Thursday, 23 February 2017

A simple way for non-dom married couples to manage the Inheritance Tax on UK residential property from 6 April 2017


Offshore companies holding UK residential property will no longer be opaque for UK Inheritance Tax (IHT) purposes from 6 April 2017.  The change is being achieved, courtesy of the Finance Bill 2017 as currently drafted, by removing IHT ‘excluded property’ status from an interest in a closely held company (see the 15 December 2016 blog for a brief definition) which derives its value, directly or indirectly, from UK residential property. 

Thursday, 9 February 2017

Finance Bill 2017 tax changes: how can UK resident non-doms protect their offshore trusts?


To date, UK resident non-doms may not have been greatly impacted by the UK tax system’s plethora of measures to try to get the foreign income and gains received by offshore trusts (i.e. trusts that are not UK tax resident) taxed in the UK.  This is because one of the key anti-avoidance provisions, the ‘S.86 Settlor Charge’ which can make a trust’s settlor liable for the offshore trust’s gains, only applies to settlors who are both resident and domiciled in the UK.

Thursday, 26 January 2017

Long term UK resident non-doms to be deemed UK domiciled


The UK Government has released draft legislation giving effect to its proposal to deem the domicile status of certain UK resident non-doms to be UK domiciled, regardless of their actual domicile.

The changes only apply to non-doms who, on or after 6 April 2017, have been tax resident in the UK for 15 out of the previous 20 tax years.   For example, in tax year 2017/2018 beginning on 6 April 2017, the changes would only affect any individual who has been resident in the UK continuously since UK tax year 2002/2003 or earlier.  These non-doms will be deemed to be UK domiciled.

Becoming deemed UK domiciled has a number of implications for UK taxes.

Thursday, 12 January 2017

‘Toxic’ survivorship clauses: does your Will contain one?


Do you have a survivorship clause in your Will?  Chances are you do, if you leave assets to someone outright in your Will.  The mischief that these clauses are designed to avoid is this.  If A gives a gift to B in his Will and B dies the day after A, B’s estate will get the gift and it will be B’s Will that decides where A’s gift ends up.  However, in these circumstances, A may have wanted someone else to get the gift instead (A may not like B’s choice of heirs!).  Survivorship clauses are meant to solve this problem.  They also prevent the delay associated with the same money being administered through two separate estates and can reduce the total Inheritance Tax bill on both estates. 

Survivorship clauses introduce a condition of survivorship to an otherwise outright gift in a Will – for example: ‘I give £100,000 to my nephew if he survives my death by 28 days’.  Sometimes a catch-all survivorship clause is included instead; for example: ‘My estate is to be divided as if any person who dies within 28 days of my death had predeceased me’.  However, this exact catch-all phrase unfortunately caught out the estates of the late Mr and Mrs Winson, as recently decided in the case of Jump v Lister [2016] EWHC 2160 (Ch).

Thursday, 15 December 2016

UK residential property in offshore structures: more surprises from the Government


The Government has confirmed its intention to make UK residential property held indirectly by non-doms through an offshore structure chargeable to UK Inheritance Tax (IHT).  As planned, this will begin on 6 April 2017.

Although the proposal was first announced as far back as July 2015, draft legislation effecting this change was only published on 5 December 2016 – and it contains some surprises.

Thursday, 1 December 2016

Get ready for another ATED valuation date


The Autumn Statement on 23 November contained no further detail about how the Government’s proposals for achieving Inheritance Tax transparency for offshore structures from 6 April 2017 is going to work in practice.  However, in rather ominous fashion, the Government did use the occasion to confirm that the changes are going ahead as planned from 6 April 2017. 

Non-doms owning UK residential property through offshore trusts, companies or other vehicles need to get their skates on if they are to get any reorganisations finished by 6 April 2017 (see my blog of 3 November 2016 for one reason why doing so may be desirable).  However, there may be another good reason – some may find their company’s Annual Tax on Enveloped Dwellings (ATED) bill goes up substantially too.  Here’s why.

Thursday, 17 November 2016

Appointing joint attorneys? Here’s a welcome clarification of the law


Lasting Powers of Attorney are an essential wealth management tool for anyone who directly holds UK assets and can name at least someone whom they trust to take decisions on their behalf.  They are often made by individuals concerned about who would continue to make decisions about their finances or their health and welfare if they ever lost capacity to do so themselves.  They are increasingly popular – registrations of Lasting Powers topped 533,000 in the year to end March 2016; a 35% increase from the previous year.  The increasing number of registrations indicates that there are more Lasting Powers in circulation. 

Many clients want to appoint more than one attorney.  The Lasting Power of Attorney legislation permits the appointment of both attorneys and replacement attorneys, the latter acting as substitutes.  Joint attorneyships are not uncommon.  Take the situation of an individual – James – who wants to appoint his wife Amy and his brother Bill as his attorneys, to act jointly in relation to his finances.  His lawyer tells him that it would be prudent to name a replacement attorney too and he chooses his son Christopher.  But his son is still in his twenties and, if either Amy or Bill or both were able to act, he would like them to do so in preference to Christopher.  This simple sounding request has had English law in knots for a while.