New government client care regulations ‘excessive’

first_imgNew government regulations requiring solicitors to inform clients about what professional indemnity insurance they have in place have been described as ‘excessive’. The Provision of Services Regulations 2009, introduced by the Department for Business Innovation and Skills (BIS) in December, require lawyers to provide information on their services over and above the existing professional obligations set out in the solicitors’ code of conduct. The new requirements include telling clients what professional indemnity insurance the firm has in place, and informing them of ‘non-judicial means of dispute settlement’ – namely, the roles of the Legal Complaints Service or the Office for Legal Complaints. Steve Meredith, a private client partner in Welsh firm Gabb & Co, said the ‘excessive’ new requirements made a bad situation worse. ‘We already have to give too much information in client care letters. No client can understand or want to read 15 pages of terms and conditions, which encourages bad solicitors to hide the nasty stuff on page 13.’ He added: ‘The key issue for clients is how much it’s going to cost. The regulations should weed out the solicitors who do the job slowly and badly. The rest of us should be allowed to loosen up. The ideal length of a client letter is one page or two pages maximum.’ Guidance published by BIS said the new regulations transposed the EU services directive into UK legislation, further opening up the internal EU market to UK service providers. BIS estimates output in the UK will increase by £4bn-6bn per year in terms of employment opportunities and trade.last_img read more

Government backs fairer access proposals

first_imgThe government signed up to wide-ranging proposals to help young people from less privileged backgrounds enter the legal and other professions this week, but rejected plans to give tax incentives or other ‘targeted support’ to law firms to help them achieve this. The government’s response to the final report of the Panel on Fair Access to the Professions, which was chaired by former cabinet minister Alan Milburn (pictured), accepted many of the proposals, including requiring firms to ‘recruit and support a network of young professional ambassadors’ to raise awareness of career opportunities, and requiring firms to adopt the ‘best practice code for high-quality internships’, so that students derive maximum benefit from work placements. However, the government rejected the report’s proposal for ‘targeted support, such as tax incentives’ to help firms open up access, describing such measures as not being effective and carrying ‘considerable risk of deadweight’. Law Society president Robert Heslett said success within the profession should be the result of merit and hard work, not social background. ‘A look at today’s solicitors’ profession reveals that the numbers of women and people from black and minority ethnic backgrounds entering the profession are good and, overall, the profession has (already) become much more reflective of the society it serves.’ Many legal practices have excellent outreach schemes to encourage young people who might not otherwise consider a career in law, Heslett said, while the Society itself runs the Diversity Access Scheme and last year launched the Diversity and Inclusion Charter. Bar Council chairman Nick Green QC said the bar has worked hard to improve access to the profession. As part of its strategy, the government is to set up a Gateways to the Professions Collaborative Forum to work with the professions to achieve its social mobility programme. Legal Services Board chief executive Chris Kenny will become chairman of a sub-group which will ‘examine how regulators can embed diversity into their strategy and reporting’.last_img read more

In-house warning over City law firm skills gap

first_imgSolicitors from the ‘cosseted environment’ of top City law firms have been denied the skills and experience they need to make the transition to an in-house role, leading general counsel have warned. In-house lawyers have complained that they cannot recruit the right candidate from private practice because City associate solicitors lack decision-making experience. Carol Williams, head of legal and company secretary at food producer Northern Foods, said effective in-house lawyers are proactive and willing to ‘step up and lead’ when required. They have a ‘can-do attitude’ and are able to put a persuasive case to other managers, she said. ‘But few solicitors from the cosseted environment of a law practice have this skill set. Many have never even mixed with non-lawyers. They have the legal knowledge, but have never been allowed to gain the responsibilities and experience to succeed in-house,’ she said. Williams said the problem stemmed from the fact that, under the traditional model, only solicitors at partner level are permitted to take decisions. The general counsel for a leading insurer, who asked not to be named, said the lack of decision-making skills among City lawyers was causing him recruitment difficulties. He had interviewed candidates from City and large national firms with three and four years’ post-qualification experience who were ‘strong on paper’, but were unsuited for the role of associate counsel. ‘In-house is a tough environment. You need to be strong-willed and you need certainty. But when I ask candidates for an example of a difficult decision they have made at work, they look at me blankly. It’s a basic interviewing question, but most reply they asked the partner for advice,’ he said. He added that although junior lawyers were well paid at City firms, the long hours worked and the lack of opportunity to develop themselves meant they were effectively being ‘exploited’. Marian Lloyd-Jones, a director of City legal recruiters Lipson Lloyd-Jones, said ‘attitude’ was more important than finding a candidate who ‘ticked all the right boxes’. Sometimes the perfect candidate is not out there, Lloyd-Jones said.last_img read more

Daunting challenges that sole practitioners face may jeopardise their future

first_img Cashflow is keyWe are very grateful to the Law Society, which has taken up this issue on behalf of all legal aid practices. Cashflow is the key to survival of any business, large or small. For SPs who do not have other private income streams, it is literally the difference between the survival or demise of the practice. The anxiety caused by payment delays, added to the daily pressures of legal aid practice, creates an untenable situation for SPs and constitutes further proof of their ability to remain stalwart, trustworthy and reliable in the toughest of market conditions. The SPG will continue to campaign on behalf of these unsung heroes of the profession who represent their legal aid clients with commitment and passion, often at great personal and financial expense. SPs are also faced with the huge challenge of alternative business structures, which will herald a very different legal services market. However, it is perhaps the case that SPs are better equipped to react and adapt swiftly to these challenges than some medium-sized firms hampered by more cumbersome management structures. Finally there is the burden of regulation and keeping up with its ever-changing manifestations. I am not sure whether we should welcome the Solicitors Regulation Authority’s proposals for ‘outcomes-focused regulation’. At present, we hardly have enough time to get on with looking after our clients as we would wish. Protecting the public interest is one thing, but we seem to be subject to too much governance, while unregulated will-writers and their ilk can get away with leading the public astray (and often without the protection of insurance). Lawumi Biriyok, principal at London firm Biriyok Show, is chair of the Sole Practitioners Group Mortgage lenders have failed to appreciate the embarrassment caused to sole practitioners (SPs) resulting from their unjust and unwarranted decisions to remove conveyancing SPs from their panels. The reasons given, such as SP firms not completing enough new business with them in the previous 12 months, are inadequate and irrelevant, especially in the current economic climate. Affected SPs have to explain to clients why they can no longer act for them and are experiencing a further dent in their cashflow. In consequence, clients suffer by having to pay twice as much as they would normally. The Sole Practitioners Group (SPG) will continue to campaign for the reinstatement of affected SPs to mortgage lenders’ panels. Following the attendance of some key speakers at our May conference, we are opening a dialogue with the Building Societies Association on the issue. Professional indemnity insurance (PII) continues to dominate the SPG agenda. With the renewal date fast approaching, the SPG is doing everything possible to help members, while not overlooking the key problem facing SPs establishing themselves of obtaining initial PII at reasonable cost. We are also conscious of the plight of SPs offering legal aid assistance. While only a small proportion of sole practitioners continue to provide legal aid, those that do are facing unprecedented challenges. At the time of writing, we are waiting to see whether SPs will even be able to continue to provide their services to legally aided clients beyond 30 September 2010, when the current contracts expire. SPs who wish to do so are waiting in trepidation for the outcome of the recent bidding process (a process in which most SPs will feel that the odds were stacked against them) and to hear whether they have been awarded a unified contract from 1 October. For most of those SPs, legal aid work accounts for the largest proportion of fee income, so the loss of the Legal Services Commission contract could mean the closure of the firm. To add insult to injury, their plight has been worsened by the LSC’s recent delays in making payments, forcing small firms to pay the price for government budgetary crises elsewhere.last_img read more

Mortgage fraud will cause problems for solicitors

first_img George Marriott is head of the professional discipline and regulation department at Russell Jones & Walker. Robert Drury is a solicitor in the professional discipline and regulation department at Russell Jones & Walker. The downturn in the global economy caused, as many believe by a property asset bubble, ended as all do by showing who was swimming naked when the tide went out. On this occasion it was the banks that for years had been fuelling the bubble with little effective regulatory control; the government appeared to turn a blind eye as there was prosperity, albeit illusory, for all to share in. The banks themselves followed an aggressive policy of lending in order to obtain a greater market share where they naively assumed that property prices would only move in one direction: up. Such was their scramble to secure larger and larger slices of this seemingly endless cake that, according to some solicitors, at best the banks chose to ignore solicitors’ advice and duties to them as clients enshrined in the Solicitors Code of Conduct 2007 (SCC), and the Council of Money Lenders Handbook (CML); at worst, according to others, they told their solicitors that they need not report such matters to them. There can be little argument that the banks must shoulder much of the responsibility. However it now seems that some banks may seek redress from the solicitors, whose advice in the heady time they appeared to overlook, in order to recoup some of their losses. The banks now wish to argue that their solicitors should have complied with their contractual obligations, most of which would appear in CML. At the time, the market was saturated with adverts and enticements from banks offering super low interest rates, no deposit purchases, or high loan to value ratio (LTVR). The latter is a way in which mortgage offers can be calculated so that if a buyer is providing a 10% deposit on a property worth £200,000 then the bank will need to provide the remaining 90% or £180,000 making this an LTVR of 90%. In some cases lenders were offering 100% LTVR and more, meaning that the purchaser might only have to fund his legal fees and stamp duty – or nothing at all. The government recently announced that it will be pursuing negligence claims against solicitors who had acted on behalf of Bradford & Bingley (now nationalised) in relation to hundreds of buy-to-let mortgages where the bank now faces losses. Claims have been made following a review of same-day remortgage applications which had been ‘unknowingly accepted’ when they might otherwise have been rejected. The banks highlighted failures by solicitors to comply with their obligations under the CML Handbook. The argument for the banks, put simply, is this: had the solicitor told us, we would not have lent the money. What should the solicitor have told the bank as his client? There are many things, but principally there are rules covering price change, control of deposits, back-to-back and geography. The banks argue that the duties owed by the solicitor to them as clients help reduce the risk of mortgage fraud. As the solicitor didn’t report to the bank, mortgage fraud increased, thereby further inflating the asset bubble. There are various forms of mortgage fraud. At its most basic, it involves a client misrepresenting his financial position, making him appear less of a risk to a lending bank, thus increasing the LTVR which the banks were willing to lend. At its most complicated, it can involve identity theft, forged documents, and offshore shell companies. Whilst back-to-back transactions are lawful, they have the characteristics and propensity to become a fraudulent transaction on the lender. A common back-to-back transaction is as follows: A (an innocent seller) sells his property to B for £250,000 where its true value is some £275,000 but A needs a quick sale. B then sets up another buyer, C, and agrees to sell the property to him for £300,000 on the same day that B buys it for £250,000. C obtains a mortgage for £285,000 being 95% of LTVR, but does not have the remaining £15,000 to complete the transaction. The lender bank relies upon its own valuation which is also £300,000. C informs his solicitor that he has paid a £15,000 deposit directly to B, and B confirms that. In fact, no monies have changed hands. The solicitor fails to declare to the lender the existence of the direct deposit, and the fact that B was purchasing the property on the same day for £35,000 less than the mortgage being offered to C. On completion, B makes a profit of £35,000, which he may split with C, while C gets a property which he would not otherwise have been able to afford. The lender loses out, being left with a charge on a property which is probably greater than the property’s actual value. The SCC, bolstered by the green card on mortgage fraud, sets out the circumstances which should put the solicitor on notice as to the legitimacy of transactions. Solicitors should, for example, consider the location of their clients: why is a client from Newcastle instructing a solicitor in Cardiff in relation to a property in Dover? Misrepresentations or changes to purchase price, length of ownership, incentives, allowances, discounts, the direct payment of funds, gifted deposits, funds being received by or sent to third parties are others. The warning card concludes ‘if you are not satisfied of the propriety of the transaction you should refuse to act’. The CML Handbook states ‘if you need to report a matter to us, you must do so as soon as you become aware of it so as to avoid delay. If you do not believe that the matter is adequately provided for in the Handbook, you should identify the relevant Handbook provision and the extent to which the issue is not covered by it. You should provide a concise summary of the legal risks and your recommendation on how we should protect our interests’. This places a broad obligation on the solicitor to inform his lender client of any fact which may well affect its decision to lend. Between 2005 and 2008, the housing market had a bull run. Buy-to-let schemes had become a large part of the market, and banks created mortgage packages specifically for it. It certainly appeared arguable that banks were more concerned with their market share than ensuring that the investments that they were making were sound. At the time of rising house prices, the odd loan which might go bad was not a cause for concern. However, once the market collapsed, banks were left with portfolios of property which they discovered were massively over-valued. The approach by the banks changed overnight. Where lending policy seemed to have been driven by sales departments with little attention to risk, suddenly the banks no longer lent; risk was at the forefront of their agenda. All the products which the banks were keen to ensure enhanced their market share vanished overnight. Entrepreneurs who had been offered packages of money to go and create a property empire saw their dreams collapse. The banks were back on the attack, and the consequence is numerous claims for breach of contract and negligence against solicitors for failing to comply with SCC and the CML Handbook. If the legal actions succeed, it will have the effect of transferring a burden shouldered by the taxpayer in part to insurance companies. Although each case will depend upon its own facts, oral evidence by a solicitor that the lender client told him not to report the matters he should to said client may be found to be a poor substitute for a well-documented file. There will be a substantial evidential burden for the solicitor. In appropriate cases, the solicitor may be called to account by the SRA. While it was evident at an early stage that some lending banks were swimming naked, it may yet take some time to discover whether some solicitors were also swimming in the buff.last_img read more

War of words

first_imgOver the past few weeks, a theme has been emerging on this page about the profession’s veritable obsession with the correct use of language. But it transpires that it is not only solicitors of the Supreme Court who get hot and bothered about the use and abuse of English; their esteemed colleagues on the bench feel the same way, as Lord Justice Beatson demonstrated last week. Hearing the Law Society’s judicial review of the Legal Services Commission’s family tender process, Beatson took exception to the use of the word ‘cascading’, which he said littered all the advocates’ skeleton arguments. The offending word had been used to refer to the way in which the LSC distributed contracts to successful bidders. Work was given to firms that scored the highest number of points, and where there was more work on offer than the firms had bid for, the rest was ‘cascaded’ to the next-highest-scoring firms, until all the work was allocated. Adjourning the case, Beatson advised all present to find a good dictionary and look up the meaning of the word. He suggested a more appropriate phraseology would be ‘winner takes it all with a trickle-down effect’, though in all honesty that can hardly be described as elegant. ‘Loose language will not help us deal with this expeditiously,’ he grumbled. Warming to his theme, Beatson observed that the documents submitted in the case had themselves ‘cascaded’ – there were seven volumes of evidence, which included witness statements from 125 firms in support of the Law Society (only one firm, Lincoln practice Sills & Betteridge, filed a statement supporting the LSC). When the case came back to court, Lord Justice Moses, sitting with Beatson, was also exercised about semantics, complaining that some of the documents were written in ‘a language I can’t understand’. Since it has been some years since Moses last took a legal aid brief, he was not quite au fait with the meaning of terms like ‘new matter starts’, ‘certified work’ and ‘remainder work’ that have become the everyday parlance of those working in legal aid. Doubtless he will be all too familiar with those terms by the end of proceedings.last_img read more

Managing partners predict merger-packed 2011

first_imgManaging partners expect a bout of consolidation in the legal market in the coming year, according to an authoritative benchmarking survey seen exclusively by the Gazette. However, the research shows that most law firm leaders believe their firm to be on a solid enough financial footing not to need to source additional funding. The annual benchmarking survey of 95 UK-based managing partners, chief operating officers and chief finance officers in law firms, conducted for Winmark’s network for managing partners (NMP), showed that 81% predict further consolidation of the legal market. Half of firms with a turnover of less than £50m said they had been involved in merger discussions in the past year, while 41% of all firms expected to be involved in merger or acquisition discussions in 2011. The economic outlook among firms was predictably downbeat, with half of those questioned expecting ‘stagnation’ or worse in the UK economy. More than half of firms believed that their insurance costs would go up, while 30% also expected an increase in bad debts. However, despite these challenges, the research showed that 67% of firms do not expect to source additional funding. Of the minority that will seek funding, most will look to a bank loan (70%), and/or seek equity from the firm’s partners (55%). Only 5% said they were considering external investment of any kind, suggesting a low takeup of the new funding opportunities that will be available under the legal services reforms due to take effect in October. Many firms cut costs to maintain profitability over the past year, according to the research. Nearly two-thirds froze salaries; 70% reduced support staff headcount; 56% cut professionals; and 27% reduced the number of equity partners. However, profit was the ‘least impacted’ measure of how firms were affected by the economy in 2010. Most firms predicted that they would not need to make further salary and job cuts, while many intend to increase spending in other areas. Some 42% plan to spend more on marketing and business development, while 5% will cut spending in this area, and 48% expect to increase the IT budget, compared to 11% that will pare IT spending. Although some firms are looking to increase technical outsourcing, including legal process outsourcing, most are not, with only 18% expecting ‘to outsource at some point’. Tony Williams, principal at Jomati Consultants, who wrote the foreword to the NMP report, said: ‘Consolidation, innovation and technology, and growing international capability are key changes managing partners expect to make – but all require significant investment.’ He added that this was needed against a backdrop of managing partners’ expectations for the economy that implied ‘no early return to the bull market highs’. The survey attracted responses from 95 managing partners, COOs and CFOs from firms with turnovers ranging from under £10m (16%) to more than £500m (8%).last_img read more

Advising clients on compliance in UK-Swiss tax agreement will not be straightforward

first_img In advising and taking clients through these issues, tax advisers will need to keep in mind that failure to pay tax liabilities (whether in the UK or abroad) constitutes ‘proceeds of crime’ for the purposes of the anti-money laundering (AML) legislation. Bircham Dyson Bell partner Helen Ratcliffe explains: ‘In connection with tax advice there are many potential AML provisions which advisers could run the risk of breaching. One of the most fundamental is the offence of failure to disclose.’ Failure to disclose is covered by section 330 of the Proceeds of Crime Act 2002 (POCA). A person commits an offence if, in the course of their business they know or suspect or have reasonable grounds for knowing or suspecting, that another person is engaged in money laundering, and fail to disclose their knowledge or suspicion to their firm’s money laundering reporting officer, or direct to SOCA (Serious Organised Crime Agency) if a sole practitioner. ‘A professional legal adviser may not commit an offence if the information came to them in privileged circumstances,’ Ratcliffe notes. ‘But solicitors will need to consider carefully their position both under the general common law rule of legal professional privilege and also the definition of privileged circumstances within POCA.’ The legal position of the adviser is of huge importance, as one of the issues clients will consider is the dissonance between various agreements and options to regularise their affairs. The pros and cons of the options are in part financial, but also involve decisions around liability and anonymity, and not least a degree of enforcement competition between various agreements reached between different jurisdictions. One option, for example, may be for the taxpayer to deal with disclosure of their Swiss source income and gains through the existing LDF. Some advisers note that the LDF looks like a more attractive option. Ingham comments: ‘Our experience of the LDF is that for many clients the tax payable is less than 20-25% of the balance, which is the figure suggested as the likely outcome if the “anonymous regularisation” option is selected.’ Mark Summers, a partner at Speechly Bircham AG in Zurich, notes that most disclosures made under the LDF result in ‘many only losing 5% or less of undisclosed funds and most losing less than 10%’. As a result, he concludes: ‘Many will favour this route over the Swiss withholding payment in order to clean up their tax affairs where they wish assets to be disclosed.’ But advisers will need to take care over the role they have in advising on, or affecting, client decisions here. On choosing to use the LDF, Ratcliffe advises: ‘This would probably result in assets having to be moved from Switzerland to Liechtenstein.’ This will require consideration of further AML provisions, notably those relating to arrangements (section 328 of POCA). ‘A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates the acquisition, retention or use of criminal property by or on behalf of another person,’ she adds. If the solicitor is involved in the arrangements for the movement of non-compliant funds, then even though this would be done to resolve the tax status of the money, ‘AML provisions may still mean that a report to SOCA is required in these circumstances’. Crisis of confidence Eduardo Reyes is Gazette features editor Uncertainties Madoff’s fraud especially ‘reflected badly on a wide range of professionals’. The effect of these events has been to proportionately increase the attraction of transparent and secure financial arrangements as compared with the attractions of ‘unregularised’ tax arrangements. Knowing look The UK-Swiss tax agreement was reached against a background of falling confidence in the financial structures and wealth management strategies used by those who hold assets in jurisdictions where their tax liabilities will be lower. UBS and LGT UBS AG is the world’s largest wealth manager. Its conduct was cited by a US Senate subcommittee, which alleged that UBS and LGT, a Liechtenstein bank, had helped 19,000 wealthy Americans to hide up to $17.9bn from the Internal Revenue Service. The committee’s report alleged that LGT, owned by Liechtenstein’s ruling family, ‘fostered a culture of secrecy and deception’. UBS, it added, ‘opened thousands of accounts in Switzerland that are beneficially owned by US clients, hold billions of dollars in assets, and have not been reported to US tax authorities’. FraudBernard Madoff’s investment fund fraud, and the collapse of Sir Allen Stanford’s banking group, involving alleged fraud (denied by Stanford) were viewed by wealthy families as signaling failures that are systemic. In a Withersworldwide survey of family offices in October 2009, 92.1% of respondents said the level of trust in institutions and investment advisers had been affected. Options The deal It is against that changed backdrop that the UK Treasury sounds a confident note about the Swiss agreement. It trumpeted the deal reached with the Swiss government as one that would secure ‘billions in unpaid tax’. The Treasury’s statement of 24 August said: ‘The agreement will resolve the long-standing abuse of Swiss banking secrecy by those who seek to conceal the proceeds of tax evasion and is expected to secure billions of pounds of unpaid tax for the UK exchequer from 2013.’ Under the terms of the agreement, existing funds (basically cash and shares) held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities, though those who have already paid their taxes are unaffected. As a gesture of good faith, Swiss banks will make an up-front payment from Switzerland to Britain of SFr500m (£360m). Then, from 2013, a new withholding tax of 48% on investment income and 27% on gains will be introduced to ensure the ‘effective future taxation of UK residents with funds in Swiss bank accounts’. This will, the Treasury says, be accompanied by a new ‘information sharing’ provision that will make it easier for HM Revenue & Customs to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC. Based on the detail currently available, legal advisers to people affected by the agreement see some positive points in it. Judith Ingham, head of the Zurich office of international law firm Withers, says: ‘Regularisation under the agreement will protect banks, bank employees and clients from prosecution and the UK will not use stolen information in the future.’ Ingham also notes some advantages to the ‘anonymous regularisation’ option provided for: ‘It really does look as though the anonymous route will protect confidentiality in all normal cases’. This means previous fears about the implications of the audit process seem unfounded. ‘For many people it may therefore offer the option of more tax than under the Liechtenstein Disclosure Facility (LDF), but anonymity,’ she concludes. National governments looking to end tax evasion are acting in an atmosphere where the wealthy are more open than in the past to demands that they ‘regularise’ their tax affairs. What their advisers note, though, is that when their clients start that process, they are looking for some certainty in the outcome. Put simply, will any settlement end the interest of investigators into their affairs, and allow them to plan their future arrangements with confidence? Here, lawyers note, the final UK-Swiss agreement, when signed, will need to provide certainty on some key points. Noting that UK-resident Swiss account holders who do not wish to disclose their accounts to HMRC will suffer very high withholding rates on income and gains (48% and 27% respectively), Summers notes: ‘This deal means that there is now very little incentive to evade tax.’ But Summers adds: ‘Questions remain as to the withholding tax rate to be applied to capital gains on non-reporting mutual funds, hedge funds and certain structured products.’ These are normally charged at the highest marginal rate of income tax in the UK – 50% as opposed to 27%. ‘It remains to be seen whether there will still be evasion on these investments,’ he concludes. Noting that ‘voluntary disclosure without penalty’ is also offered, Ingham asks: ‘What does the “without penalty” description mean for clients who might have chosen to pay the tax actually due plus interest and penalties under the LDF? Will they be able to pay the same amount, but without the penalties?’ Of central importance, Ratcliffe argues, is this: ‘It is not… clear whether the payment will cover only income and gains resulting from the funds while they have been held in the Swiss bank account, or whether it will regularise the tax position with respect to all non-compliant funds.’ On some points though, a degree of uncertainty may assist with co-operation. HMRC will have the right to make a few hundred information requests per year of the Swiss regarding specific UK taxpayers. Though Summers notes that ‘fishing requests’ under this right are ‘almost certainly off limits’, what is certain is that this agreement is one of many developments that are making it harder to avoid paying national taxes. If the full agreement addresses advisers’ main questions, compliance may also provide long-term peace of mind for clients – albeit it at a cost. The UK-Swiss tax agreement, announced last month, will be in force from 31 May 2013, and full details will only be made available as both countries sign it. But it is already clear that the existence of the agreement places legal advisers in a difficult position when advising their clients on compliance. There are significant uncertainties at a time when clients affected want to ‘regularise’ their tax affairs, and being party to some client information may lead solicitors to fall foul of proceeds of crime legislation. As private client advisers know, all tax agreements and amnesty initiatives are closely watched by the individuals and families whose assets are being targeted. While it might be assumed that the international wealthy can simply move the wealth ‘elsewhere’, in fact their confidence in that option has sharply decreased in recent years. A 2009 survey of the family offices that manage wealthy families’ affairs, sponsored by Withersworldwide, reflected the damage a series of events had done to such an approach. In the wake of the Madoff and Stanford affairs (see box below), and investigations into the role that UBS AG and Liechtenstein bank LGT Group allegedly played in enabling tax evasion, more than half said they had been prompted to review their tax position. A US tax ‘amnesty’ received 7,500 applications in the seven months it was available. As one family office manager told researchers: ‘Some families are hoping they can avoid the entire issue. This is a false hope.’ last_img read more

New SRA handbook online

first_imgThe final version of the new Solicitors Regulation Authority (SRA) handbook has now been posted online. The handbook, which includes the updated Code of Conduct, is to underpin the introduction of outcomes-focused regulation (OFR) on 6 October. It was prepared by the SRA in consultation with solicitors, consumer groups and other stakeholders. The handbook runs to 532 pages when printed, but is suitable for viewing online. Helpful online features include a guide to what’s new, advanced search options and an updates section. The SRA is also to produce a book-form printed version in late October. A new practice note on the Law Society website, ‘Outcomes-focused regulation: overview’, will provide further help. From 6 October, all solicitors and law firms regulated by the SRA will be subject to the new regulatory approach. This will be expanded to include owners of companies who may not be lawyers when the SRA is in a position to regulate alternative business structures (ABS), probably at the turn of the year. SRA chief executive Antony Townsend said: ‘The handbook outlines fully the framework we have put in place to put consumers at the heart of legal services. It makes sense therefore to make that handbook as easy to use as possible. ‘So it has been created in just that way, making it easy to navigate and simple to search. This should help the profession adopt the consumer-led principles of OFR, and ensure resources are deployed on areas where they are needed most.’ The handbook can be read on the SRA site.last_img read more

Costs rule ‘will fuel litigation’

first_imgLitigators may face a tough new rule on the ‘proportionality’ of their costs that could fuel satellite litigation and uncertainty, experts warned last week. Nicholas Bacon QC, a member of both the Civil Procedure Rules committee and Civil Justice Council group dealing with implementation of the Jackson reforms, said that a number of options were available to deal with Jackson’s proposals on proportionality, which are intended to ensure that costs do not outweigh the sums at stake. Bacon, speaking in a personal capacity, said he believed that a rule would be introduced departing from the current case law which allows judges to take an initial ‘global approach’ to the proportionality of costs, before conducting an item-by-item examination. If the initial global test points to disproportionality, each individual item must be considered  ‘necessary’, not just ‘reasonable’, under current rules. Bacon said: ‘The likelihood is that there will be a change in the test that runs along the principle that you look at reasonableness and necessity on an item-by-item basis, and after that you have a longstop, whereby the judge can disallow further costs. ‘If that’s the case, there will be a much tougher test on proportionality. There is a discussion that the longstop should only apply in rare and exceptional cases.’ Bacon, speaking at a LexisNexis costs conference, added: ‘If a longstop rule comes in, it is inevitable that you will have arguments about costs. There are going to be lots of test cases, and great uncertainty.’ Senior costs judge Master Haworth said that Jackson’s proposals on proportionality were ‘another recipe for satellite litigation’. He noted that while the so-called ‘costs war’ had currently proceeded toward an ‘amicable truce’, the Jackson reforms were likely to lead to ‘new skirmishes’.last_img read more