Where to start?

The fall out surrounding the UK Chancellor’s Budget statement continues.  The House of Commons Treasury Select Committee has said that the Chancellor’s plans to scrap the 50p tax rate don’t add up.  In addition it criticized the numerous Budget leaks.  An article on this from the Daily Mail online can be found here.

I am surprised that more has not been made of the change to the 40p income tax band.  One of the arguments put forward for reducing the top rate of income tax was the effect it was having on entrepreneurship.  I cannot see how massively increasing the number of people liable to pay income tax at the 40p rate compliments that argument.

Then there is the charity furore and the apparent contradictions in the arguments put forward by the UK Government in support of this policy.  The fact that some UK Government Ministers fought extremely hard to reduce the top rate of income tax is well documented.  Now the UK Government is criticising the fact that rich people don’t pay a high enough rate of income tax.  In addition, the UK Government has made it clear they wish to increase charitable giving.  Only a year ago, in the 2011 Budget, the UK Chancellor announced proposals to support giving, such as a lower rate of inheritance tax for those leaving 10% of their estate to charity.  The UK Government started by saying that the policy is needed by alleging that high earners are using donations to dubious charities to reduce their income tax bill to almost zero.  Now it is talking about fairness.  Will this policy even survive the summer?  An article from the STEP online journal on this issue can be found here.

HM Treasury has released figures showing the extent of tax avoidance by the UK’s so called “super rich”.  Robert Peston has written an excellent article on this.  His comment on the contrasting approach taken by George Osborne and his Labour predecessors is particularly noteworthy.  If the report does tell us one thing, it is how complicated a picture this is.  One fact does though stand out.  73% of those earning over £250,000 were paying an average tax rate above 40% in 2010/11. Robert Peston’s article from the BBC news website can be found here.

Good to see the Church of Scotland entering the earnings and taxation debate.  A Kirk commission has issued a report on the “greed and inequality” of the bonus culture and tax avoidance.  An article from this from the Herald can be found here.

Now to what is expected of HMRC in the next year.  HMRC’s remit for 2012/13 is:

• improving tax collection
• delivering cost reductions
• improving services for individual and business customers
• Real Time Information
• tax policy and the policy partnership

The context to this is fewer staff and a smaller budget.  More on this can be found here.

The Scottish Parliament this week endorsed a legislative consent motion which effectively allows the UK Government to pass the Scotland Bill, also known as “Calman minus”, at Westminster next week.  Have I anything else to say on this?  No.  The term “Calman minus” says it all.  An article from the Scotsman on this can be found here.

The Guardian reported recently that Amazon’s tax affairs are being investigated in the US, China, Germany, France, Japan and Luxembourg.  HMRC have refused to confirm whether it is also investigating Amazon.  Amazon is the largest retailer in the UK.  The Guardian also reports that Amazon paid no UK corporation tax last year.  This is primarily because the US parent in 2006 transferred ownership of the main Amazon.co.uk business to a Luxembourg company.  It is not just the UK Government that is being asked questions about this company.  The Scottish Government is also being asked questions relating to a £10m grant.  Of course if the relevant tax powers were devolved to the Scottish Parliament, the left hand might have more of a chance of knowing what the right hand is up to.  Articles from the Scotsman and the Guardian on this matter can be found here and here.

Another week and another VAT issue.  The Church of England fears church renovation projects could be scrapped because of planned changes to VAT set out in the UK Budget.  From October this year HM Treasury will charge VAT at 20% on approved alterations to listed buildings.  Presently this is exempt from VAT.  The Church of England thinks the change will cost it £20m a year.  HM Treasury says funding will be available to ensure church renovations are not cancelled.  A report from the BBC news website on this can be found here.  The BBC report notes that a “source close to Chancellor George Osborne is reported as saying that this proposal was about ensuring a millionaire wanting to build a swimming pool in the garden of their listed mansion had to pay VAT on it.”

HMRC is improving and streamlining its processes for customers who need to deal with them following a bereavement.  HMRC is creating dedicated teams who will be responsible for dealing with PAYE and Self Assessment for bereaved customers.  The main form which customers use to finalise the tax affairs of the person who has died, R27, has been redesigned following feedback from customers and tax specialists to make it easier to complete.  More on this can be found here.

A “fat tax” is back on the agenda.  The Academy of Medical Royal Colleges has called for stronger measures to reduce obesity in the UK.  The first phase of the Academy’s campaign will try to find out what works.  It will review evidence for diets, exercise, taxation, minimum pricing and changing advertising and food labeling.  The Academy has also blamed the UK Government’s previous strategies and irresponsible marketing for aiding to obesity issues.  An article on this from the BBC news website can be found here.

There are suggestions that the German Government’s recent renegotiation of its withholding tax agreement with Switzerland may tempt the UK Government to try and do the same with its own Swiss agreement.  The UK Government has though already changed it once already.  An article on this from the Guardian can be found here.

Let’s finish with the “Buffett Rule” as it sounds like it might be about food and I am feeling peckish.  Sadly, the Buffett rule is not about food but instead a tax plan that would apply a minimum tax of 30% to individuals making more than a million dollars a year.  An editorial in the Wall Street Journal calculates that the Buffett Rule, which is supported by President Obama, would lose $80bn a year from USA federal tax revenues.  The US Senate has in fact this week voted to block the Buffett Rule.  The article from the Wall Street Journal can be found here and a BBC website news report on the Senate vote can be found here.

Have a good weekend and good luck to all the teams competing at Scottish Rugby’s Cup Final day at Murrayfield on Saturday.

The facts
Inner House case considering a property dispute over Broadford Church and Manse on Skye between two factions of the Free Church of Scotland.  A Feu Charter in 1869 set out the terms of the trust in favour of Trustees for the “Congregation of the Body of Christians called the Free Church of Scotland in the Parish of Strath, Skye”.

In 2000 a split occurred when a substantial minority of the Church (the break aways) separated themselves from the rest of the Church (the majority) taking themselves outside the system of church government (although there was no difference between the factions on religious doctrine). The congregation at Broadford was divided and the majority brought an action for declarator that (amongst other things) the church and manse belonged to the majority rather than the break aways. They also sought a conclusion preventing the break aways from trespassing on and carrying out renovations to the manse

The decision
An extra division of the Inner House found in favour of the majority.  It was clear from the trust deed that membership of and participation in the institutional structures of the Free Church was an essential feature of the trust. Whilst the break aways claimed that, following the division in 2000, they continued to adhere to the law and practice of the Free Church, they did not claim to maintain the continuity of the Church government system nor did they seek to argue that they remained part of the system of church courts. Participation in and membership of the system of church courts was the decisive principle on which the Broadford property was held on trust and the arguments put forward by the break aways were consistent only with the view that they had withdrawn from the system of church courts existing prior to the division.

Some general principles
After reviewing the authorities, Lord Drummond Young highlighted a number of principles and factors which would be taken into account when considering property disputes within churches. He noted that property rights will always be dependent on the circumstances of the individual case and in particular the terms of the trust agreement under which the property is held but also considered the following:

Majority rule
The principle of majority rule (i.e. that property should simply go to the majority of the money contributors on any division) was prevalent in older decisions but was rejected in the judgement of Lord Eldon in the House of Lords in Craigdaillie v Aikman (1813). Lord Drummond Young also took the view majority rule is unsatisfactory:

 “In the first place, it is not clear who the majority are: are they the majority of the congregation, or the majority of the members (as against adherents) among that congregation, or the majority of the elders, or a majority of the money contributors? If the last of these, how are the contributions of the various contributors to be assessed? In the second place, and more importantly, the principle of majority rule would permit a bare majority of the congregation to effect a fundamental change in the doctrines taught in the church or the religious practices followed there.”

The distinction between church property and congregational property
There is an important distinction to be made between property which is to be held for the general governing body or ecclesiastical judiciary of the church in question (especially from the funds of parties other than the parties in the congregation) and property which is to be held in trust for a congregation and its members. Church property must be used for the benefit of those whom the Church acknowledge as part of the church. Congregational property is the property of the congregation alone and the governing body has no interest or power over the property.

Adherence to fundamental doctrine
The court must scrupulously respect the religious opinions of the parties involved in the litigation especially the differences of opinion which the parties consider important. Those who adhere to the principles on which the congregation was united will not forfeit the property merely because a majority has decided otherwise. In the event of a division, the property held for a congregation will go to the part of the congregation which adheres to the fundamental principles of the church as identified in the churches original documents.  Those fundamental principles:

“may take a number of forms. Particular doctrines may be important, but so too may be a system of church government, and so may adherence to specific structures of church government.”

Unsurprisingly, however, it seems that the most important principle is that the trust deed rules.

The full judgement is available from Scottish Courts here

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.