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What will Q4 hold for private client and wealth management practitioners?

Eleanor Sepanski takes a look at some of the things that will keep private client practitioners and wealth managers occupied in the closing months of the year.

The summer is over.  The warm feeling of late summer, the diamond jubilee celebrations and the haul of Olympic medals will soon dim as reminders of continuing economic uncertainty and the deepening euro crisis once again dominate headlines. 

The legal landscape is also changing as the reality of 'Tesco law' hits home, with the Co-Operative Bank, for example, all set to become the largest providers of consumer legal services in the country.  We also have the continued, and not always coherent, debate about tax avoidance and evasion.

But what is likely to occupy private client practitioners?  The short answer is consultation.  On its website HMRC lists 18 current consultations, of which at least eight are of interest to the private client practitioner.  At last count a further nine open consultations are underway led by the HM Treasury.  Again, not all of these are private client specific, but it will be interesting to see how many areas of private client practice are affected by current consultations.

The consultation approach to developing new legislation can work well.  The development of the new statutory residence test is a good example of that.  At other times, the process can lead to a good deal of uncertainty, most typically when changes are announced but implementation lags far behind.  Whatever the outcome, it all takes up an enormous amount of practitioner time.

The tax avoidance/tax evasion debate will continue to attract public, political and media attention, not all of which will be helpful.  The General Anti-Avoidance Rule (GAAR) consultation closes on 14 September and we also have the announcement on Disclosure of Tax Avoidance Schemes (DOTAS) to look forward to.  The government proposes that the GAAR should apply to tax advantages arising from arrangements carried out on or after 1 April 2013.  The consultation paper clearly states that the GAAR is intended to be narrowly focused targeting artificial and abusive schemes and that it is not intended to affect what it describes as "the centre ground of tax planning".  However as matters stand there is no clear demarcation in the draft GAAR legislation to distinguish between the two ends of the spectrum.  Instead, the current proposal is that the legislation will be backed up by HMRC non-statutory guidance which will not in itself be binding.  It will be left to the Courts to consider the guidance in the event of a dispute about the application of the GAAR and it may be a while before there is a reasonable amount of certainty on these issues. 

Trusts continue to be a key part of planning and the relevant property regime is as relevant as ever.  The consultation looking at simplifying IHT and trusts is, in a sense, disappointing. The 1984 legislation that sets out the relevant property regime is very well-drafted.  It should not be dropped out of hand purely because it is complex and detailed. 

On the arts and heritage front, the Cultural Gift Scheme (CGS) has received Royal Assent.  There is a concern that CGS will be used less than acceptance in lieu (AIL) because there is less incentive in CGS for the taxpayer.  Having consulted on bringing CGS in, there is a threat of a future consultation on how it is working.   For the present the AIL scheme suffers from a considerable backlog and there is a move to publish figures on the Arts Council website so that advisers understand the pressures on the system. 

For charities we have a Select Committee consultation into the impact and implementation of the Charities Act, closing on 14 September.  As regards Will drafting, the possibility of leaving 10% of the estate to charity and getting tax relief will be sinking in and it will be interesting to see the take up there.  Philanthropy is now an essential area for wealth advisors, and philanthropic strategies are increasingly integrated into mainstream planning for family businesses, whether they be a major commercial company or an urban or rural estate.  Wealth advisors are reflecting this by setting up their own philanthropic foundations to "partner" with their clients. 

Looking offshore, the consultation on high value residential properties closes shortly with draft legislation expected in October/November.  This will not give advisers and trustees much time to react if the changes are brought in from April 2013 as planned, and it is hoped that HMRC will respond positively to the constructive feedback it has had to its road shows.  The statutory residence test, set to come into effect from 6 April 2013, will provide welcome clarity.  However until that happens we must continue to wrestle with the current rules.  The proposals to make it possible to elect to be treated asUKdomiciled for IHT purposes may be particularly interesting to UK/US couples. 

This is an eclectic look at just a few issues that will keep private client practitioners busy in the coming months and I am sure that there will be many others that I haven't mentioned.   There can, however, be no doubt that the final quarter of 2012 will be busy for private client practitioners, but will it be productive?  You will have to ask me that again next year.

This article first appeared in Wealthbriefing.com on 29 August 2012.

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