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Stay Ahead of Corporate Compliance: Navigating the Changes to Corporate Regulations
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) follows on from the Economic Crime (Transparency and Enforcement) Act 2022 which introduced the Register of Overseas Entities in 2022. The legislation is a concerted effort to prevent the criminal exploitation of the UK’s economy through corporate structures and improve the reliability of data held by Companies House.
Key Changes Introduced By ECCTA:
The first series of measures are to come into force on 4 March 2024, which will impact Companies and Limited Liability Partnerships (LLPs).
There will be new stringent regulations relating to registered office addresses – all companies and LLPs will be required to maintain an “appropriate” physical address. An address is considered appropriate if correspondence delivered at that address would be expected to be received by a representative of the company which can be verified by the representative’s acknowledgment of delivery. This means that PO Boxes will no longer be permitted.
Any non-compliant addresses will be changed to the Companies House default address. Failure to provide a suitable alternative address within the specified period may result in the company being struck off. If you consider your address may fall short of the new requirements, you should act now to rectify this.
Additionally, companies will be required to provide a registered email address, to enable the Registrar of Companies to communicate with the company via email for updates, notices, and reminders. The email address will not be published on the public register. New companies will be required to provide a registered email address at the time of incorporation, for new companies incorporated from 4 March 2024. Existing companies will be required to provide a registered email address with their annual confirmation statement for all confirmation statements submitted as of 5 March 2024.
Other important changes to be introduced include granting Companies House power to:
- impose fines up to £10,000 for non-compliance with the Companies House 2006 regulations, as an alternative to pursuing such non-compliance via the courts;
- evaluate the quality of data produced to the Registrar or contained on its register. Information can be cross-referenced against external sources for discrepancies and inconsistencies, in which case the Registrar may:
- reject or remove the data;
- require the production of supporting evidence to validate the accuracy of the data;
- annotate the public register to alert users where the information appears unclear or deceptive; or
- strike the company’s name off the register;
- scrutinise company names that have the potential to deceive the public or which do not otherwise meet the incorporation requirements and if appropriate to require such companies to alter their names, failing which the company may incur a fine or be struck off;
- require companies to deliver a statement that the company is established/operated for lawful purposes, and thereafter to annually declare that the company’s future activities will also be lawful. New companies will be required to provide this statement on incorporation, and existing companies will be required to provide the statement with their annual confirmation statement;
- share data with other government departments and law enforcement agencies;
- expand the types of information/documents that can be withheld from public view on the register.
How We Can Help At Quastels:
With these important changes on the horizon, it is crucial to take action promptly to ensure your company or LLP adheres to the new regulations and avoids the consequences of non-compliance, which could undermine your company’s integrity.
The Corporate Team at Quastels has specialised legal expertise to assist you in navigating and implementing the requisite measures for your business.
To discuss any of the points raised in this article, please contact our corporate team by filling out the form below.
Wills for Business Owners: Maximising Business Relief
Business assets can constitute a significant portion of an individual’s wealth and is often a key aspect of their estate planning.
Whilst it is generally known that gifts of ‘relevant business property’ can benefit from Business Relief, without careful planning, this relief can be wasted or cause unintended UK inheritance tax (IHT) consequences when an individual holds such assets on their death.
This article focuses on how this relief can be optimised with careful planning and precise Will drafting.
Business Relief
Business Relief reduces the value of ‘relevant business property’, which is subject to IHT on a transfer arising on death (or by a lifetime gift). Depending on the type of property, relief is available at either 50% or 100% of the value of the property.
For deaths and transfers on or after 6 April 1996, there are six categories of property which can qualify as relevant business property:
| Relevant Business Property | Rate of Relief |
| 1. Property consisting of a business or interest in a business | 100% |
| 2. Control holdings of unquoted securities in a company | 100% |
| 3. Unquoted shares in a company | 100% |
| 4. Control holdings of quoted shares in a company | 50% |
| 5. Land, buildings, machinery or plant used by a company controlled by the transferor or by a partnership of which the transferor was a member | 50% |
| 6. Settled land, buildings, machinery or plant in which the transferor had an interest in possession and used in his business (this applies to lifetime transfers only) | 50% |
To qualify for relief, the business to which the property relates must be a trading business. There are additional conditions which must be met for the property to qualify for the relief.
Generally speaking, these are that the property must have been owned by the donor throughout the period of two years before the date of transfer (the ownership condition) and, that whilst a business as a whole may qualify for relief, if it holds assets which are not used in the course of the business such as surplus cash (known as ‘excepted’ assets), then those assets can reduce the amount of relief available.
Gifts By Will
Beneficiaries of a Will generally fall into two categories: ‘exempt’ beneficiaries and ‘non-exempt’ beneficiaries for IHT purposes. Gifts made to exempt beneficiaries are as the name suggests: they are exempt from IHT.
The most common exempt beneficiaries are spouses or civil partners (who benefit from the ‘spouse exemption’) and UK charities (who benefit from the ‘charity exemption’). Non-exempt beneficiaries are any beneficiary which are not afforded a specific exemption from IHT.
To the extent possible, business property should made directly or through the creation of an appropriate trust interest to non-exempt beneficiaries, to ensure that the relief is not ‘wasted’ on an exempt beneficiary whose share of the estate would already benefit from an IHT exemption.
Gifts That ‘Waste’ Business Relief
When qualifying business property is specifically given to a spouse, for instance, this would effectively be a ‘waste’ of the relief, as the spouse exemption already exempts from IHT any assets which pass between spouses. As the relief attaches specifically to the business property, it is not available to be set off against any other part of the estate.
It is, therefore, preferable for ‘non-exempt’ beneficiaries to receive the business property directly or be capable of receiving such property under a suitable mechanism, to optimise the estate from an IHT perspective.
However, notwithstanding the tax savings, individual circumstances need to be borne in mind; the surviving spouse may, for example, have need for the business property, or it may not be appropriate for the non-exempt beneficiaries to receive those assets. In the latter case, a gift of these assets into a discretionary trust in the Will, could provide a solution.
Business Property That Falls Into The Residue Of The Estate
When qualifying business property forms part of the residuary estate, and the entirety passes to an exempt beneficiary, then any available relief is ‘wasted’ in the same way as if the business property were directly gifted to an exempt beneficiary.
However, if the beneficiaries of the residuary estate comprise both exempt and non-exempt beneficiaries, IHT legislation (Section 39A Inheritance Tax Act 1984) operates to apportion part of the relief to the exempt beneficiary, even though the exempt beneficiary may not receive the business property.
Not only is the relief therefore ‘wasted’, it could also result in unintended IHT charges, which could otherwise have been avoided by ensuring that the business property was given to a specific beneficiary (or trust) in the Will.
An Example
Anna dies leaving shares in a business worth £10,000,000. Anna’s other (non-qualifying business) assets amount to £5,000,000. In her Will, she leaves her entire estate to her husband Bob and her son Chris in equal shares absolutely. It is subsequently determined that the business qualifies for 100% Business Relief. Anna has not made any specific gifts, and all her assets including the business, falls into the residue.
Anna’s gross estate for IHT purposes, before the deduction of Business Relief or any exemptions, is £15,000,000.
As Bob and Chris share the entire estate equally, the Business Relief is apportioned equally between them as follows (note that how the assets are actually distributed between Bob and Chris are irrelevant):
| Share of gross estate (before reliefs) | Share of Business Relief | Share of net estate (after reliefs) | |
| Bob (50%) | £7,500,000 | £5,000,000 | £2,500,000 |
| Chris (50%) | £7,500,000 | £5,000,000 | £2,500,000 |
IHT is calculated on the net estate as follows:
On Bob’s share: nil, due to the spouse exemption.
On Chris’ share: £870,000 (£2,500,000 less Anna’s nil rate band of £325,000, multiplied by the IHT rate of 40%).
This would be the position even if the executors decided to distribute the whole of the business to either Bob or Chris.
However, if instead Anna’s Will had included a specific gift of her business to Chris, with the residue of her estate to Bob, the IHT position would have been as follows:
| Share of gross estate (before reliefs) | Share of Business Relief | Share of net estate (after reliefs) | |
| Specific gift of business to Chris | £10,000,000 | £10,000,000 | Nil |
| Gift of residue to Bob | £5,000,000 | Nil | £5,000,000 |
IHT is calculated on the net estate as follows:
- On Bob’s share: nil, due to the spouse exemption.
- On Chris’ share: nil, as his share is fully relieved by Business Relief.
Although Bob has received less as a result of the specific gift to Chris, IHT of £870,000 has been saved.
Conclusion
Individuals who have business assets and interests should give special consideration to these assets when planning their estate, to ensure that any available relief is maximised. There are various complexities to Business Relief, and professional advice should be taken to understand its availability and how to account for it in the context of succession planning.
To discuss any of the points raised in this article, please contact Ben Rosen or fill out the form below.
A Look at Enforcing Foreign Judgments in England and Wales
The United Kingdom, is a renowned global centre for finance and business. It is also frequently chosen as the international destination for legal disputes – a report in October 2023 stated that London was the “most attractive centre for commercial litigation and international arbitration… outperforming New York and other competitors”.
However, even when disputes arise, and are adjudicated upon, overseas it may be an award cannot be enforced in that jurisdiction. We address how a judgment creditor might be able to enforce a foreign judgment in England and Wales; for example, where a debtor possesses assets or interests in the UK.
Recognition of a foreign judgment in England can also bring advantages as, once recognised, it becomes as enforceable as an English judgment. This means that the party who won the judgment is able to use the full range of legal tools available in England to try to make sure they get paid. These tools include revealing the debtor’s finances, freezing assets globally, and placing liens on assets. Importantly, these enforcement options are not limited to England—they can extend internationally, thereby affecting parties and assets outside the UK.
Whilst there is no automatic right to enforce a foreign judgment in England and Wales, it is often possible to do so. There are different methods and procedures depending on the country where the overseas judgment was obtained, but essentially there is a two-stage process:
- recognition (or ‘domestication’ of the (foreign) judgment) and
- enforcement.
The First Step: The Judgment Needs To Be Recognised In The Courts Of England And Wales
The recognition test is primarily based on the principle of reciprocity. The English and Welsh courts will be more likely to recognise a foreign judgment if it was made by a court of competent jurisdiction, it is final and conclusive in the jurisdiction obtained, and if it is for a definite sum of money.
The acknowledgement of a judgment’s validity hinges on the specific jurisdiction in which it was obtained. In certain jurisdictions, a judgment can be immediately enforced. For instance, if the judgment originates from a jurisdiction bound by the Hague Convention on Choice of Court Agreements 2005, the application for enforcement doesn’t necessitate serving the responding party. Instead, an opportunity to contest the order arises only at any appeal, after a registration order is made.
However, in other scenarios where a claim must be initiated, various defences might be raised. These could include arguing that the foreign court lacked jurisdiction according to English law or asserting that the judgment was obtained through fraudulent means. The recognition process and the availability of potential defences will vary depending on the specific approach sought for recognition.
The Second Step: Enforcing A Foreign Judgment
Once a foreign judgment has been recognised, its enforcement does not generally differ from judgments in England and Wales. There are different methods available to enforce judgment debts and, whilst each enforcement mechanism might be available, the most appropriate approach will depend on the circumstances.
The range of recovery actions include, the seizure of assets, charging orders, attachment of earnings, and insolvency proceedings. The choice of action will depend on the individual circumstances of each case, and the nature of the debtor’s assets.
Many judgment creditors find it worthwhile to consider pursuing enforcement of their foreign judgment in England and Wales as the benefits of pursuing such action may often outweigh the challenges. For example, one of the key advantages of pursuing enforcement in the UK is the accessibility of public records – including Companies House and Land Registry records – which, together with other investigations, may provide valuable information about the debtor’s assets.
In addition, a judgment creditor may also be able to obtain a court order requiring a judgment debtor to provide information about their finances and anything else relevant to enforcing the judgment. In such a scenario, the person (or, in the case of a company, an officer of the company) served with such an order has to attend court to answer questions truthfully under oath and provide any necessary documents. This is a strong measure as disobeying a court order could be contempt of court and lead to imprisonment.
Conclusion
The fact that a court judgment has been obtained in another jurisdiction (and even if there are procedural obstacles in enforcing in that jurisdiction) does not necessarily preclude action being taken against a debtor with assets or interests in England and Wales.
To discuss any of the points raised in this article, please contact Robert Kay or fill in the form below.