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It is quite common for divorcees to claim that they have been placed under undue pressure to strike an unfavourable financial deal. In a big money case, however, a judge ruled that a wife was no lamb to the slaughter but voluntarily signed up to a compromise with her ex-husband which was toasted with champagne.

The German couple, aged in their 70s, enjoyed an immensely high standard of living during their marriage of over 30 years. Following their divorce in Germany, there was a meeting at a hotel during which both signed a settlement agreement by which the husband was to make substantial financial and other provision for the wife.

She, however, went on to swiftly repudiate the agreement and launched proceedings in England – where she resided – seeking financial relief against the husband under the Matrimonial and Family Proceedings Act 1984. She asserted that he and the couple’s son had placed her under massive pressure to enter into the agreement, which she had not signed of her own free will.

Rejecting those allegations, however, the judge found that she was the driving force behind the meeting taking place and that she could not be viewed as a supplicant cowed into submission by a bullying ex-husband and son. Far from being upset, disappointed or distressed at the meeting, her mood was one of relief. She willingly engaged in the champagne toast and considered at the time that she had achieved a good result. She signed the agreement voluntarily, with her eyes open.

Her subsequent repudiation of the deal was an act of foolishness that only served to weaken her position. The terms of the agreement were, in any event, not unfair and the provision it made for her future fell very much within the bracket of awards that she might have obtained from an English court.

Despite her repudiation of the agreement, the judge was confident that the husband – who had professed his wish to do the right thing by her – would comply with its terms. In order to secure her position, however, the provisions of the agreement were encapsulated in an order of the court. The judge hoped that his ruling would mark an end to the years of strife that had riven the family.

Those dissatisfied with HM Revenue and Customs (HMRC) decisions must exercise any right of appeal within tight legal time limits and should consult a solicitor as a matter of urgency. The point was powerfully made by the case of a businessman who failed to act promptly and was left nursing a six-figure bill.

Following an investigation, HMRC issued a seven-figure demand against a company in respect of alleged errors in its VAT returns. An inaccuracy penalty was also raised, and the company subsequently entered liquidation. The businessman was issued with a personal liability notice (PLN) on the basis that he was the company’s sole director and shareholder.

He had 30 days in which to lodge an appeal to the First-tier Tribunal (FTT) against the PLN, which, after amendment, came to almost £875,000. However, he did not notify the FTT that he wished to challenge the bill until more than 38 months after that deadline expired.

In seeking to explain the delay, he asserted that he had reached an agreement in principle with HMRC and thus believed that there was no need for a formal appeal. He argued that the PLN was invalid and that HMRC had contributed as much as he had to the muddled handling of his case. He said that HMRC had itself recognised that the PLN was excessive and that he was likely to be forced into bankruptcy were he required to pay the full amount.

Refusing to entertain his late appeal, however, the FTT found that the main reason for the delay was either his wilful disregard of the deadline – in the hope that the matter would simply go away if he ignored it – inattention, or an assumption that everything would be sorted out satisfactorily without further involvement on his part. None of that could be viewed as a good reason for the delay.

The FTT acknowledged that the dismissal of the appeal on grounds of delay would cause very great prejudice to the businessman. On the other side of the balance, however, was the need to ensure that statutory deadlines are respected. If the appeal were permitted to proceed, HMRC would be required to devote resources to re-examining matters it had long considered closed.

Engaging a professional to draft your will and give advice has many advantages that may not be apparent at the time. In a case on point, a lawyer’s prudence in arranging a medical assessment of an elderly client proved decisive in the Court of Appeal’s decision to uphold the validity of his final will.

Following the death of an elderly farmer and businessman, his estate was valued at almost £2 million. By his first two wills, he left business assets to two of his children and farmland to his third. After the third child died suddenly, however, he instructed a solicitor to draft a new will which made significantly different bequests.

He had been experiencing problems with his memory for some time and the death of his child had a devastating impact on him. The solicitor was concerned to ensure that he had the mental capacity required to make a valid will and, with that in mind, she asked the man’s GP to carry out an assessment.

After doing so, the GP noted that he was fully orientated and gave no appearance of being confused or distressed. He was able to go through the will, bit by bit, with very little prompting. After an inheritance dispute developed within the family, however, a judge found that the will was invalid for want of testamentary capacity.

Reversing that decision, the Court noted that the case raised important issues about the proper weight to be attached to the evidence of a drafting solicitor and a medical practitioner’s assessment of capacity. The man was astute enough to realise that it might be sensible to change his will following his child’s death and the document he signed was rational on its face.

The solicitor had prudently enlisted the GP’s assistance and was entitled to, and did, rely on his medical assessment. Neither of them was required to question the man as to his reasons for changing his will. The Court concluded that, had proper weight been given to their evidence, it would not have been open to the judge to find that the will was invalid.

Adults who lack the capacity to make important decisions for themselves are entitled to their autonomy and should never be equated to children. The Court of Appeal trenchantly made that point in directing that a man with a severe learning disability should be vaccinated against COVID-19.

The man, aged in his 20s, also suffered from congenital heart defects and his mother and primary carer was deeply anxious that vaccination against the virus would place him at particular risk. A judge nevertheless found that vaccination would be in his best interests and authorised an NHS body to perform the procedure.

Ruling on the mother’s challenge to that ruling, the Court did not doubt the sincerity and strength of her beliefs, which were worthy of respect. She had provided her son with the best possible care throughout his life and it was thanks to her that delightful and engaging aspects of his personality had blossomed and grown.

In dismissing her appeal, however, the Court found that her principled opposition to his vaccination could not be reconciled with national medical guidance or the expert opinion of a consultant cardiologist that it was the virus itself, rather than vaccination against it, that would place him at heightened risk.

The Court noted that an adult who lacks capacity is not and never should be treated as a child. Such a paternalistic approach had long since been consigned to history and recognised for what it is – a subversion of adult autonomy. The Court was concerned to protect the man’s freedom, not that of his mother.

The views of parents, friends and others close to a person who lacks capacity are, the Court acknowledged, invariably helpful when considering non-medical issues in such cases. However, their relevance is to illuminate the broader canvas of such a person’s circumstances, not to provide a platform for their own opposition to a course of action which is, objectively, in the person’s best interests.

The Court noted that, whilst the man’s ability to exercise his autonomy may be circumscribed, it was not extinguished. He had a quality of life which was both dignified and meaningful and his lack of capacity did not render his own wishes and feelings irrelevant. Although unable to express himself verbally, he was able to express enjoyment or displeasure, acquiescence or resistance.

The preponderance of evidence indicated that he was not anxious about receiving injections or having blood taken. The only force likely to be required in vaccinating him was to hold his arm to keep it still. Although he could not absorb the medical issues involved in the case, he was perfectly able to decide for himself whether to cooperate or reject vaccination.

In the UK, there are quite generous exemptions from Inheritance Tax (IHT) which apply to business assets. One problem with making use of such exemptions is the effect this may have on the subsequent value of the relevant assets for Capital Gains Tax (CGT) purposes. Under S274 of the Taxation of Chargeable Gains Act 1992, the ‘base cost’ value of such assets for future CGT purposes is the IHT value, provided that value has been ‘ascertained’.

This can be especially important when assets are aggregated for IHT purposes. For example, if a deceased person owned 15 per cent of an unquoted company’s shares in his own name and had an indirect interest (say through a trust in which he held a life interest) in another 40 per cent, the IHT valuation would be on the basis of having a controlling (greater than 50 per cent) interest. If the company is a trading company, Business Property Relief (BPR) would apply and in the case of a controlling interest, BPR is given at 100 per cent.

The Capital Taxes Office will not in such circumstances wish to enter into negotiations about the value of these shares and will simply regard the value transferred as nil. The value, therefore, will not have been ‘ascertained’, which may lead to a later dispute about the real value of the shares at the date of death, when the value may well be much harder to ascertain or at least agree.

One possible way around this dilemma is for the executors to submit a valuation of the shares, preferably with the benefit of a valuation by an appropriate professional. This is likely to be ignored by HM Revenue and Customs when dealing with the estate taxation, as 100 per cent BPR will apply. On a subsequent disposal of the shares, that valuation – probably unchallenged – can be used to help to justify the base cost in the CGT computation. […]

Ownership of two homes in the UK is becoming more commonplace as couples who both own houses marry, houses are inherited, parents buy houses for their children to live in, or people just buy a place in the country, either to let or to escape to at weekends.

Owning two houses does have significant Capital Gains Tax (CGT) implications. When house prices are rising fast, many owners face CGT liabilities. CGT on property is very complex. Here are some of the main planning points, but this is just an outline guide. Always take professional advice before going ahead with any significant transaction.

Once you have two houses, you have two years to make an election regarding which is to be your ‘principal private residence’ (PPR). This is important since PPRs are exempt from CGT. In general, it is sensible to elect for the property that is expected to rise most in value to be the PPR. A married couple can have only one PPR.

If a house is sold which has been the PPR and was actually lived in at any time, the last three years of ownership are treated as private residence (this period is being reduced to 18 months for sales after April 2015), so if a house has been owned for ten years, lived in for six years and then rented out for four years, only one tenth of the gain will be chargeable. There are a number of other exemptions which apply for periods of non-residence for various reasons.

If your residence has extensive grounds (over 0.5 hectares), a chargeable gain may arise on the land. There is an exemption, where the grounds are ‘required for the reasonable enjoyment of the property’. Where a large landholding is being divided into lots and sold for development, beware of selling the house first and retaining the land, since CGT may then arise when the land is sold.

If you rent out part of your private residence, or use it for commercial purposes, it will normally become chargeable, although (at least) the first £40,000 of the gain will be exempt if the letting was for residential purposes.

Since transfers between spouses are exempt from CGT, where a chargeable gain is expected it can, in some circumstances, make sense to transfer an interest to your spouse before sale. This will make use of both CGT exemptions.

HMRC are likely to challenge a ‘principal private residence’ election for a second property where it is sold reasonably soon after acquisition and there is a gain chargeable to CGT. In such cases, a demonstration of actual residence will be critical for a claim to succeed.

One common circumstance in which this occurs is when a home is inherited and subsequently sold.

In the 2015 Budget, measures were introduced which will adversely affect the owners of homes in the UK and abroad who are resident outside the UK and who sell their UK home at a profit.

From 2017, the allowable interest on mortgages on ‘buy to let’ properties is to be restricted to the basic rate of tax.

In addition, higher rates of Stamp Duty Land Tax (SDLT) are charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes. The additional rate is be 3 per cent more than the ‘basic’ SDLT rate.

The Government has published guidance on tax on selling property. Such decisions should always be undertaken with the benefit of professional advice.

Source: Private Client Library – Articles