Just over a month has now passed since the EU Referendum and the Nation’s decision to leave the European Union. The impact of that decision has been dramatic – most of our leading political parties look very different to how they did before, we have a new Prime Minister leading the country and a very different Government to the one we had less than a month ago.
What we still do not have at the moment is a great deal of clarity. PM Teresa May has confirmed that formal exit talks will not begin until at least 2017, hence we remain in uncertain times.
When considering the impact of Brexit upon Private Client matters, such as inheritance tax or personal taxation, at present it does not appear that the result of the Referendum is going to change much for the majority. Many of these issues are regulated by UK law and the EU has had little influence over them. Obviously those with foreign property in the EU will ultimately be impacted by our withdrawal.
When considering the administration of our estates when we die, England and Wales have a very separate legal approach, different to even our closest UK neighbours as well as the rest of Europe and beyond. Our approach is all-but unencumbered by EU law, so what we know now is not likely to change considerably.
The EU has recently attempted to simplify the laws in relation to the administration of estates across Europe, with the intention of allowing individuals to elect whether they wanted to apply the laws of their national state, or the law of their last habitual residence, to the administration of their estates. This was in an effort to try and avoid multiple rules from different countries applying the administration of one person’s estate. This was introduced by the EU as the ‘EU Succession Regulation’ in August 2015.
The UK opted out of this Regulation long before ‘Brexit’ became such a prominent part of our vocabulary. The impact of this decision in a post-Brexit world is still unknown. It may be that individuals who have foreign based assets as part of their estate when they die will find that to whom those assets are left will be governed by the laws of that foreign jurisdiction. In a number of European countries for example, ‘forced heirship’ rules apply to the administration of estates, which stipulate the inheritance of assets by certain relatives, such as children of the deceased, regardless of whether that was the wish of the individual themselves.
There may also be an impact on those who wish to leave assets to EU based charities, or who may hold farmland in an EU country. At present, such gifts and assets are treated very kindly in relation to inheritance tax, with charity exemptions and agricultural property relief available. Stepping out of the EU may see this beneficial tax treatment applying only to gifts made to UK charities, or applicable only to agricultural land in the UK.
As with everything, the future post-Brexit is unclear. The picture will slowly become clear if, as and when the Prime Minister activates ‘Article 50’ and formal talks of leaving the EU begin. However, since the UK retained control over the majority of legal issues regarding will drafting and the administration of estates away from the influence of the EU, the future may not look too different to the present for the majority of us. Obviously only time will tell.