Energy Performance Certificates (EPCs) – New Requirements regarding the Grant of New or Renewal of Leases from 1 April 2018

The legislation for Energy Performance Certificates (EPCs) has been in place since 2008 and provides that an EPC is required if a property is marketed for rent (as well as sale).  However the Energy Efficiency (Private Rented Property) England and Wales Regulations 2015 will bring phased minimum energy efficiency standards (MEES) into force which may make it harder to rent out a property.

MEES will apply only to assured, assured shorthold and rent act tenancies and not, therefore, to properties rented to companies or non-Housing Act tenancies.  The first phase of MEES came into force in April 2016, and provided that tenants can request landlord consent (which cannot be unreasonably withheld) for improvements listed on the EPC to be completed.

The significant change from 1 April 2018, is that it will be unlawful to grant new, or renew, leases with an EPC rating of less than ‘E’ and from 1 April 2020 that provision will apply to all let properties.  Landlords with properties that have an EPC rating of less than ‘E’ will need to carry out works to improve the energy performance of the building to a rating of ‘E’ or higher, or they will face civil penalties albeit there are certain exemptions.

It will be sensible for all landlords to consult their agents or surveyors at the earliest opportunity to consider the implications of this legislation for any properties they may own and thereby establish a practical action plan so that any work that may be necessary can be spread over a reasonable period.

Principal Residence Dilemma

“It is quite simple, our investments and savings are covered by our nil rate bands – the house which is our biggest non-income producing asset, can be gifted to the children and after seven years will fall outside our estates for inheritance tax.”

What could be simpler – but a straight gift of the house to children does not work for inheritance tax as it will be caught by the ‘Gift with Reservation’ rules.

The principal residence is often perceived to be an ideal asset to gift on to the children because

  • It is the most significant element of the estate
  • It is non-income producing and future occupation is secured as it will be owned by the children.

The Gift with Reservation rules catch a straightforward gift of the house to children, quite simply because a benefit is retained (continued occupation and enjoyment). As a consequence, the gift is considered a non-event for inheritance tax purposes and the value of the property is subsequently brought into charge to tax, even if the gift took place over seven years previously.

Schemes have been developed to get round the problem, but each has its own drawbacks and the Inland Revenue have made it clear that they will look closely at each scheme and will attack them if they do not comply with the current rules.

New anti-money laundering requirements affecting trusts and estate administration

HMRC has launched its “trusts register” for trustees and personal representatives of complex probate matters.

Trustees and personal representatives now have a single point of online access to comply with their new registration and reporting obligations.  All trusts and estates with a tax liability must be registered and provide information about the trust assets and the identities of settlors, other trustees, beneficiaries, those with effective control over the trust and anyone identified in a document or instrument relating to the trust.

On an annual basis, the trustees will now have to ensure and confirm that the trust register is accurate and up to date, even where trusts were registered under the old system (Forms 41G).  The registration deadline for new trusts has been extended to December 2017 and the registration deadline for existing trusts falls early in 2018.

This provision may affect you if you are involved with sorting out someone’s affairs after they have died, or if you are a trustee of a trust of any kind.