did not make adequate provision for the individual on death. Such a claim can be made regardless of whether the deceased left a will and must be commenced within six months of the grant of representation being issued.

The court has wide discretion and it will ultimately be for the court to decide, based on the specific circumstances of the case, whether ‘reasonable financial provision' has been made and if not, how much to award the claimant. The threshold of ‘reasonable financial provision' varies, depending on who is making the claim.

There are many other ways in which a will may be challenged, such as:

  • undue influence (forceful influence by a third party);
  • lack of testamentary capacity (little or no understanding in relation to the act of preparing one's will);
  • lack of knowledge and approval (little or no understanding of the contents of one's will);
  • failure to comply with the necessary will validity requirements (as discussed at question 4.1);
  • fraud (someone other than the testator signed the will); or
  • revocation (a subsequent will covering the same assets was prepared).

4.9 What intestacy rules apply in your jurisdiction? Can these rules be challenged?

If the deceased dies without a will, the intestacy rules will apply. The intestacy rules apply equally to both spouses and civil partners, but unmarried or ‘common law' couples are not covered.

Who ultimately inherits under the intestacy rules depends on the family members alive at the date of the deceased's death. For example, if a spouse/civil partner and two children are alive at the date of death, then the spouse/civil partner will inherit the first £270,000. The remainder will be divided into two:

  • half for the spouse/civil partner outright; and
  • half to be shared equally between the children outright.

If an individual dies without a spouse/civil partner or any children, then the deceased's parents will inherit; otherwise the deceased's siblings and so on.

These rules can be challenged under the Inheritance (Provision for Family and Dependants) Act 1975. See questions 3.5 and 4.8.

5 Trusts

5.1 What laws govern trusts or equivalent instruments in your jurisdiction? Can trusts be governed by the laws of another jurisdiction?

In general, the Trustee Act 1925 and Trustee Act 2000 govern trusts in England and Wales. These only govern trusts made under the laws of England and Wales.

A UK non-resident trust is likely to be a ‘foreign law' trust, in that is it is governed by the laws of a country outside the United Kingdom – for example, Jersey. The settlor or trustee (or, for purposes of varying the law, another person with an express power to choose the law governing the trust) will choose (or may vary, if so empowered) the governing law of the trust. The recognition of foreign trusts in England and Wales is addressed in question 5.4.

5.2 How is any conflict of laws resolved?

As set out in questions 3.2 and 4.2, if a conflict of laws arises, according to England and Wales, a detailed analysis of how the ‘thing' should be classified (ie, movable or immovable), where the ‘thing' actually is and the domicile of the owner of the ‘thing' must be undertaken. A ‘thing' could be real property or a chose in action, such as a trust. The answers to these questions are important, as it is usually the law of the country where the ‘thing' is situated (lex situs) which determines how the ‘thing' should be treated. These concepts are relevant, particularly in matters of succession, as the lex situs of the ‘thing' determines:

  • whether the settlor had the power to settle it on trust; and
  • whether any claims/attacks on the trust by another person are:
    • in rem (broadly, a claim directly against the assets themselves); or
    • in personam (broadly, a right to bring a claim against the trustees).

This is important when considering whether any foreign rights arising from forced heirship or a personal relationship (eg, matrimonial property claims) will be given effect. Additionally, the situs of any asset transferred into trust will likely govern whether the asset was validly transferred into trust and whether the gift will be binding on any creditors.

5.3 What different types of structures are available and what are the advantages and disadvantages of each, from the private client perspective?

The most common types of trust are described below.

A bare trust is the simplest trust, under which a trustee holds the assets for the beneficiary absolutely as long as the beneficiary is an adult. The beneficiary can call for all income and the assets of the trust at any time and the assets are treated as belonging to the beneficiary for tax purposes. A bare trust is usually straightforward to administer, with minimal running costs. The disadvantage can be that there are no controls on the asset once the beneficiary takes absolutely.

Under an interest in possession trust, the beneficiary has the right to receive trust income, but cannot control the assets. It is common for a settlor to give his or her partner access to trust income in the partner's lifetime, while ensuring that rights to income and assets pass to the settlor's children after his or her partner dies. The tax profile of an interest in possession trust is more complex, with some liabilities falling on the beneficiary and some on the trustees.

Under a discretionary trust, the trustees typically have absolute discretion (perhaps subject to the consent of a power holder) over whether to pay out trust income and/or capital, how much and to which beneficiaries. A discretionary trust can be a more flexible way to hold family assets so that they are not broken up and passed down the generations. No individual beneficiary has an ownership interest, but merely a spes or hope of benefiting from the trust.

5.4 Are foreign trusts recognised in your jurisdiction? If so, what process is followed in this regard?

Trusts established under the laws of other jurisdictions are recognised in England and Wales, both under the general law and under the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985, which is applicable in the United Kingdom.

In certain circumstances, an express trust must be registered on the UK trust register and specified information provided regarding the trust and its settlor and beneficiaries. Please see further information on this below at question 5.8.

5.5 How are trusts created and administered in your jurisdiction?

The English law requirements to constitute a valid and enforceable trust are not onerous; this is because equity looks to intention, not form. Where the intention to create a trust is apparent, it will be carried into effect. A trust can be created in two ways – either:

  • the legal owner of the property can declare himself or herself a trustee and hold the property for the benefit of others; or
  • the legal owner of the property can transfer the legal title of the property to trustees to hold on trust.

The most important formalities are known as the ‘three certainties':

  • certainty of intention (or certainty of word);
  • certainty of subject matter of the trust; and
  • certainty of the beneficiaries/objects.

While some forms of trust can arise involuntarily (these forms are essentially remedial in nature), most trusts are express; express trusts should take the form of a deed (typically called deeds of trust or settlement).

The trustees' powers may be either:

  • administrative – that is, powers relating to prudent management in the discharge of the trustees' duty to maintain the trust estate; or
  • dispositive – that is, powers intended to have an actual effect on the benefits that the beneficiaries become entitled to receive.

The powers possessed by trustees to administer a trust effectively are generally contained in statute – mainly the Trustee Act 1925 and Trustee Act 2000 – as supplemented or amended by the terms of the trust instrument.

5.6 What are the legal duties of trustees in your jurisdiction?

There are a number of key duties of trustees under the law of England and Wales. These start with the duty to bring the trust's property under the trustee's control, but also to acquaint himself or herself with the nature and circumstances of the trust property and the terms of the trust. The trustee must obey the lawful directions of the trust document.

Typically, the trustee is under a duty to act impartially and has duties to invest in authorised investments and maintain the appropriate standard of care in the management of the trust and exercise of discretions. The trustee has an obligation to consider the exercise of any fiduciary powers. When the trustee considers the exercise of any power, he or she must act within those powers, act honestly and for the proper purposes of the trust. A trustee may delegate the exercise of duties, powers or discretions under the trust only to the extent permitted either under the general law or by the deed. Beneficiaries of bare and in possession trusts must be informed of their position and, if requested, supplied with information as to the management of the trust. The objects of a discretionary trust may be entitled to notice of their spes and information about the administration of the trust, depending on the likelihood of their benefit. The trustee must prepare accounts and must not enter into transactions with the trust property in which he or she has a personal interest.

5.7 What tax regime applies to trusts in your jurisdiction? What implications does this have for settlors, trustees and beneficiaries?

The United Kingdom has a complex regime of taxation for trusts. Trusts that are resident in the United Kingdom are subject to different treatment compared with trusts that are not resident in the United Kingdom. A detailed survey is beyond the scope of this chapter and specialist advice should be sought in all cases. The following is a very high level outline of the main taxes.

Different types of income from trusts have different rates of income tax. Each type of trust is taxed differently. Income tax can fall on the trustees, the settlor or the beneficiaries, depending on all the circumstances.

Inheritance tax can arise on assets held in trust various points in the lifecycle of the trust. The following are common instances of charge:

  • Assets are transferred into a trust;
  • A trust reaches the 10-year anniversary of when it was settled;
  • Assets are transferred out of a trust or the trust ends; or
  • Someone dies and a trust is involved in his or her estate.

Non-resident trusts may be subject to inheritance tax in certain circumstances.

Capital gains tax commonly arises where a trust disposes of chargeable assets, including on a transfer out of trust. A specific capital gains regime applies to non-UK resident trusts where beneficiaries are UK resident and receiving benefits.

Trusts can also be subject to property taxes, including stamp duty land tax and annual tax on enveloped dwellings (ATED), if they enter chargeable transactions and hold assets within the ATED charge.

5.8 What reporting requirements apply to trusts in your jurisdiction?

The UK system of reporting for trusts is called the Trust Registration Service (TRS). Specialist advice should be sought to determine whether a trust is registrable and the applicable deadlines for reporting, which largely depend on the category under which registration is required.

Generally, all express trusts that are UK resident must register on the TRS, even if they are not taxpaying. There are certain exclusions for, among other things:

  • charitable trusts;
  • trusts created by will which are wound up within two years of the date of death; and
  • pension schemes and life insurance policies held in trust.

There is no general exclusion for bare trusts and nominee arrangements, and these may be registrable depending on the facts.

Generally, non-UK resident express trusts must register where they have links to the United Kingdom. This might be:

  • a liability to UK tax;
  • one of the trustees being UK resident; or
  • the acquisition of UK land or entry into a business relationship with a UK business (including with UK advisers including lawyers, accountants, investment managers and so on).

Where all trustees are non-UK resident, generally the trust need not be registered on the TRS unless the trustees:

  • receive UK source income;
  • hold UK assets on which a tax liability in the United Kingdom arises (including income tax, capital gains tax, inheritance tax, stamp duty land tax and stamp duty reserve tax); or
  • acquire an interest in UK land.

Where all trustees are non-UK resident, a relationship with UK advisers would not of itself cause the trust to be registrable.

5.9 What best practices should be observed in relation to the creation and administration of trusts?

When creating a trust, it is best practice to take instructions from the settlor as to his or her intention to create the trust in order to ensure that it is validly created and to reduce any potential for capacity claims, undue influence and so on. The settlor must also understand the fundamentals of the trust and the impact of bringing the trust into existence – that is, to ensure that he or she does not have an interest in or control over the trust (to avoid claims the trust assets were not sufficiently alienated or of sham). In relation to the formal requirements for creating a trust, ensure compliance with the three certainties set out at question 5.4. Settlors should seek legal advice in this regard to ensure these requirements are satisfied and to understand any tax implications. The settlor or trustee should reduce any express trust to a deed.

Wider details – such as ownership and location of assets, family dynamics and residence/domicile of the settlor, details of beneficiaries and trustees – are required, so that proper advice, including tax advice, can be provided. A careful file note should also be prepared, outlining the settlor's instructions, the professional's advice and any overarching concerns.

In terms of dealing efficiently with trust administration after the creation of the trust, both the trustees and settlor should be familiar with their powers pursuant to the trust deed and statute as set out above. They should also ensure tax compliance and compliance at all times with trustees' duties.

6 Trends and predictions

6.1 How would you describe the current private client landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

We are seeing a growing issue for individuals affected by the COVID-19 travel restrictions who spent longer in particular jurisdictions than they had planned, leading to risks of creating tax residence, with the resulting complications of their tax affairs. The United Kingdom and other jurisdictions have made some clarifications and/or concessions to their usual residence rules in light of the pandemic, but we anticipate that the true extent of this flexibility will be become apparent only as tax returns are filed.

Concerns among wealthy individuals continue to grow about the erosion of the right to privacy of an individual regarding his or her personal and financial information as a result of global transparency initiatives. Conversely, governments are concerned about the use of private client planning to facilitate corruption, money laundering, tax evasion and ‘unacceptable' tax avoidance, the latter exacerbated by the financial consequences of the COVID-19 pandemic. In the United Kingdom, we await the details of tax changes arising from the pandemic.

Brexit has raised serious concerns for the enforceability of English judgments in respect of trust indemnities in the European Union and the European Economic Area (EEA). Similarly, Brexit has raised serious concerns as to whether advice from English lawyers will enjoy privilege in any European proceedings or tax investigations unless the advice is ancillary to advice from an EU or EEA-qualified lawyer. Please see question 7.

7 Tips and traps

7.1 What are your top tips for effective private client wealth management in your jurisdiction and what potential sticking points would you highlight?

Before Brexit, English judgments were enforceable across the European Union under the Brussels Recast Regulation and in the European Economic Area under the Lugano Convention; the United Kingdom has ceased participation in both regimes (though it is seeking admission to the Lugano Convention). The other treaty providing for the enforcement of UK judgments in the European Union is the Hague Convention (HC), which the United Kingdom has joined with effect from 1 January 2021. The HC applies only to contractual exclusive jurisdiction clauses and to contracts concluded after its entry into force. The difficulty is that trusts are not contracts as a matter of English laws and contractual indemnities rarely contain exclusive jurisdiction clauses, making the HC unsatisfactory for trust indemnities. However, the laws of a jurisdiction where an indemnifier resides or holds property may permit the enforcement of UK judgments in that jurisdiction.

There are also serious concerns as to whether English solicitors enjoy privilege in other European countries. UK-qualified lawyers (who are not qualified to practise in an EU country) became third-country lawyers with the ending of the Brexit transition period. They may enjoy legal professional privilege, but this depends on the national laws of each jurisdiction. There are practical steps that UK lawyers can take, including:

  • meeting with clients only in the presence of an EU lawyer;
  • opening the matter in an EU jurisdiction; and
  • structuring the retainer so that the third-country advice is supplementary to advice from an EU lawyer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.