Funeral Plan Compensation and Leasehold Reform

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BBC Sounds. Music, radio, podcasts. Hello, welcome to this Moneybox podcast. The government plans to ban the sale of new leasehold flats in England and Wales. But what about the five million householders already in one? Winter fuel payment is back, but only in Northern Ireland and only £100. Fewer small online traders will have to fill in a self-assessment tax return, but they'll still have to pay the same amount of tax. First though...

There'll be no compensation for more than 46,000 people who lost thousands of pounds each when the funeral plan firm Safe Hands went bust three years ago. The regulator, the Financial Conduct Authority, was told this week it should consider compensating them after a report by Rachel Kent, the Complaints Commissioner, set out the FCA's failings over safe hands.

But as soon as that recommendation was published, the FCA said it didn't accept it was at fault, that it didn't regulate the funeral planning firm at the time, and no compensation would be paid. It told me it had been aware of the Commissioner's report for some time and had considered it. carefully before rejecting the findings. We'll play the first interview with the SCA shortly, but first, Dan Whitworth's been following this story which we first looked at some years ago, Dan.

Yes, indeed, Paul. And as you said, more than 46,000 people paid money to Safe Hands to cover the cost of their funerals before the company went bust in 2022. Now, that happened because it was effectively refused registration. by the FCA when it took over responsibility for regulating these plans. Now many people complained about the firm and about the way the FCA handled it before they were regulated and 44 of those complaints reached the complaints commissioner.

Now, she confirmed in her 15-page report that there were a large number of allegations about failings on the part of the FCA in relation to safe hands and what it knew about the firm before it collapsed, of course, taking thousands of customers.

money with it. Now whilst the Commissioner Rachel Kent didn't agree with all the complaints, she did say that the regulator was tipped off about activity at Safe Hands and didn't follow it up. And that is why she said it should look again at compensation.

for those affected. And we're talking about people like Denise Hudson here, Paul. She paid safe hands nearly £2,500 so her relatives wouldn't have to worry about the cost of her funeral when she dies. I think the whole thing... the regulation of safe hands it's appalling really because this had come to light they knew it was going on and yet they did nothing about it in the first instance and you know i just think it's it's really bad and they've written that

that 15 page report and in the end of the day are we going to get anything back this has come at a time when i'm still going through a lot of emotions and looking at this it's it's just like who's trying to apportion blame on who i just want this settled i want this to go higher if needs be

I think people who are put into it just need to get back what they put into it and need compensating for all the anxiety and stress and worry that we've been put through because of this. I do hope that this will achieve something and that everyone putting their views forward will help or else all this will be in vain and that can't happen.

Now, as we said at the time, the funeral plan industry was unregulated, but plans were being drawn up to bring them under the remit of the Financial Conduct Authority. But until they were, customers weren't eligible for the financial service. compensation scheme because the funeral plan industry didn't become regulated until July 22. Now that is five months after safe hands went into administration.

Now, the administrator said earlier this year that plan holders could receive initial payments of between just 8.5p to 12.5p. for every pound they lost. And that's by the end of this coming June. That's three years after the company collapsed. And I should add that the Serious Fraud Office is investigating the activities of Safe Hands before it went out of business. Thanks, Dan.

I played Denise's clip to Matt Brewis, he's Director of Insurance at the Financial Conduct Authority. We have great sympathy for Denise and the thousands of other people who have lost money through the suspected fraud at Safe Hands. uh works with the government to bring into regulation so that this type of situation does not occur again the people will have

access to the financial services compensation scheme and the financial ombudsman scheme in the future were there to be regulated failures. Yes, but from her point of view, she lost thousands of pounds in a financial product. You're the financial regulator. She feels you failed her and should compensate her. And indeed, all the others, and I have to say the complaints commissioner, agrees.

the failure of safe hands happened prior to regulation. If we go back to what happened here and the complaints commissioner was dealing with a complaint about how the FCA went about the information it received and what action it took and in our response we've set out to receive

thousands of pieces, 34,000 pieces of data a year and we have to decide how best to use that. And for a firm like SafeHands, which was not regulated, at the time well hang on you say it wasn't regulated it was only outside your remit because it was supposed to be fulfilling the rules to exempt it having a trust where a separate trust where customer money was kept

And it was suggested to you in 2021 that there were problems. So you could have brought it into your remit by investigating and saying, sorry, you're not following the rules. You should be regulated. So the way the Complaints Commissioner viewed it and the remit we had, this blocked the firm from being part of our remit. It was outside because it applied an exemption. But it wasn't fulfilling the terms of that. That's exemption, wasn't it? The money was not safe in a trust. It's disappeared.

So because the firm was not authorized by us, we did not have the powers that we would have over the firm now to ask it for the information, to compel it, to provide it to us.

and as this was going through the process of becoming authorised a few months after we received this intelligence uh that same year in 2021 we received safe hands application for authorization we swiftly reviewed that rejected it and the firm failed very shortly thereafter it took a few months between it applying for authorization and you telling it you didn't think it would get it and in that time it was there apparently

mis-selling products to people, didn't you realise that was a dangerous time for customers? Of course, but we had to follow due process and we had to investigate.

whether or not it wasn't clear to us if we go back to that period we had had this kind of correspondence that had come in and this information but actually we had to verify whether or not it was accurate this was a priority uh we did focus on it but we still need to do it properly thoroughly as any firm would expect us to when they when they apply for authorizations as soon as we reached a point that we felt this firm

would not meet our standards, we told them and they agreed to stop selling the plan. It's the position of the FCA that basically it's blameless. Everything it did was right. It couldn't have acted differently. Despite the fact the complaints commissioner doesn't share your view. So there are certainly different routes that we could have taken to investigate the information that we received. In our view, it would not have resulted in a different outcome.

She does agree it might not have made a difference, but she did say the Financial Conduct Authority has not made a compelling case for why it did not ask the firm for information, to ask if it was inside the... the circle that you can regulate it in. So she thinks the answer you just gave me is simply wrong, that you should have done it and you could have done it. So we take a different view.

to that uh based on based on our experience and based on the information that we that we had at the time and the quality of that information all of that uh is now with the serious fraud office investigating and have been since 2022 the suspected fraud at Safe Hands. Yes. I mean, people might say, what's the point of a complaints commissioner if you just reject her findings? I think there are parts to it. We...

have reached a different view. She has published her report and transparently we have published why we think the approach to it. we took was correct and got us to the same conclusion where unfortunately many customers have lost money. You've referred yourself to the Treasury Select Committee. If it recommends you revisit this decision, will you ignore that too?

We will engage with the Treasury Select Committee in any recommendations that it does if it chooses to make to us in a transparent and open way. But you might still reject them. We will engage in a transparent and open way. Matt Brewis from the Financial Conduct Authority. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed.

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More than five million people who would call themselves homeowners in fact only own the right to live in their flat or house for a certain number of years. They are leaseholders and the building itself and the ground it stands on are owned by someone else called the freeholder. It's a feudal system that pretty much only exists still in England and Wales. Scotland scrapped it in 2000. There have been many attempts to give leaseholders more rights, but the rules are complex.

However, this month, the government has announced plans in what is called a white paper to end the sale of newly sold flats. Instead, they'll be sold with commonhold. That's a system already used in Scotland where homeowners collectively own the building and the land. It also plans to improve the rights of existing leaseholders. Ellie wants to know how that will work for her.

A couple of years ago, I bought my flat in East London and when I bought it, I knew that I would need to extend the lease within the first sort of five or six years. But I've been continually holding off from doing that. And now I've just heard that there's a new white paper. And I don't really know what that means for someone like me.

I have 84 years left on my lease and I don't know whether I should keep waiting to see if the reforms will benefit me or if I should just get on with it because each year I wait it gets more and more expensive. And then obviously at 80 years, it becomes really expensive. I think tens of thousands more. I'm not sure exactly how much. Another issue that perhaps complicates it is it's an ex-local authority flat.

So my flat is made up of leaseholders and tenants. I really, really appreciate that they're trying to make improvements. They're trying to make it better for leaseholders. But the biggest issue is the uncertainty.

Well, with me in the London studio is Liam Spender from the Leasehold Knowledge Partnership, which campaigns for the rights of leaseholders. Liam Spender, Ellie mentioned that white paper there, which announced the beginning of the end for leasehold. Talk about that first. What are the key changes in it?

So the most significant change is the government will prevent any more leasehold flats being created. They'll all have to be created common hold, which means the people who live in the building will... take all the decisions in relation to that building, which is a major change. When? Well, there's no timetable. I mean, the government's given a commitment that this will happen by the end of the current parliament, which may be as late as 2029.

But to give them credit, at least they're starting early in their term. And there is a common hold system already in place in Scotland. How does that differ from leasehold? What will it mean for things like service charges and ground rents? Well, it won't have any effect on ground rents. I mean, they don't exist for new flats now. It won't have any effect on existing ground rents. But there won't be any ground rents in Commonwealth.

control the building will make their own decisions on service charges so they will choose their own agents and they will decide how that agent runs the building. Yes, the Residential Freehold Association, the trade body for the largest freeholders, says that it firmly believes leasehold is the most effective way of managing a large, complex apartment building. I mean, they are the professionals. Will a group of flat owners who just take it over be able to cope with those responsibilities?

Well, the Residential Freehold Association would say that, wouldn't they? I think giving people control over their own money and their own building is a good thing and it will change the culture. So instead of being them and us, landlord versus tenant.

will be we together. What can we together do to improve our building? As they do in most of the rest of the world. Exactly. But what will this change mean for current leaseholders? I mean, we heard from Ellie, she's coming to the point where her lease will cost more.

99 year lease, presumably when you've been there 15 years, it's an 84 year lease. She's holding on, hoping for improvements. Is that going to happen? Well, everybody in this situation should take their own independent advice because it is complicated. I mean, broadly, there are two choices. If you think you will need to remortgage or sell...

then you may want to take advice on whether you should get an extension under the current system. If not, then you may want to wait. But we don't know what the new system will look like yet. So there's risk either way. need their own advice. So these are changes under an existing Act that the last government passed but didn't introduce mostly, the Leasehold and Freehold Act 2024. Correct, yes. So we've got to wait for the government to say how it's going to implement that and when. That's right.

Right. And they've given a timetable for that. Parts of it are coming into force. There's a consultation on the insurance reforms, which is just closed. But the key reforms... are currently under attack by judicial review in the High Court. So a group of seven of the...

Groups of seven of the largest freeholders, including the Grosvenor estate, the Duke of Westminster's property business, are challenging these reforms. And that will slow things down. Is that the danger, though, that there are some very large, what you might call...

interested interests in this, who can afford to go to court and try to prevent things. Is that going to slow perhaps the whole of the government's plans down? Well, the government says they're committed to it, but the story of these reforms from 1967 on... would, is that the vested interests have lined up against them.

and attack them. So the government needs to dig in, put the resources, fight the fight for the 5 million people affected. Now, a lot of people buy in what's called shared ownership, where you own a bit of it. and you rent the rest. Is that going to be dealt with by these reforms? Are they going to get the same rights as other leaseholders? So that, again, is under the Leasehold and Freehold Reform Act 2024. There are measures to improve the...

the lot of shared owners to give them a statutory right to a lease extension, for example. But unfortunately, the government's identified errors in the legislation that have to be fixed by another. Act of Parliament. So that may be a while coming as well. And very, very briefly, what's the one key change, the one message to the government from you?

They should get on with it and they should prioritise the interests of 5 million leaseholders. Get on with it. A good message. Liam Spender from Leasehold Knowledge Partnership. Thanks.

Now, around a quarter of a million pensioners in Northern Ireland will get £100 towards their heating bills starting next week. The payment from the Northern Ireland Executive will be made to those who previously received the winter fuel payment but are no longer eligible.

Devlin's here. Ema, how will it work and who'll get it? The winter fuel payment was previously paid to all pensioners and was worth £200 per household, or £300 if at least one of the people there were aged 80 or more. But as we reported at the time...

The UK government cancelled it last year except for people who receive pension credit or some other means-tested benefits. Northern Ireland pensioners who didn't get the winter fuel payment this winter because of that cut will instead get a one-off pension aid.

fuel support payment of £100 per household to help pay the bills. The money will start arriving in the bank accounts of eligible people from Friday and you don't need to apply for it. And there's also a scheme being set up in Scotland. How much will they get there and when?

It is a similar scheme but doesn't start until next winter. Then every pensioner household in Scotland will receive a winter fuel payment. As in the rest of the UK, those who get pension credit or other benefits will receive a £200 payment or... £300 if they're over 80 and all other pensioner households will get £100. Thanks, Ima.

This week, the government announced it was going to simplify the tax system for people who have a small side hustle, a sort of self-employed enterprise that has sales, not profits, sales up to £3,000 in a year. They have a trading allowance of £1,000 and no tax is due if their total sales are worth up to that amount. But once their sales top £1,000, they must fill in a self-assessment form, even if their profits are negligible. In future, and I have to say what future...

future means is not clear in this story either. They will not have to fill in the tax return if turnover is £3,000 or less. James runs Dargan Dog, which makes a personalised lifetime tag for dogs. at the moment it's not making me enough to sustain it completely so i still work three other jobs at the moment and with regards to the tax side it's been very hard even with an accountant to try and get it all sorted due to HMRC and how it can be quite complicated for someone who's very new to...

Starting a business, doing your tax return and things like that is extremely time consuming. Yes, I prefer to have more money to put back into the business. That would be perfect. But obviously, I'm not going to expect that. If they're just going to give me time instead of time and money, then I'll take it.

Well, listening to that is Emma Rawson from the Association of Tax Technicians. Emma Rawson, Jade, sort of half pleased there anyway. Just clarify for us what this change is because there's been a lot of confusion in the press that I've seen. Yeah, absolutely. So this is a change to when people with small amounts of trading income, so typically side hustles, selling online, for example, have to file a tax return. So currently, if you make more than £1,000 of income...

and as you said that's income before expenses so not profit, you have to file a tax return and at some point in the future that will move up to £3,000. So that means in effect if you get income of between £1,000 and £3,000 from trading, you won't have to file a tax return anymore. That doesn't mean you'll have nothing to do. You'll have to use instead a new online service that's going to be simpler, easier to interact with to let HMRC know how much tax you need to pay and pay that over.

Right, so that's a new system that we'll see at some time in the future. People like James, who has three or four jobs or businesses, does this rule apply to each of them or to the total? So if you've got more than one small business, it will apply to the total, we understand. There's quite a lot of things that still need to be confirmed about the detail of this announcement. But my understanding is that it would look at the total. So if you've got three, you'd have to add all three together.

And just clarify something else for us, because not all selling online is trading, is it? eBay... Etsy, Vinted and the others, have started sending information to HMRC about sales income, but some of those people won't have to pay tax. What counts as taxable income and what doesn't?

Okay, so in order for it to be taxable for this purposes, you have to be trading. Now, if what you're actually doing online is selling old clothes, clearing out the attic, getting rid of an old bike you don't need anymore, selling your own personal possessions, that's unlikely to be trading.

What we're looking for is an intent to make money. So you might be making things to sell with a view to making money or buying things in to resell. But it's really got to be that intent that you're doing it. You're making some action to make the money, not just selling your old possessions.

Yes, so just selling things from the loft or selling clothes you don't wear any longer, that doesn't count. But if you're buying them to sell, then it does. Now, this new rule, as you said, is about reporting. That's if you've got a very small business. You won't have to fill in the self-assessment form. And just tell us a bit more, if you know it, about how they'll pay the tax. There's this new online system. Is that going to be simpler just for HMRC apart from us and save them some time?

Yeah, so it will be simpler for the individuals in question so they won't have to fill out a complete full tax return as they do now. We don't actually have the details of how the system will work, but we assume it will be an online service that's fairly easy to interact with. And that will also benefit HMRC. We've got a record number of people in self-assessment at the moment. So the idea is that by taking these people out...

We not only save them a bit of time, it saves HMRC the time and the expense of administering self-assessment for them. Yeah, so the word streamlining features in the press release. So it's as much about that as about actually helping individuals. Of course, it will help. It will help some people. Is there a danger, though, that if...

I mean, apart from all the confusion about whether it's turnover or profits or whether you have to pay anything in the first place, might it mean people just don't bother paying the tax? They'll hear, oh, it's £3,000. I don't have to do anything now. They don't have to report it or they won't pay.

Absolutely. I think that's a risk. So it's really important to note that the amount you can get tax-free is staying at £1,000. The only thing that's moving is when you have to file a tax return. So I think that's a real area possibly for confusion that people hear. £3,000 and think, OK, I have nothing to do. I think also if you're taking people out of self-assessment, that might make them think they have nothing to do. And that's not true. They might still have to report their tax.

using the new system. So I think HMRC are going to have to be incredibly clear when they write out to people about this and in their communications to avoid that. Thanks very much. Emma Rawson from the Association of Tax Technicians. And emails are coming in. Let me just look at them. There's one about the Financial Conduct Authority. David doesn't think people should get compensation. And Judith thinks that it's so complicated.

I'm sure she's right about that, that it's not going to be simple to change things. Well, understanding tax, and indeed leasehold can be taxing, but Moneybox is here to take the taxing out of tax, and that's despite the efforts sometimes of the Treasury and HMRC. Never miss an episode by subscribing to the podcast on BBC Sound.

Of course, you can always hear the news first by listening live midday every Saturday on BBC Radio 4. And if you have a burning money issue that really sets you alight, email us. moneybox at bbc.co.uk or send us a message or a voice note on WhatsApp 0306 783 183. We do read and listen to them all and it might open that door onto the show for you.

In this podcast, the reporters were Dan Whitworth and Ima Devlin, researcher Joe Krasner, studio manager Chloe Wilson. The editor was Sarah Rogers. I'm Paul Lewis and this was a BBC News Money and Work production for BBC Sounds. And now... The secret's in your DNA. It's a parent's nightmare. They said, oh, it's a boy. And I was holding my hands out, ready to cuddle him, and they took him away. A switch at birth.

discovered with the gift of a home DNA test. The so-called brother that we grew up with wasn't a brother, and there's someone out there, if he's still alive, is. A race against time. I don't want this woman to leave this earth not knowing what happened to her son. The Gift from Radio 4 with me, Jenny Kleeman. Listen now on BBC Sounds.

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Through frontline reporting, global stories and local insights, we bring you closer to the world's news as it happens. giving you unlimited articles and videos, ad-free podcasts and the BBC News Channel streaming live 24-7. Subscribe to Trusted Independent Journalism from the BBC. Find out more at