“Whenever you do a thing, act as if all the world were watching.”
- Thomas Jefferson
We are thrilled to introduce Issue 17 of the Private Client magazine, 2024 In Review: Private Client Around The World. This edition explores the dynamic landscape of Private Client across the globe, featuring an engaging collection of articles contributed by experts from within the community. Keep an eye out for more exciting events and thought-provoking content as we continue to celebrate and unite the global Private Client community.
As we wrap up the final issue of 2024, we want to express our sincere gratitude to everyone who has contributed to the Private Client publication throughout the year. Wishing you all a wonderful festive season, and we look forward to engaging with you again in 2025!
The ThoughtLeaders4 Private Client Team
Paul Barford Founder / Managing Director 020 3398 8510
Maddi Briggs Strategic Partnership Senior Manager 020 3398 8545
email Maddi
Chris Leese Founder / Chief Commercial Officer 020 3398 8554
email Chris
James Baldwin-Webb Director, Private Client Partnerships 07739 311749
email James
Rachael Mowle Business Development & Partnerships Director 020 3398 8560
email Rachael
INTRODUCTION CONTRIBUTORS CONTENTS
ABOUT
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Lydia Kember, CRS
Samantha Ruston, CRS
Ashling Cashmore, CAF
Iñigo Egea Pérez Carasa, Cuatrecasas
Cara Hough, Irwin Mitchell
Mark Greer, CAF
Michael Lewis, EY
Collas
Margaux Pfister, BWG Associés
Camille Anger, BWG Associés
Frederick Bjørn, Payne Hicks Beach
P r i v a t e C l i e n t C o n t e n t i o u s T r u s t s C i r c l e E u r o p e
2 4 - 2 5 A p r i l 2 0 2 5 ( T h u r s d a y & F r i d a y )
L e M i r a d o r R e s o r t & S p a , V e v e y , S w i t z e r l a n d
I n i t s f o u r t h s u c c e s s f u l y e a r , t h i s e v e n t h a s p r e v i o u s l y t a k e n p l a c e i n t h e U K , a n d f o r t h e f i r s t t i m e ,
w e ' r e m o v i n g l o c a t i o n s t o t h e b e a u t i f u l m o u n t a i n s e t t i n g o f L e M i r a d o r H o t e l i n V e v e y , S w i t z e r l a n d .
T h i s e v e n t i s a n e x c l u s i v e T L 4 C i r c l e e v e n t a n d i s b y i n v i t a t i o n o n l y C u r a t e d b y o u r C o - C h a i r s a n d A d v i s o r y
B o a r d , t h i s C i r c l e b r i n g s t o g e t h e r k e y p r a c t i t i o n e r s f o c u s i n g o n b o t h n o n - c o n t e n t i o u s a n d c o n t e n t i o u s p r i v a t e
c l i e n t w o r k W e a r e c u r r e n t l y w o r k i n g w i t h t h e C o - C h a i r s a n d A d v i s o r y B o a r d o n a n i n t e r a c t i v e a n d n e x t l e v e l a g e n d a f o r t h e d i s c u s s i o n s . T h e r e a r e n o s e t - p ie c e p r e s e n t a t i o n s o r p a n e l s e s s i o n s a n d p u r e l y
d e s i g n e d t o b e a s i n t e r a c t i v e a n d a s i n c l u s i v e a s p o s s i b l e
J o n a t h a n A r r M a c f a r l a n e s
A t t e
P l e a s e o n + 4 4 ( 0 )
C h a r l o t t e F r a s e r F a r r e r & C o G e o f f K e r t e s z S t e w a r t s
C o - C h a i r s : A d i B d
R o b e r t C h r i s t i e B e d e l l C r i s t i n
J u t t a G a n g s t e d L e n z & S t a e h e l i n
REMOVING A TRUSTEE FROM A TRUST
by:
There are various circumstances in which the need to remove a trustee from a trust may arise, including for practical reasons (such as replacement following death or retirement). In other cases, trustee removal and appointment is an important mechanism for upholding the proper administration of the trust. Applications to the court to remove a trustee are often set in the context of disagreement between those connected to the trust, for example when there is friction or hostility between beneficiaries and trustees.
This article provides an overview of the means by which a trustee might be removed, as a starting point for individuals and professionals who are involved with trusts.
Provisions Of The Trust Instrument
One way to remove a trustee is to rely on an express provision in the trust instrument. This provision may either be a power of removal, or a provision for the automatic removal of a trustee. It is more common for powers of removal to be included in the instruments of offshore trusts (such as in Jersey, Guernsey, BVI or Bermuda trust deeds) – and the power to remove the trustee will often be given to the protector of the trust.
If the protector (or a settlor) has an express power to remove trustees – but does not have any beneficial interests under the trust – then the power is normally fiduciary. This means that when considering their power to remove a trustee, the proposed removal must be with the best interests and the benefit of the beneficiaries in mind.i
To exercise removal, the terms of the trust instrument should be construed to determine the proper procedure. For example, in what circumstances, how, and by whom. It may include provisions as to who has the power to appoint, replace, and/or remove trustees, and how this should be done.
Authored
Lydia Kember (Associate) and Samantha Ruston (Trainee Solicitor) - Charles Russell Speechlys
If there are no express powers or provisions dealing with removal of trustees within the trust instrument (or they are limited), it may be necessary to look at statutory powers to change the trustee.
Statutory Powers Of Trustee Replacement Trustee Act 1925
The Trustee Act 1925 sets out certain provisions for the regulation of trustees’ powers and appointment. It includes statutory provision for the replacement of the trustee of a trust.
Section 36 Trustee Act 1925
In England and Wales, section 36 Trustee Act 1925 is a way of replacing a trustee out of court. It is not in itself a power of removal but confers a power to replace a trustee (by appointing a new one). The power may be exercised in the following circumstances:
• When a trustee has passed away;
• If a trustee has been outside of the UK for more than 12 months;
• Where a trustee wishes to be discharged from its duties (as trustee) – perhaps because they wish to retire;
• If a trustee refuses to act or is unfit or incapable of acting – most likely relating to mental incapacity, age, and/or infirmity; or
• Where a trustee has been appointed who is not over 18 years of age.
The power must be exercised in writing and by either those expressly named in the trust instruments with the power to appoint new trustees or by the surviving/continuing trustees (or their personal representatives).
Section 41 Trustee Act 1925
Section 41 Trustee Act 1925 is a statutory power for the court to intervene and appoint a new trustee/new trustees, when specific circumstances arise. Again, this applies in respect of replacing a trustee, rather than outright trustee removal.
The court will only put into effect the replacement of a trustee under section 41 if the following two conditions can be satisfied: (1) It is expedient to appoint a new trustee or new trustees, and (2) It is inexpedient, difficult, or impracticable to do so without the assistance of the court.
The court may order the replacement of a trustee under this section in the following circumstances:
• When a trustee lacks capacity to fulfil their duties;
• If a trustee is deemed bankrupt; and
• Where a trustee (that is a corporation) is in liquidation or has been dissolved. It is only appropriate for a trustee or beneficiary of the trust in question to make a claim under section 41 Trustee Act 1925. Such an application should only be made if there is no other mechanism to accomplish removal.
The Court’s Inherent Jurisdiction to Replace or Remove a Trustee
The court also has an inherent jurisdiction to replace or remove a trustee (although it will not remove a trustee without a replacement if there is not a sufficient number of trustees remaining, should the removal in question take place). Ordinarily, there should be at least two trustees of a trust, but the trust instrument may set out a minimum or maximum number of trustees.
Can A Beneficiary Remove A Trustee?
Removal of a trustee by the court may be sought by a beneficiary of the trust or by another trustee of the trust who has standing to seek relief for breach of trust.
Will The Court Intervene?
Following an application to remove a trustee, when considering whether to exercise its inherent jurisdiction, the court’s primary focus is the welfare of the beneficiaries of the trust. The court will also consider the proper administration of the trust, and the protection of trust property.ii Other
influential factors might include the fact that the settlor (or testator in the context of a will trust) has chosen particular trustees for the trust.
The court is likely to exercise its inherent jurisdiction to remove a trustee if they have positively abused their position and any misconduct has been dishonest, disloyal, or jeopardised the trust property.
While the court may take into account the beneficiaries’ views, hostility or antagonism between beneficiaries and the trustee(s) alone may not amount to a cause for removal. However, where the relationship between the beneficiaries and the trustee is such as to adversely affect or impede the trustee’s ability to duly perform its duties, the court may deduce that removal is the appropriate course of action for the welfare of the beneficiaries.
In Long v Rodman, Chief Master Marsh emphasised that the court’s discretion to remove a trustee (or as was the case, an executor) is to be exercised in a pragmatic way.iii The Master referred to the case of Harris v Earwicker to outline the principles to be applied when the court exercises its inherent jurisdiction:
• The guiding principle is the proper administration of the trust and the welfare of the beneficiaries and it is unnecessary for the court to find wrongdoing or fault. If there is wrongdoing or fault that may jeopardise the estate, the court is more likely to exercise its power of removal;
• The wishes of the testator (or settlor), as reflected in the will (or trust documents) will be a factor that is taken into account. The wishes of the beneficiaries may also be relevant. However, even where the views of the beneficiaries are unanimous, there is no right to demand replacement and the court will consider the interests of the beneficiaries as a whole;
• The court will consider whether it has become impracticable (or impossible) for the personal representative/ trustee to carry out the estate/trust’s administration;
• The court will consider the additional cost involved in replacing the trustee and take into account the size of the estate and scope of work involved.iv
As summarised in the case of Schumacher v Clarke: “the administration of an estate or a trust
can often lead to tension and indeed feelings often run high. It is essential for the court to avoid as far as possible providing a forum for the parties merely to vent their complaints about each other. The core issue is whether the continuation in office of one or more parties is detrimental to the interests of the beneficiaries.”
What Happens When There Is A Breach Of Trust?
In the event of a trustee being in breach of trust, an application may be made to the court for their replacement, or in extreme circumstances for an injunction to prevent the trustee from taking further action in relation to trust assets.
The court will consider what a reasonably prudent trustee would have done in those circumstances. vi If the court decides that a trustee has breached their duty, they may be personally liable to compensate the trust fund for any loss caused by their actions.
Breach Of Trust
Trustees owe duties of skill and care in their administration of the trust and must exercise such skill and care as is reasonable in all the circumstances.
A trustee may be in breach of trust if they fail to comply with the terms of the trust or act in breach of their trustee duties.
Circumstances that might amount to a breach of trust include, but are not limited to, the mismanagement of trust assets, distributing assets to a beneficiary who does not have any right to them, or self-dealing.
It should be noted that in the context of discretionary trusts, the court will not intervene with a trustee’s exercise of discretion if the trustee has acted bona fide (within their powers) – even if the court would have acted differently.vii
In the case where a claim for removal of a trustee forms part of the relief sought by breach of trust action, the position as to costs will be governed by the general principles of breach of trust actions. Accordingly, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party.
Conclusion
Overall, the need to remove a trustee may arise in a number of scenarios. The mechanism by which the trustee can be removed will depend on those circumstances and specialist legal advice should be sought.
Knowing what matters.
OVERVIEW OF CRYPTOASSETS TAXATION IN SPAIN FOR INDIVIDUAL INVESTORS (PART I)
Introduction
The use of cryptoassets is rapidly gaining importance in the economic sector. Recognizing this trend, the Spanish tax authorities have taken steps to determine the tax treatment of these digital assets. In response to the increasing prevalence of cryptoasset transactions, the Spanish tax authorities have introduced new tax measures aimed at enhancing oversight and control over transactions involving these virtual assets.
Proof of this is that, since 2017, cryptoasset transactions have been included in the Spanish tax authorities’ tax audit plans published annually.
In contrast, apart from certain reporting obligations introduced by Act 11/2021, no specific provisions regarding the taxation of cryptoassets have been incorporated into Spanish tax legislation.
Therefore, to determine their taxation, existing legislation must be applied, adapting its interpretation to their characteristics. To that end, there have already been several binding rulings from the Spanish Directorate-General for Taxation (“DGT”) that have contributed to providing greater legal certainty regarding the tax treatment of cryptoassets.
This article analyses how individual investors resident in Spain are taxed on the various sources of income obtained from cryptoassets and on their mere holding.
Taxation under the Personal Income Tax (PIT) in Spain to income from cryptoassets
Obtaining Cryptoassets In The Primary Market
• Mining: Any income miners earn can generally be classified as income from economic activities for personal income tax (“PIT”) purposes. This is because it meets the requirements of self-management of factors and the purpose of intervening in the market. Under this classification, the income is calculated by the difference between computable income and deductible expenses. It is then included in the general tax base of the PIT and taxed according to the general tax scale, with marginal rates that can exceed 50%.
• Staking: According to the binding rulings that the DGT issued in 2022, income from staking is classified as income from movable capital. Under this classification, cryptoassets obtained are taxed in the savings tax base, with a maximum marginal rate of 28%.
• Airdrops: In its 2021 and 2023 rulings, the DGT confirmed that virtual assets received from participating in an airdrop are considered a capital gain not derived from any transfer. Therefore, the market value in euros of these virtual assets must be included in the taxpayer’s general tax base.
Obtaining Income From Transferring Or Exchanging Cryptoassets In The Secondary Market
The DGT has established that income private investors earn from exchanging their cryptoassets outside of economic activities is generally classified as capital gains or losses for PIT purposes, with the following specifics:
• The capital gain amount is calculated as the difference between (i) the transferred cryptoasset’s acquisition value, and (ii) the higher of its market value or the market value of the good or right received in exchange (i.e., cryptoasset or fiat currency received). In binding ruling V1604-18, the DGT established that fees or commissions charged by exchange companies increase the acquisition price and decrease the sale price, respectively, if they are directly related to the transaction.
• According to the DGT, cryptocurrencies should not be classified as “currencies” but rather as “intangible assets not equivalent to currencies” for PIT purposes. Consequently, a taxable capital gain for PIT purposes is generated both when (i) transferring from one cryptoasset to another cryptocurrency or cryptoasset, and (ii) converting any cryptoasset to euros or another fiat currency.
• The DGT has also established that the first-in, first-out (FIFO) criterion applies to determine the acquisition cost when transferring the same cryptoasset.
• If the transfer value is lower than the acquisition value, the taxpayer incurs a capital loss, which can be integrated and compensated within the savings tax base. Special rules may apply regarding the temporary allocation of losses due to (i) the subtraction or hacking of the keys or the bankruptcy of platforms; or (ii) transfers of cryptoassets at a loss followed by a subsequent acquisition of the same or a cryptoasset classified as homogeneous within a certain period.
• Capital gains or losses generated are included in taxpayers’ savings tax base, with a marginal tax rate of up to 28%
• Lastly, the DGT has confirmed that exit tax does not apply to cryptocurrencies such as bitcoin or IOTA. However, it could apply to certain security tokens, so a case-bycase analysis is necessary.
Taxation Of Cryptoasset Ownership For Wealth Tax Or Tax On Large Fortunes Purposes
The mere holding of cryptoassets on December 31 of each year by investors resident in Spain is also subject to wealth tax (“WT”) or tax on large fortunes (“TLF”), regardless of where the virtual assets are located.
Therefore, the value of these virtual assets, along with the taxpayer’s other assets and rights, is included in the tax base of the WT or TLF. For these purposes:
• Cryptocurrencies and other cryptoassets, such as non-fungible tokens (NFTs) and utility tokens, should be valued according to their market value on December 31; and
• Other cryptoassets, such as security tokens, can be valued according to more specific taxation rules, provided they grant rights and powers to the holder that are comparable to equity or debt instruments.
Other Ways Of Obtaining Income
Recently, the DGT established that income generated from cryptocurrency lending, liquidity pools or yield farming on DeFi platforms is taxed as income from movable capital. This income is included in the savings tax base and subject to marginal rates of up to 28%.
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60-SECONDS WITH: CARA HOUGH PARTNER IRWIN MITCHELL
Imagine you no longer have to work. How would you spend your weekdays?
I adore shoes and so if I could add unlimited skills to my future without work, I would spend my days designing shoes. There would also be a lot of reading done as well –my “to read” list is entirely unmanageable currently!
What do you see as the most rewarding thing about your job?
Winning for my clients. It never looks the same as everyone will usually see winning as something different, but achieving that for them gives me a real buzz.
What book do you think everyone should read, and why?
I really love reading, which makes choosing just one book almost impossible. However, if my arm was twisted, I would currently say They Both Die at the End by Adam Silvera. I really enjoyed this book as it got me thinking about life, death, and the relationships we make along the way.
What legacy would you hope to leave behind?
Happiness.
Do you have any hidden talents?
I am a tap dancer, having completed all tap grades. It drives my husband mad because I can always be found doing little tap routines while in the kitchen waiting for the kettle to boil or the toaster to pop.
What’s the most important quote you’ve heard that you have adapted to your personal or professional life.
“The world is not going to come to you. The sooner you realise this, the more time you’ll have to pack”. I saw it on an a-board in Salem in America many years ago, and while it can be taken as a desire to travel more, I feel it also shows true determination. That if you want something you have to go out and get it, rather than just wait around in a hope that it will come to you.
Is there anything you want to do/ achieve that you haven’t already?
I would love to be fluent in a foreign language – my GCSE Spanish and French just don’t cut it enough for me.
What piece of advice would you give to your younger self?
That you can’t (and actually shouldn’t) please everyone. To be fair though, I still need to remind myself of this one even now!
Where has been your favorite holiday destination and why?
This is a tough choice as I love travelling, but if I could only choose one it would be Disneyland Paris. I have holidayed there for the last two years with my son and there is something truly special about sharing my childhood experiences with him.
Dead or alive, which famous person would you most like to have dinner with, and why?
Anne Boleyn. I would relish the opportunity to find out what really happened, and to learn how she wielded such power at a time when women had so little. Spoiler alert, it ended badly for her, but the legacy she left behind by bringing about England’s dissolution from the Catholic Church, the creation of the Church of England, and a change to laws that had been in play for hundreds of years before her. It is no wonder historians, authors and film makers alike are all drawn to her story.
What’s your go to relaxing activities to destress after a long day at work?
I find peace in reading. Escaping to a world of fiction or an opportunity to learn something new. If it’s a story that piques my interest, I can happily be lost in a new world.
What is your New Year’s Resolution?
This is a question I really struggle with. I believe strongly that if I say I will do something, then I will commit to it, but I am equally realistic that I can’t do everything. This usually leaves me not making any resolutions in the New Year. I do always try to reflect though and think about what improvements to myself I can make, whether that’s to be more healthy, or to try a new skill.
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INTERNATIONAL INSPIRATION COULD BE THE KEY TO GROWING GIVING IN THE UK
Authored by: Mark Greer (UK Managing Director) - CAF
The UK is no longer one of the most generous countries in the world, according to our World Giving Index 2024. It now places 22nd, its joint lowest ranking, having fallen to the same level it was in 2020 when much charitable activity was severely hampered by the Covid 19 pandemic.
The UK’s global ranking has been declining over the past decade; in 2014, it was the sixth most generous country in the world. Meanwhile many other high-income countries have maintained or improved their ranking.
Building a giving society is crucial to connect us to one another in communities and strengthen our social fabric; something that other countries appear to be recognising. Could the UK benefit from looking beyond our borders for inspiration to increase our giving?
Additional research by the Charities Aid Foundation (CAF) that examines giving in the UK shows that while the overall amount the public donates has gone up, it’s from fewer individuals who are giving more. This is a trend that isn’t sustainable. The long-term decline in the UK’s overall generosity shows we seem to have increasingly fallen out of the habit of giving – of both our time and our money.
While the UK is recognised as having generous tax incentives for giving – in particular the Gift Aid system – and is lauded for its strong charity regulation,
it may be that overly complex systems developed over time could be holding back its giving potential. We have a strong philanthropic history, however the term ‘philanthropy’ is sometimes viewed negatively and derided as being of another time. In contrast, the USwhich ranks consistently highly in the World Giving Index - is known for its strong philanthropic culture, with giving seen as something that is far more aspirational.
Perhaps in part because of this culture, the US offers a much wider variety of ways to give, often making it easier to give.
While the UK does allow for the donation of non-cash assets such as property, artworks and listed shares, the US goes further, to include unlisted shares and life insurance policies, as well as charitable contributions made directly from a pension fund. The UK could also take inspiration from the US by developing more philanthropic vehicles for giving such as charitable remainder trusts. These vehicles enable assets to be allocated to charity over time and offer an incentive for donors to set funds aside for charity. In terms of cross-border giving, both the US and Canada have a simpler system than the UK for individuals to donate to overseas charities.
Singapore moved up 19 places to rank 3rd in this year’s Index, its highest ever ranking. By looking at Singapore, we can see how government efforts may be helping to increase charitable activity. The global financial centre’s rise up the generosity rankings follows an active push from the Singapore Government to bolster philanthropy in the country, through a number of different initiatives. These included new schemes to encourage deeper partnerships between charities and businesses on volunteering, a generous tax benefit scheme for donations and government matching on charitable donations. For high-net-worth donors, new tax rules for the family offices of the wealthy mean that tax deductions can be claimed for overseas donations.
Australia, which climbed back up to eighth place this year, having fallen out of the top 10 in 2023, has also seen a government-led approach to philanthropy.
Australia’s Labour party made a manifesto pledge to double philanthropic giving by 2030 if it won the 2022 federal election, and now in power, the Government recently published a report with recommendations to achieve this, including the introduction of a minimum distribution for ancillary funds, regulatory reforms and more transparency from corporate donors.
Similarly last year in Ireland, which came 15th in the global index, Minister of State Joe O’Brien announced a public consultation on the country’s First National Philanthropy Policy, intended to deepen knowledge and understanding of philanthropy to create an enabling environment and accelerate engagement with philanthropy in Ireland for social good. What stood out in Ireland’s strategy was the recognition of the value of collaboration across governments, businesses and philanthropists.
At CAF, we have long argued that there is great untapped potential for government to work with philanthropy, businesses and charities to maximise positive social impact. Learning lessons from other countries can help us to reverse the downward trend in the UK’s generosity, so we can grow giving and community engagement to work towards a vibrant civil society in the UK.
There are signs that the new Government in the UK is taking note of the importance of charitable giving and potential for philanthropy. October saw the launch of the Government’s new Civil Society Covenant to ‘usher in a new era of partnership between government and civil society’, with further developments expected in the new year.
In the same week, the London Stock Exchange hosted the Giving & Impact Summit, a gathering of philanthropists, wealth advisers and policymakers, which followed the UK Government’s International Investment Summit, underscoring the importance of charitable giving and the role the UK plays on the world stage. Events like these are crucial for raising the profile of philanthropy - particularly in these circles - and moving us towards a renewed culture of giving in the UK.
60-SECONDS WITH: ASHLING CASHMORE
HEAD OF IMPACT AND ADVISORY
CAF
Imagine you no longer have to work. How would you spend your weekdays?
In addition to spending more time with my kids, if I didn’t have to work, I would definitely indulge in studying, whether dusting off my mandarin textbooks or delving into history. Volunteering and activism would also be high on the list, alongside growing vegetables and lots of exercise in the great outdoors.
What do you see as the most rewarding thing about your job?
I am grateful to have a job with purpose. In my team, we influence how philanthropic capital is deployed to drive positive social change as well as helping charities build their resilience.
What book do you think everyone should read, and why?
It’s very hard to limit myself to one book! Despite reading it a few years ago, I still think about The Overstory by Richard Powers a lot. It’s a novel about trees and human destruction of nature which I think really makes the reader open their eyes more widely, inspiring a little bit of activism and gave me a new appreciation for just how amazing trees are.
What legacy would you hope to leave behind?
I hope that people remember me as being kind, helpful and driven by social justice. I’d love my kids to follow in my footsteps on all counts.
Do you have any hidden talents?
I speak fluent French with very little accent, so I am told.
What’s the most important quote you’ve heard that you have adapted to your personal or professional life.
Pain is temporary, quitting is permanent – I’m a strong believer in perseverance, especially as change can be really hard.
Is there anything you want to do/achieve that you haven’t already?
Yes, but my bucket list is endless! I am proud to have achieved what I have so far, whether that is having a job I love, a great family, scaling the highest mountains in Europe and Africa and some other challenges in between.
What piece of advice would you give to your younger self? Hard work isn’t enough, you need to advocate for yourself too.
Where has been your favorite holiday destination and why?
Bolivia, specifically the Salar de Uyuni, which is the world’s largest salt flat. It is mesmerisingly beautiful. We were lucky to see it with a few centimetres of water in places and the reflections were incredible. However, visiting the Salar is tinged with sadness when you realise that, like all the natural wonders of the world, it is under threat.
Dead or alive, which famous person would you most like to have dinner with, and why?
There are lots but I’m currently reading a book to my kids about Grainne O’Malley who was the leader of a clan in 16th century West of Ireland. She sounds like an amazing woman: at one point she sailed up the Thames to confront Queen Elizabeth about jailing her sons. I’d love to hear her stories as well as more about her leadership in the midst of all the obstacles stacked up against her.
What’s your go to relaxing activities to destress after a long day at work?
Whilst it’s more of a before work activity, running always helps me to destress and feel ready for the day ahead.
What is your New Year’s Resolution?
I’d like not to shout at my kids as much!
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AROUND THE WORLD: THE GREAT WEALTH TRANSFER AND THE RISE OF OFFSHORE STRUCTURES FOR SAUDI FAMILIES
The concept of wealth transfer is reshaping the global financial landscape, particularly in the Middle East, where a unique confluence of factors has led to a pronounced shift in the way that wealth is managed. As younger generations inherit significant wealth, the dynamics of financial stewardship are evolving, prompting an increased demand for offshore structures – particularly trusts. This article delves into the nuances of this wealth transfer phenomenon, particularly in Saudi Arabia, and examines how offshore trusts are becoming pivotal tools for preserving and managing this wealth.
The Great Wealth Transfer
The great wealth transfer refers to the shift of assets from the older generation to their heirs. It is estimated that trillions will be passed down over the coming decades, a phenomenon that is not just limited to the West but is increasingly relevant in the Middle East. In Saudi Arabia, where vast oil revenues have created immense wealth, a significant portion of this wealth is starting to transition to the next generation.
This generational shift is not merely about the movement of financial assets. It encompasses a transformation in values, investment philosophies and approaches to wealth management.
Younger generations tend to prioritise sustainability, technology and social impact, contrasting with the more traditional investment strategies of their forebears. As they take the reins, they are also more inclined to seek innovative solutions to safeguard their wealth, leading to a burgeoning interest in offshore trusts.
A Surprising Spectrum Of Sophistication
Until very recently it has been relatively difficult to enter Saudi Arabia as an offshore professional adviser without a direct invitation. As such, the discussions that we have had with Saudi clients historically have been with those with an existing international reach, such as a family office in London or existing offshore bank accounts and trust structures.
However, on travelling directly into Riyadh and Jeddah in recent years it is apparent that there are many, many families with substantial wealth who co-own the family business with nothing more than a shareholder’s agreement and a bank account to receive dividends. The continuation of these family businesses is at risk without offshore trust structures for succession planning; if shareholdings remain
personally held and shareholders die, the recipients under local inheritance laws can step in and unintentionally fragment the running of the family enterprise potentially leading to business failure.
There is huge opportunity for us as international advisers to help these families and the more of us who can travel to the region and spread the same positive message about offshore structures, the more reassured these families will be.
The Appeal Of Offshore Trusts
Offshore trusts offer numerous benefits such as asset protection, tax efficiency and privacy. For affluent individuals in Saudi Arabia, the appeal of offshore trusts is multifaceted:
1. Asset Protection: Political stability is a key concern for wealthy individuals in the Middle East. Offshore trusts provide a layer of protection against local legal challenges, creditors and potential expropriation. Jurisdictions such as the Channel Islands also have the benefit of robust firewall provisions.
2. Tax Efficiency: While it is not tax often a primary driver for Middle Eastern clients, offshore trusts can provide tax benefits in certain circumstances, allowing for more effective wealth management strategies.
3. Succession Planning: The cultural emphasis on family and lineage in the Middle East makes succession planning particularly significant. Offshore trusts allow for a structured approach to transferring wealth across generations, ensuring that assets are distributed according to the settlor’s wishes. This is especially
pertinent in Saudi Arabia, where traditional inheritance laws may complicate matters for families with substantial wealth and a more flexible approach may better suit the family.
4. Privacy And Confidentiality: Privacy is a paramount concern for many wealthy individuals, particularly in the Middle East, where social standing and reputation are closely linked to financial status. Offshore trusts offer a level of confidentiality, allowing individuals to manage their wealth discreetly.
Moreover, the emphasis on sustainability and social responsibility is driving investment strategies. As young inheritors take control, we are witnessing a shift towards impact investing, where financial returns are aligned with social and environmental goals.
In Saudi Arabia, Vision 2030—a strategic framework aimed at diversifying the economy away from oil revenues —will also influence wealth management trends. As the country seeks to attract foreign investment and develop its private sector, the financial ecosystem is rapidly evolving, incorporating innovative solutions that cater to both local and international investors.
Regulatory Changes And Trends
Confidentiality and client safety must also, of course, be balanced with global regulatory changes and the drive by governments towards increased transparency to combat financial crime.
In response, many offshore jurisdictions – including the Channel Islands - are adapting by enhancing their regulatory frameworks to attract clients and structures comfortable with appropriate reporting and sharing of information.
The advantage for clients in setting up their structures in white listed jurisdictions, such as the Channel Islands, are many but ease of doing business – particularly getting the structure banked and able to transactis clearly one.
The Future Of Wealth Management In The Middle East
As the great wealth transfer continues, the landscape of wealth management in the Middle East is set to undergo significant transformation. The younger generation, more tech-savvy and globally minded, will likely leverage advancements in fintech to manage their wealth. Digital platforms for setting up and managing structures are also emerging and evolving.
Conclusion
The great wealth transfer in the Middle East, particularly in Saudi Arabia, is not just a financial phenomenon but a cultural shift. The rising demand for offshore trusts reflects a growing recognition of the need for sophisticated asset management strategies that prioritise asset protection, efficiency, and privacy.
As the younger generation navigates this transition, the role of professional advisers is becoming increasingly crucial, guiding clients through the complexities of wealth management in an ever-evolving global landscape.
The future promises not just challenges but also opportunities for innovative solutions that align with the values and aspirations of a new generation of wealth holders.
60-SECONDS WITH:
ED FORD ASSOCIATE DIRECTOR RAWLINSON HUNTER
Imagine you no longer have to work. How would you spend your weekdays?
Having time to give back meaningfully to the community with the experience I have gained as a trust professional would be great. I think I could make a positive difference to those in need helping with financial literacy or small business support programs.
What do you see as the most rewarding thing about your job?
Working through complex problems both with client families and staff. Knowing I have helped them in some way to reduce their anxiety and give them more confidence about the way forward is hugely rewarding.
What book do you think everyone should read, and why?
The Overstory by Richard Powers. It is was an incredible reminder of how important the natural world around us is to our existence.
What legacy would you hope to leave behind?
I have been lucky to have had some great mentors in my career and will always appreciate their investments of time and effort in me. I would like to be remembered in the same way by the next generation of trust professionals that I have the opportunity to mentor.
Do you have any hidden talents?
I have consistently been invited to cook the turkey at Christmas for our family and received compliments, so I think I must be getting that right.
What’s the most important quote you’ve heard that you have adapted to your personal or professional life.
“Start where you are. Use what you have. Do what you can.” This quote by Arthur Ashe is a great reminder when facing overwhelming challenges. Just take a small step forward, then another and keep going.
Is there anything you want to do/ achieve that you haven’t already?
I remain ever hopeful that the regulatory and compliance demands on our industry will plateau and will be easier to manage with new technologies going forward so that we can spend more time on the work that adds real tangible value to the families we work with. Doing my part to help us as a firm, and an industry, get there is a long-term goal.
What piece of advice would you give to your younger self?
I wish mindfulness training was more mainstream and better appreciated when I was at school and university as it seems to be today. The importance of self-awareness and constantly honing those skills cannot be over-emphasised in one’s professional career.
Where has been your favorite holiday destination and why?
Kenton on Sea in the Eastern Cape, South Africa. I grew up spending school holidays boating and fishing on the river and at the beach. It was like heaven on earth at the time.
Dead or alive, which famous person would you most like to have dinner with, and why? It is so difficult to choose one. Bear Grylls would definitely be on the short-list though. He is an inspiration and would have some great stories.
What’s your go to relaxing activities to destress after a long day at work?
Simply coming home to family makes any long, stressful day better. I am really lucky to have an amazing wife for support.
What is your New Year’s Resolution?
Trying to spend more time outdoors. That’s where I think I truly relax and recharge. Somehow, it’s easier said than done these days and takes effort given all of life’s other demands and distractions.
AUTUMN BUDGET 2024THE ABOLITION OF THE NON-DOM TAX REGIME.
After nearly eight months of uncertainty following the March 2024 Spring Budget, the Autumn Budget has at last delivered a fully formed plan (and 103 pages of draft legislation) to abolish the current tax regime for non-domiciled UK resident individuals from 6 April 2025 and to replace it with a generous but much shorter term regime for new arrivers to the UK based solely on residence.
It will take some time to analyse and digest the draft legislation in detail. In the meantime, this note is intended to give a high level summary of the many facets of the new regime.
The Current Non-Dom Regime
Before we analyse the new rules, it is helpful to summarise the current nondom regime.
The normal tax regime for UK resident individuals is the “arising basis”: the individual’s worldwide income and gains are taxed in the UK as they arise. However, UK resident individuals who are domiciled outside the UK can elect to be taxed on the “remittance basis”: UK source income and gains are taxed in the UK as they arise but foreign income and gains (FIG) are only taxed if and when they are brought into the UK.
The regime has undergone a series of changes in recent years, with the biggest change taking effect from April 2017, when the existing concept of “deemed domicile” was extended to include not only inheritance tax but also income tax and capital gains tax.
Since then, non-doms who have been resident in the UK for 15 of the past 20 tax years are treated as being UK domiciled for tax purposes and so cannot elect to be taxed on the remittance basis.
To soften the blow of the new deemed domicile rule, the “protected settlement” regime was also introduced in April 2017. The UK has complex antiavoidance rules which tax a UK resident settlor of an offshore trust structure personally on income and gains arising in the structure if the settlor retains an
interest in the trust. However, since April 2017, UK resident non-dom settlors are not taxed on FIG arising in offshore trust structures (unless or until they receive a benefit from the structure); this applies even after the settlor has become deemed domiciled, provided that the settlor does not “taint” the trust by adding value after becoming deemed domiciled. Put simply, since April 2017 it has in effect been possible for a non-dom who has become deemed domiciled in the UK to continue to benefit from a form of the remittance basis for assets held in trust.
The New FIG Regime For New Arrivers
From 6 April 2025, an individual who becomes tax resident in the UK for the first time (or after a period of at least 10 continuous years of non-UK residence) will pay no UK tax on FIG arising in the first four tax years from becoming UK resident (even if those funds are brought into the UK) regardless of their domicile status or nationality – this regime will therefore apply equally to returning UK nationals who have spent at least 10 years abroad. Unlike similar regimes in other jurisdictions (such as Italy and Switzerland), there will be no charge to benefit from the new regime. However, from the fifth year of tax residence onwards, the special regime will fall away and the individual’s
Authored by: Frederick Bjørn (Partner), Basil Dixon (Partner) and Michael Parkinson (Consultant) - Payne Hicks Beach
worldwide income and gains will be taxable in the UK as they arise in the normal way.
The New FIG Regime For Recent Arrivers
An individual who became tax resident in the UK in 2022/2023 or a later tax year (and who had been non-UK resident for at least 10 continuous years before the current period of residence began) will be eligible for the new FIG regime from 6 April 2025 for the remainder of the four year period (counted from their first year of UK tax residence).
Non-Doms Who Have Been UK Resident For Four Or More Years On 6 April 2025 But Have Not Become Deemed Domiciled Before That Date
The new FIG regime will not apply to these individuals and from 6 April 2025 they will no longer be eligible for the remittance basis of taxation. Their worldwide income and gains will therefore be taxable in the UK as they arise from 6 April 2025.
In addition, these individuals will no longer benefit from the protected settlement regime from 6 April 2025 –this is covered in more detail below.
Non-Doms Who Have Become Deemed Domiciled In The UK Before 6 April 2025
These individuals will already be taxed on their worldwide income and gains under the arising basis, so this will not change.
In addition, these individuals will no longer benefit from the protected settlement regime from 6 April 2025 – this is covered in more detail below.
FIG that arose to a remittance basis user prior to 6 April 2025 will continue to be taxed at full rates if it is remitted to the UK and has not been designated and taxed under the TRF.
Abolition of Trust Protections
The current “protected settlement” regime, under which FIG arising within settlor-interested offshore trust structures are not taxed on UK resident non-dom settlors (or on deemed domiciled settlors, provided that the trust has not been “tainted”) unless and to the extent that they receive a benefit from the structure, will no longer apply from 6 April 2025.
From that date, FIG from such settlements will therefore be taxed on UK resident settlors as they arise (but unmatched pre-6 April 2025 FIG will continue to be matched to benefits under the existing regime), unless the settlor is a new or recent arriver within the new four year FIG regime.
From 6 April 2025 until 5 April 2028, UK resident individuals who have previously been taxed on the remittance basis under the current non-dom regime will be able to designate unremitted pre- 6 April 2025 foreign income and gains at a special reduced rate under a new “Temporary Repatriation Facility” (the TRF) – those funds can then be remitted to the UK without any further tax charge. The TRF rate will be 12% in the 2025/2026 and 2026/2027 tax years but will increase to 15% for the final 2027/2028 tax year.
Settlors and beneficiaries who are new or recent arrivers within the new four year FIG regime will also be able to receive benefits from offshore trust structures from 6 April 2025 free of UK tax (at least initially), whether or not the benefits are received in or brought to the UK. However, the value of those benefits will not reduce the pools of relevant income or stockpiled gains available for matching to benefits received by arising basis UK taxpayers.
However if they dispose of a foreign asset after that which they held personally at 5 April 2017, they will be able to elect to rebase that asset to its value at that date for CGT purposes provided that:
• They were a remittance basis user in at least one of the tax years from 2017/2018 to 2024/2025; and
• The asset was situated outside the UK between 6 March 2024 and 5 April 2025.
The TRF will be available not only for unremitted FIG which arose to the individual personally before 6 April 2025 but also to unremitted FIG in an offshore trust or corporate structure that was attributed or matched to them before 6 April 2025. FIG which arose in offshore structures before 6 April 2025 but which has not been matched or attributed before that date will also be eligible for the TRF to the extent that it is matched to benefits received by a qualifying individual during the 3 year TRF period.
The Inheritance Tax Regime
Individuals
IHT is a currently a domicile-based regime. The worldwide assets of UK domiciled (or deemed domiciled) individuals are within the scope of IHT but for non-doms this is limited to assets which are situated in the UK only. In broad terms, non-UK assets held in a trust made by a non-dom are also “excluded property” and outside the scope of IHT under the current rules, even if the settlor subsequently becomes UK dom or deemed dom.
From 6 April 2025, IHT will become a residence based regime.
An individual’s worldwide assets will fall within the scope of IHT if the individual has been resident in the UK for 10 or more of the previous 20 tax years (a long-term resident). One of the consequences of this rule is the extension of the so-called IHT “tail” –for example, if an individual has been continuously resident in the UK for 20 tax years and then leaves the UK, they will remain a “long-term resident” for IHT purposes for the next 10 tax years even though they are no longer UK tax resident for other tax purposes. Their worldwide assets will therefore be within the scope of IHT throughout this tail period.
To mitigate the harsh effect of the tail for individuals who leave the UK having been UK resident for between 10 and 19 of the last 20 tax years, the tail will be tapered so that:-
• Individuals who have been resident for between 10 and 13 of the last 20 years will remain within the scope of IHT on their worldwide assets for 3 tax years; and
• For each additional year of UK residence, the tail will increase by one tax year – so if an individual had been resident for 14 out of the past 20 tax years before leaving, the IHT tail will be 4 years and so on.
A transitional rule will apply to nondom individuals who are non-resident in the 2025/2026 tax year and would otherwise be long-term residents on 6 April 2025. In effect, the current rules will continue to apply from that date, so that the individual will be treated as being a long-term resident only if and for as long as they would have been deemed domiciled in the UK under the current rules (so if the individual had become deemed domiciled before leaving the UK, they will lose their deemed domicile after three continuous tax years of non-UK residence).
Trusts
For trusts, chargeability of non-UK assets will depend primarily on the settlor’s status from time to time (rather than just at the time that the trust was created or assets were added).
If a settlor is or becomes a long-term resident, this means that the worldwide assets of the trust will be subject to IHT unless or until the settlor ceases to be a long term resident (so that the ‘tail’ described above will also apply to trusts). If the settlor dies, the status of the trust will depend on the settlor’s status at the time of their death.
Most trusts, except where there is a “qualifying interest in possession” (a QIIP – more on that below) will be subject to the IHT “relevant property regime”, where there is an IHT charge of 6% on every 10th anniversary of the trust and a proportionate charge if assets leave the trust between 10 year anniversaries. A proportionate charge will also apply if assets which were within the scope of IHT become excluded property because the settlor ceases to be a long-term resident. This ‘exit tax’ is a new feature which could extend to catch trusts whose settlors became non-UK resident as far back as the 2022/2023 tax year.
to receive the income from the trust and certain other conditions are met), the life tenant is deemed to be the owner of the trust assets for IHT purposes.
The relevant property regime of 10 yearly and exit charges does not therefore apply and instead the trust assets are subject to a 40% IHT charge on the death of the life tenant. Under the current IHT regime, non- UK assets held in a QIIP trust settled by a nondom are outside the scope of IHT even if the life tenant is UK domiciled or deemed domiciled.
In addition, if the settlor of the trust is a long-term resident and can benefit from the trust, the trust will also be caught by the “gift with reservation of benefit” rules, so that the worldwide assets of the trust will be exposed to a 40% IHT charge in the event of the settlor’s death (in addition to any charges under the relevant property regime). However, in a welcome concession to the non-dom community, the reservation of benefit rules will not apply to non-UK assets held by trusts settled by non-doms before 30 October 2024, even if the settlor continues to benefit.
If a beneficiary has a QIIP in a trust (in broad terms, where the beneficiary - the life tenant - has the right
Under the new regime, concessionary treatment will apply to existing QIIP trusts settled by non- doms that held assets outside the scope of IHT immediately before 30 October 2024. Those trusts will be not be subject to IHT when the QIIP comes to an end or on the death of the life tenant. However, after the existing QIIP ends, the IHT status of the trust will then depend on the settlor’s status from time to time (or at the time of the settlor’s death).
For new QIIP trusts made after 30 October 2024, the trust assets will still be deemed to belong to the life tenant for IHT purposes and will be subject to a 40% IHT charge in the event of the life tenant’s death unless neither the settlor nor the life tenant are long-term residents at the relevant time. In practice, the impact of this is likely to be relatively limited because new QIIP Trusts can only be created on death (or in some other very narrow circumstances).
A Footnote On Domicile
The concept of domicile itself is not being abolished – the proposed changes simply mean that it will no longer be a relevant factor for UK tax purposes.
Domicile remains a connecting factor in many other contexts, such as succession and family law.
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ABOUT US
Payne Hicks Beach LLP is a firm of solicitors who take pride in building strong client relationships based on trust, integrity and the vision to succeed. At the heart of what we do is a deeply engaged connection with our clients – their lives, their businesses, their interests. The firm’s long-standing reputation has been built on our family and private client work. Our authority in these fields and subsequent successes in litigation, immigration, property and commercial expertise, means we are regarded as one of the very best of the small number of firms in the UK that undertake this work at the highest level for clients across the world.
WHAT WE DO
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For further information please contact: Robert Brodrick, Partner, Private Client rbrodrick@phb.co.uk
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60-SECONDS WITH:
MICHAEL LEWIS PARTNER
Imagine you no longer have to work. How would you spend your weekdays?
Honestly, I don’t even want to think about that just yet! I genuinely enjoy my work and the relationships I’ve built with clients—it’d be hard to give that up. But maybe in about 20 years, I could see myself spending a lot more time cycling, improving my very basic golf skills, doing some more volunteering and maybe even finally picking up another hobby or two.
What do you see as the most rewarding thing about your job?
Solving client issues. Every project is unique, and it’s incredibly rewarding to dig in, understand a client’s specific needs, and make them feel fully supported and in safe hands. Helping clients reach their goals is a pretty unbeatable feeling.
What book do you think everyone should read, and why?
Dan Simmons’ Hyperion. It’s a bit unexpected, but as someone who loves science fiction I believe this is an excellent introduction to the merits of the genre. Known as Canterbury Tales in space it focuses on the personal experiences and tales of a group of travellers. It reiterates how in adversity the human spirit can prevail and is an excellent reminder that despite changes in technology the fundamentals of what makes us all human remain unchanged. Its exploration of leadership, resilience, risk taking and the importance of making tough decisions feels surprisingly relevant to the business world. It’s sci-fi with a lot of insight about how we connect, lead, and learn from each other.
What legacy would you hope to leave behind?
Building a respected presence in the market is important to me, but so is creating a strong, capable team. I’d be thrilled to know I helped assemble a team that’s well-regarded and can expertly serve US/UK connected clients for many years ahead.
Do you have any hidden talents?
Well, I am known to tell a pretty good story. But if I told you all my talents, they wouldn’t be hidden anymore, right?
What’s the most important quote you’ve heard that you’ve adapted to your personal or professional life?
“Leadership and learning are indispensable to each other.” - John F. Kennedy. Every day is a learning opportunity, and I am regularly reminded of this every time a new unexpected challenge hits my desk. Embracing learning is I think fundamental to leadership and I am very much aware that I still have much to learn…
Is there anything you want to achieve that you haven’t already?
Often the journey is as important as the destination and there are many things I don’t want to feel are finished as life can then feel anticlimactic. In my continued life journey I feel that an area I could improve upon is in volunteering and looking to give something back in recognition of all the good things I have been privileged to experience (acknowledging that others may not have the same opportunities). Trying to achieve a better balance in life to enable this is something I would definitely want to achieve.
What piece of advice would you give to your younger self?
Don’t assume people will immediately recognise your value—build networks and support systems. You’ll go much further when you invest time in meaningful connections.
Where has been your favorite holiday destination and why?
St. David’s, Wales. For me it will always be a reminder of the idyllic family holiday! Amazing beaches, breathtaking scenery, great history— just the perfect place to unwind and recharge with the family.
Dead or alive, which famous person would you most like to have dinner with, and why?
Boris Johnson. I think we’d have a great laugh and a guarantee of very lively conversation—he’d definitely keep things interesting!
What’s your go-to activity to destress after a long day at work?
A good book, a quick cycling/gym session and then a guilt free glass of wine! It’s the perfect mix to clear my head and unwind.
What is your New Year’s Resolution?
Listen more, talk less. It’s surprising how much you can learn by just letting people share their stories.
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THE 2024 BUDGET AND THE IMPLICATIONS FOR HNWS
Authored by: Hunters Law
On Wednesday 30th October, Chancellor Rachel Reeves delivered Labour’s first budget in 14 years. Some of the changes expected had been trailed for some time prior to this, particularly around the non-dom tax regime. Reeves had already stated many times that this would be a tough budget given Labour’s assertion that it had inherited a £22bn budget deficit from the Conservatives. So expectations were low that any good news would flow through.
Hunters and TL4 Private Client invited several key guests to dinner on 31st October to discuss immediate thoughts post-Budget and how the changes would impact HNW clients. We were delighted to be joined by colleagues from EY, Gravita, RSM, Lewis Golden, Atomos, Rawlinson & Hunter, Rathbones Greenbank, Investec and Cazenove Capital.
Non-Doms
Labour has followed through with its promise to reform the non-dom tax regime, resulting in changes to income, capital gains and inheritance tax (‘IHT’), which have largely followed the proposals put forward by the previous administration.
The remittance basis of taxing the foreign income and capital gains (FIGs) of non-domiciled individuals will be replaced in April 2025. Instead, a new residence-based system, determined by reference to the statutory residence test, will be introduced.
Individuals will be able to claim this new tax status for the first four years of their tax residency, allowing FIGs from pre-April 2025 to be brought to the UK without suffering further tax charges.
Those eligible for claiming the status must have been non-UK tax resident for at least 10 consecutive years before residency takes effect. And they also must disclose to HMRC all FIGs which are being relieved. The regime
only applies for a maximum of four years, and there should be some clear advantages for certain individuals who choose to claim the new status during that period. Distributions of foreign income and gains which arise within a non-UK resident trust during the four years will also be free of further UK tax.
The new Temporary Repatriation Facility will come into operation to assist those who had been remittance basis users up to 2024/25, and will result in a charge of 12% for FIGs remitted between April 2025 and April 2027, and 15% for the following tax year. But the consensus was that the relatively short duration of the FIG regime is unlikely to be attractive for anyone looking to settle in the UK for a longer time.
The movement away from domicile to residence from 6 April 2025 will also impact IHT. Long-Term Residents (LTRs) will be subject to IHT on their worldwide estate, whereas those who don’t fall within the definition will only be subject to IHT on UK situs assets.
A LTR will be designated as such if they have been tax resident in 10 or more of the preceding 20 tax years. The ‘tail’ i.e. the amount of time an individual will remain within the scope of UK IHT once they cease to be tax resident, will vary. For those who have been resident in the UK for 20 years or more, the tail will be 10 years, and 3 years for those who have been tax resident between 10 and 13 years of the preceding 20 years. For every extra year of tax residence between 14 years and 19 years inclusive, the tail increases by one year.
These changes will also affect “protected” trusts where the settlor, who had neither been domiciled nor deemed domiciled in the UK, becomes resident, so potentially making trust income and capital gains taxable on the settlor. In addition, “excluded property” trusts will lose their exemption from IHT if the settlor is a LTR at the time when a potential IHT charge arises.
This could lead to various unintended entry or exit charges arising depending on the settlor’s movements.
It was also noted among guests that the technical document accompanying the Budget makes clear that the proposed changes are all based on draft legislation which could be revised as the Bill passes through Parliament. This makes it difficult to give cast-iron advice to clients.
The reported non-dom exodus will depend heavily on clients’ long-term views and financial objectives. Some of our guests had clients who will stay in the UK regardless, others said their clients will leave fairly quickly as the changes were just too onerous to make it worthwhile settling in the UK long-term.
Pensions
The fundamental change to pensions, whereby they are brought into the IHT net on the death of the pension holder from 6 April 2027, will mean pensions will no longer be able to be used as a convenient nest-egg to pass on tax-free to successive generations. Guests considered whether we were likely to see a fundamental shift in accessing pensions earlier rather than later to prevent them from becoming part of the IHT pot at a later date. Gifting seemed to be the most consistent form of impact mitigation. A consultation on the practicalities of these changes is due to close on 22 January 2025. Concerns were expressed, notwithstanding government commitments to increase funding to HMRC, as to how all these changes would be administered by an already beleaguered HMRC?
Private School Fees
As promised early in Labour’s election campaign, VAT will be imposed on private school fees from January. Our guests discussed the impact a VAT rate of 20% would have on current and future parents who may have to reconsider their children’s education in light of the increased cost. While it’s expected that larger and more established schools will be able to absorb some of the impact, schools with a small student body or that cater to students with certain needs are likely to be hit hardest and may struggle to keep their doors open. Given the flight to state schools which will inevitably result, and the consequent increasing numbers of students in the state sector, our guests speculated whether this measure would even raise the funds the government hopes it will.
Reform of Business Property Relief and Agricultural Property Relief
There has been speculation in recent years about the great wealth transfer expected to happen in the 2020s. It is likely to be the case that the IHT changes in particular relating to APR, BPR and pensions will accelerate that shift.
Reform to BPR and APR had been expected, but capping relief on the first £1 million of agricultural and business assets has in particular provoked an outcry from the farming community. Although the Chancellor stated that the measures were designed to protect family farms and only close a “loophole” affecting a small percentage of much larger estates, it was clear that the £1m cap will hammer agricultural businesses that are asset rich but cash-poor. As this article goes to print, the government has been accused of engineering a bleak economic outlook for the farming community and farmers are protesting at Westminster.
Conclusion
The heavily trailed message in advance of the Budget was that the nation’s coffers needed replenishing, but that “working people” would not be paying for it. Arguably, however, the hike to employers’ NI contributions and increases in the minimum wage will ultimately have a considerable impact on employees. It will take time to unpick the details, and it is likely that there will be some amendments as the legislation progresses. The overall impression seemed to be that the farming communities and non-doms will be most affected and for a budget premised on growth it did seem rather anti-business.
Thank you to those who attended the dinner: Adrian Smale of EY, Andrew Moss of Lewis Golden, Helen Howcroft of Atomos, Katherine Haggie of Rawlinson & Hunter, Jonathan Moon of Rathbones Greenbank, Chris Etherington of RSM UK, Michaela Lamb of Gravita, Ben Miller of Investec Wealth & Investment UK, Rory Fleming of Cazenove Capital, Matthew Yates of Hunters, Sunir Watts of Hunters, Amy Scollan of Hunters, Alex Brereton of Hunters, Victoria MacdonaldHill of Hunters, and Seth Fleming of ThoughtLeaders4 Private Client.
FIVE THINGS TO REMEMBER WHEN ACTING FOR MINORS AND UNBORN CHILDREN
Minors and unborn children (unborns) are joined to many types of trust and probate disputes. Commonly, they are actual or potential beneficiaries of the estate or trust that is the subject of the dispute, meaning their interests will be affected by the outcome.
In some ways, minors and unborns are easy clients: no Zoom meetings, no meandering email chains, and, if you are representing only unborns, no actual clients. However, the representative for minors and unborns holds an important role, and their input can potentially change the course of a dispute.
Here are five things to remember when acting for minors and unborns in a trust or probate dispute.
Your Client’s Age
If your clients are very young or yet to be born, they obviously do not have the means to understand or form an opinion about the issues in dispute.
However, it is important to remember this is not always the case. Despite lacking legal capacity, many intelligent teenagers will understand the issues and have opinions about them.
When acting for minors in this position, it is important to do what you can to make them feel included in the decisions being taken on their behalf, notwithstanding the red line separating the legal standing of those over and under 18.
Get Involved Early
Similarly, the importance of the minors’ and unborns’ perspective should not be underestimated, and their representative should provide this as early in the proceedings as feasible.
The worst-case scenario is that late input on behalf of the minors and unborns scuppers an agreement reached in principle between the other
parties. Re the V, W, X and Y Trusts [2021] JRC 208 is an example of this. This was an application by the trustee of four Jersey trusts for a blessing of a proposed decision to carve out a sum from those trusts and settle it on a new trust so that it would meet the ‘needs’ element of any claims by a future spouse of a beneficiary on a divorce, thereby insulating the existing trusts from such claims. Although all the existing adult beneficiaries supported the trustee’s proposal, the representative for the minors and unborns, who was convened late in the day, raised several uncertainties about the proposal including that it was not in the minors’ and unborns’ interests. The court shared these concerns and declined to bless the proposal.
The key message from this case is that it is not realistic to expect the representative for the minors and unborns blindly to follow what the other parties have decided, and they should be consulted at an early stage to avoid last-minute issues.
The Outcome Of The Dispute Will Affect The Minors And Unborns For The Longest
As the youngest beneficiaries of an estate or trust, the outcome of the dispute will be longest-lasting for the minors and unborns. From their perspective, it is vital that the outcome works in the long term. In particular, if assets are to pass from adult living beneficiaries to the next generation at an unspecified future point, representatives for the minors and unborns will want to ensure there will still be something left for them if and when they become entitled to the trust funds.
Avoid Crystal-BallGazing
While it is important to contemplate possible future outcomes, the temptation to model more and more scenarios to try to predict exactly how each one will impact the minors’ and unborns’ lives should be resisted.
It is impossible to predict the future, and the best-laid plans can easily go awry. For example, after the proceedings have concluded and the outcome has been put into effect, an unforeseen event might occur that has a catastrophic effect on investment returns. Or, there might be a boom in an industry in which the minors’ and unborns’ funds have not been invested.
The best you can do is to make a sensible judgment on the facts of the case as you know them at that time. Depending on the nature of the case, an application can always be made to adjust the arrangements at a future point. Those footing the bill for your advice are unlikely to thank you for taking an over-exhaustive approach during the proceedings.
Keep Your Fees Under Control
Linked to this is the importance of keeping your fees under control. Although your clients themselves might not be scrutinising them, the court may well do so at the end of the dispute when it comes to costs recovery.
Typically, the minors’ and unborns’ role is more confined compared to the adult parties, so it is an immediate red flag if their representatives have incurred substantial fees or taken too proactive a role.
Conclusion
Ultimately, how you approach a case on behalf of minors and unborns depends on the circumstances of the case. With unborns and very young children in particular, you can act only in their general best interests as they do not have the capability to understand the issues or express any views.
You should make the best decisions you can with the information you have at the time. That way, if your advice is unpicked later, you can show that what you decided was appropriate when you made it.
French nationals will be familiar with the Pacte Civil de Solidarité (PACS), which has been in existence since 1999. English nationals are likely to know about the existence of the English civil partnership, introduced 20 years ago by the Civil Partnership Act 2004 (CPA). Whilst originally created in order to enable same-sex couples to gain legal recognition of their relationship, Civil Partnerships were extended in 2019 to include opposite-sex couples.
Less known however, is that these amendments to the CPA, as laid down in the Civil Partnership (Opposite Sex Couples) Regulations 2019, have the potential to lead to the most significant and far-reaching consequences for PACS’d couples with English connections (whether they live in England and Wales, or in France).
As such, it is imperative that advisers make themselves aware of the interplay between the two, in order to be able to alert clients to the multitude of tricky situations that they could unwittingly find themselves in.
TALES FROM ACROSS LA MANCHE – THE INTERPLAY BETWEEN THE FRENCH PACS AND THE ENGLISH CIVIL PARTNERSHIP.
This article provides a brief overview of the rights and obligations stemming from a French PACS, their potential treatment in England and Wales and the warning flags that might alert advisers to the need to seek international advice.
What Is A PACS?
A French PACS (“Pacte civil de solidarité”) is a form of union between a couple, distinct from marriage, which offers tax benefits. Partners sign the contract either before a “notaire” (notary) or at the town hall. As part of this contract, they must elect a matrimonial regime. The default regime is the separation of assets, but, they can opt for joint ownership of acquests (in summary terms only - anything owned pre-PACS is sole property, and anything jointly owned post-PACS is to be split provided that the funds to purchase the asset did not derive from the sole property of one partner). Partners in a PACS must live together but are not legally obligated to be faithful. They share living expenses according to their means, but this duty ends when the PACS is dissolved. There are no financial claims, and in particular no maintenance obligations, following the dissolution of a PACS.
How Is A PACS Treated In France?
A PACS can be dissolved easily: either by mutual agreement or unilaterally by one partner through a commissaire de justice. There is no judicial procedure, and partners are encouraged to agree on asset division. If they cannot agree, proceedings will only deal with asset liquidation (not division), with no maintenance ordered by the judge.
Authored by: Colleen Hall (Associate) - Kingsley Napley, Margaux Pfister (Associate) and Camille Anger (Partner) - BWG Associés
How Is A PACS Treated In England?
In England, the CPA initially provided a legal framework for same-sex couples, later extended to opposite-sex couples. The CPA grants civil partners the same rights as married couples. The CPA was amended in 2019 (Civil Partnership (Opposite Couples) Regulations 2019) and part of those amendments provided that some overseas relationships, including a French PACS, were to now be treated as a civil partnership for the purposes of the CPA.
Therefore, under English law a French PACS is treated as a civil partnership, thus producing the same rights on dissolution as a marriage.
These rights are significantly greater than those which would be afforded to a PACS’d partner in France (and greater than those which would be afforded to a cohabiting but unmarried or un-civil partnered couple in England).
jurisdiction, claiming that the male partner was domiciled in France. She further claimed that even if that were not the case, France would be the correct forum to deal with the dissolution and resulting financial relief given that both parties remained living in France and had actively chosen to enter into a French PACS in full recognition of what that entailed. The court eventually dismissed the male partner’s application, finding that he was not domiciled in England on the relevant date, but also that even were he domiciled, England was not the correct forum.
result, should bear the consequences of that decision wherever they find themselves. For an English practitioner, it might be that arguments relating to the existence of the PACS will fall under the same realm as that of nuptial agreements, or matrimonial regimes.
Case Law
There have only been two reported cases in respect of French PACS since 2019 – V v W (Jurisdiction: Dissolution of Pacte Civil de Solidarité [2024] EWFC 111 and FC v WC [2024] EWFC 291. Both dealt with different questions but both highlight the complex situations in which couples could find themselves in.
In V v W, the question centred on domicile and forum. In this case, the PACS’d couple lived in France (although both partners were originally from the UK). The male partner filed for dissolution in England on the basis of his sole domicile. The female partner challenged the English court’s
In FC v WC, the question centred on the recognition of a French dissolution in England, and whether a couple who had dissolved their French PACS was entitled to enter into an English civil partnership thereafter. In this case, the parties had entered into a French PACS whilst living in France (although both were British nationals). Having sold their French assets and returned to England, they chose to dissolve their PACS and instead enter into an English civil partnership (on advice, as a way of simplifying their tax affairs). However, the General Register Office refused to recognise the dissolution of their French PACS, thus blocking them from entering into an English civil partnership. The couple therefore had to apply to the courts for a declaration that the dissolution was valid. This was eventually granted, but at great and unexpected expense for the couple who had simply acted on advice and in good faith.
What Next?
The above two decisions could mark the start of a tide of cases relating to the jurisdictional basis for the recognition or dissolution of a French PACS in England. It remains to be seen what would happen in a case where the English courts accept that they have jurisdiction, and therefore what weight may or may not be given to the fact that a PACS is treated so differently in France. The majority of French practitioners would argue that a couple making an active decision to enter into a French PACS, fully aware of the rights (or lack thereof) afforded to them as a
Additional Issues
It is also possible that the courts will see a rise in applications for so-called Hemain injunctions (which prevent a party from pursuing proceedings abroad). Given the ease with which it is possible to dissolve a French PACS in France, the partner seeking to have their case heard in England may apply to prevent the other partner from effecting the dissolution in France until the matter has concluded in England.
Going one step further, in cases where financial provision is made in a case where an English dissolution of a French PACS has occurred, there is a question over enforcement if particular assets are held in France. In particular, an English decision granting maintenance (and/or capital) obligations between former PACS partners might be argued to contravene the spirit of the PACS and therefore be contrary to French public policy (see the Cornelissen1 judgment).
The above gives just a flavour of the complex issues which must be considered when faced with this type of situation. What is clear is that knowledge is power and clients (and practitioners) must be sure to seek advice quickly to ensure that their clients’ positions are protected.
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Being wholly management and staff owned, Accuro has the freedom to pursue its mission with passion. The way we operate and who we partner with, can only be made possible by our independence.
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UNIVERSAL THREADS:
HOW COMMON VALUES CONNECT FAMILIES ACROSS CULTURES
Authored by: Tsitsi Mutendi (Co-Founder) - African Family Firms
In our increasingly globalised world, families are more interconnected than ever. Despite vast cultural differences, many families share fundamental values that bind them together. This shared foundation can be particularly significant for family governance advisors, who play a crucial role in navigating challenges and fostering unity amidst the complexities of wealth management. This article explores the universal family values that transcend cultural boundaries, delves into their significance, and provides actionable strategies for advisors to help families cultivate these connections and strengthen their governance frameworks.
The Foundation Of Common Values
At the heart of every family—regardless of geographic or cultural background— lies a set of shared values. These values often include:
1. Love and Support: Unconditional love is a universal constant within families. It fosters a safe environment where individuals can thrive, express themselves, and feel valued. This emotional foundation is essential, particularly in moments of crisis or conflict, as it allows family members to navigate challenges with empathy.
2. Trust and Integrity: Trust is the cornerstone of all familial relationships. Families that prioritise honesty and integrity create an atmosphere of openness that encourages communication. When trust is present, families can tackle difficult topics, including financial matters, with greater ease and understanding.
3. Education and Growth: Many families view education as a pathway to success, both in a formal and informal sense. This shared belief in the value of lifelong learning not only promotes individual growth but also enhances family cohesion as members encourage one another to pursue personal and collective goals.
4. Community and Responsibility: A sense of belonging to a larger community often serves as a common thread among families. Instilling values of social responsibility encourages family members to contribute positively to society,
which can be a source of pride and unity, especially during charitable endeavours.
5. Tradition and Legacy: Families across cultures value their heritage and traditions. This connection to the past informs their present values and shapes the legacy they aim to leave for future generations. Understanding and honouring these traditions can serve as a powerful motivator for family members to work together toward shared objectives.
The Importance Of Identifying Common Values
Recognising and articulating common values can empower family governance advisors to facilitate
meaningful discussions that strengthen relationships. When families identify their shared beliefs, it becomes easier to address conflicts and establish a cohesive governance structure.
1. Conflict Resolution: In contentious situations, grounding conversations in shared values can redirect focus from disagreements to common goals. This approach not only fosters empathy and understanding but also helps to diminish tensions that may otherwise escalate.
2. Vision Alignment: Collaboratively crafting a family vision rooted in shared values allows families to align their wealth management strategies with their collective aspirations. This alignment not only enhances commitment to governance practices but also creates a sense of shared purpose.
3. Strengthening Bonds: Regularly revisiting and celebrating common values can reinforce familial ties. Engaging in family retreats, workshops, or discussions centered around these values serves as a bonding exercise that deepens connections and cultivates mutual respect.
illustrating the power of common values in resolving disputes.
The Garcia Family (Mexico)
The Garcias, a close-knit family in Mexico, prioritise community and social responsibility. When faced with disputes regarding their family business’s direction, they convened a family meeting to revisit their commitment to their community. By realigning their business goals with their shared value of giving back, they not only resolved their conflict but also strengthened their family brand, showcasing how common values can enhance business endeavours.
The Müller Family (Germany)
In Germany, the Müllers value education and lifelong learning. When the younger generation expressed frustration over wealth management, the family organized workshops on financial literacy. This initiative not only educated younger members but also reinforced their shared commitment to growth and learning, fostering a more cohesive family dynamic and demonstrating the role of education in uniting family interests.
2. Create A Family Mission Statement: Collaboratively develop a mission statement that encapsulates the family’s shared values and aspirations. This document can serve as a guiding compass for governance decisions, ensuring that actions align with core beliefs.
3. Encourage Storytelling: Invite family members to share personal stories that highlight their values. Storytelling fosters connection and can illuminate the impact of these values on family dynamics, enriching the family’s narrative and reinforcing bonds.
4. Regular Check-Ins: Establish a routine for revisiting shared values, allowing for regular discussions that reinforce the importance of these values in governance and daily interactions. This ongoing dialogue can help families stay aligned and connected over time.
5. Celebrate Diversity: While focusing on commonalities, it’s essential to acknowledge and celebrate the unique backgrounds and perspectives within the family. This approach fosters respect and understanding, creating a richer dialogue that embraces the family’s diversity.
Strategies For Advisors
Case Studies: Families Across Cultures
To illustrate the universality of these values, let’s explore how different families worldwide have successfully leveraged commonalities to strengthen their governance practices.
The Chen Family (China)
In a traditional Chinese family, the value of filial piety—respect for one’s elders— holds significant importance. The Chen family encountered generational conflicts over wealth distribution. By emphasising their shared value of respect and the importance of legacy, they established a family council that included voices from all generations. This council, focused on mutual respect and understanding, enabled the family to navigate wealth distribution equitably,
As family governance advisors, facilitating discussions around common values can be transformative for families. Here are some strategies to consider:
1. Facilitate Values Exercises: Conduct workshops or retreats where family members can articulate and discuss their values. Utilise tools such as values surveys or group discussions to identify commonalities and foster deeper connections among members.
In the realm of family governance, recognising and cultivating common values can serve as a powerful tool for fostering unity. By emphasising what connects families rather than what divides them, advisors can help navigate conflicts, align visions, and strengthen bonds. As families evolve within a global context, the universal threads of love, trust, education, community, and tradition will remain essential in guiding their paths forward. Embracing these values not only enriches family relationships but also enhances the stewardship of their wealth for generations to come, ultimately laying the groundwork for a legacy of resilience and collaboration.
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KEY RISKS OF MODERN WEALTH DATA MANAGEMENT
As the next generation of wealth generators and inheritors (the “NextGen”) emerges, expectations that clients have on their trustees is evolving.
Having grown up with data at their fingertips, the NextGen expects information to be visible and instantly accessible. These clients are used to having their needs met immediately. With increased speed and access, comes an inevitable increase in risk, particularly surrounding wealth data.
To effectively mitigate these risks, service providers must first understand some of the key potential challenges facing private clients – in particular highnet-worth families – and their trustees.
A
Matriarch/Patriarch Passes Away with No Succession Plan in Place
Succession planning is the core of what we do as trustees. From a lack of transparency with NextGens (eg the patriarch/matriarch did not share information) to a lack of understanding around non-standard assets, there are no shortage of stories of the lengthy, costly, and complex consequences of families who did not have plans in place.
When the head of a family passes away, familial dynamics inevitably shift. This shift can, and often does, align with Tuckman’s four stages of group development1:
1. Forming: Where new positions are appointed/taken, eg a NextGen moving into a leadership role within the family.
2. Storming: As the new hierarchy develops, contentious matters are likely to arise. For example, disagreements over how assets should be distributed, or how much individuals should contribute to family business operations.
3. Norming: Where disagreements and personality clashes are resolved, and a new status quo is established.
4. Performing: Where the family is content with the new dynamic and return to a focus on meeting business, financial and personal objectives.
For each of the four stages, a trustee can be an invaluable as an impartial mediator and a clear succession plan can ease potential conflicts or even prevent them being triggered.
Trustees should have regular conversations with the matriarch/ patriarch to ensure any succession plan in place is up-to-date and reflective of their wishes. They will also seek to engage NextGens – where possible and appropriate – to ensure transparency to a centralised store of information.
Authored by: Stefan Aegerter (Client Director) and Siobhan Moret (Client Director) - Saffery Trust
Litigation Around Underperforming Assets In Trusts
The primary source of litigation against trustees tends to surround the performance of assets. This is particularly relevant as the NextGen begins to scrutinise asset performance more closely.
It is important for trustees to have access to, and regularly review, market comparables to give a clear performance picture to beneficiaries.
As family offices become more professional, there is an upward trend in families seeking to better understand and manage their private wealth. The benefits of structured, comprehensive information and effective communication cannot be underestimated in ultimately giving peace of mind that comes handin-hand with heightened organisation, experience and expertise.
reduce administrative burdens, as well as providing an enhanced view of their structure(s).
It is no longer “good enough” for trustees to only provide traditional monitoring and decision-making services, they must actively seek to improve their tech suite, for benefits to be passed to their clients and providing clarity in the complex.
Inability To Act Quickly Amidst Global Uncertainty
Historically, a notorious lack of transparency in some wealth sectors may have deterred clients from taking legal action against their service providers. In our view, the welcome introduction of regulatory measures such as the Common Reporting Standard over several years ‘cleaned out’ undeclared structures. This increased transparency and, with it, accountability as the likelihood of legal action for underperformance increased.
Despite delegating specialist roles – such as asset and investment management – to expert intermediaries, trustees remain accountable for ensuring that performance does not fall below expectation. Utilising technology for reporting can help enhance performance tracking and support trustees in meeting this obligation.
Lack Of Benchmarking Across Diverse Assets
The growing diversification of assets presents challenges in benchmarking performance. For example, it is not possible to gauge performance of digital assets against years of data – as you may be able to with art or wine – simply because digital assets have not been in place long enough.
Quantity And Complexity Of Wealth Data
Wealth data is becoming increasingly complex and costly to manage. Historically, families would generally use one bank and have a close relationship with one organisation with minimal, or no, input from other advisors/ intermediaries. Clients often relied on their bank to provide quarterly or even annual updates with key information.
Today, increased compliance regulations, a growing interest from HNWs to be more actively involved in their wealth management, along with the expansion of a reliance on a wider range of service providers (e.g. investment managers and custodians) can leave clients overwhelmed with the amount of data their investments generate.
Trustees can support private clients, including family offices, by taking on the administrative burdens associated with managing their wealth data, giving clients have access to the information and analytics they want and need, while ensuring the confidentiality of this information
Global economics and politics have highlighted the need for quick decisionmaking capabilities. For example, highprofile events such as the collapse of Silicon Valley Bank in 20232, which went from solvent to broke over the course of a few days underscore the importance of being able to quickly identify and manage exposure to risk. These type of “shock events” have increased the demands of clients on their service providers.
Relationships between clients and their advisors has, in many cases, evolved from periodic communication to requiring immediate action and decision-making facilitation. This shift demands that advisors, including trustees, be prepared to act quickly, which requires them to keep abreast of changes, and have an up-to-date view of their client’s wealth data. The ability to ‘slice and dice’ data, and drill down into the small details of investment exposure is critical in working with families, and their financial advisors, to mitigate these risks.
Conclusion
Modern wealth management presents significant risks due to the evolving landscape of asset diversification, increased complexities of data, and the need for rapid decision-making in uncertain times.
Trustees can adapt by leveraging technology, maintaining robust governance structures, and ensuring clear communication to manage these risks effectively and maintain their seat as a trusted advisor at the family table.
Forward-thinking trustees will partner with reputable technology companies to provide their clients access to advanced options including wealth consolidation platforms, which increase accuracy and
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We care for our clients’ assets like our own because we never forget who they really belong to. If you’re an individual, family, charity, trust or corporate looking for a global investment manager with diversified investment solutions, choose the one that is personally committed to your future. The one who does things the right way. The Melville Douglas way.
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AN ALTERNATIVE ROUTE TO BRITISH CITIZENSHIP VIA CAYMAN ISLANDS RESIDENCY
Authored by: Daniel Altneu (Partner) – Bedell Cristin
Obtaining an alternative right of residence and citizenship, and an ability to leave one country and settle in another is becoming increasingly important. Allied to this, as the world becomes ever more interconnected, so does the attractiveness and feasibility of making lifestyle choices of where to live and do business.
The acquisition of a British Passport remains one of the most appealing citizenships in the world. Aside from the raft of domestic benefits which include an ability to live in the UK; full civic rights plus the right to vote; free NHS medical care; no restrictions on your right to work; unrestricted entry and travel abroad, the UK passport remains the 4th most sought-after global citizenship due to a holder’s ability to access 190 of 227 jurisdictions without requiring a prior visa1
Notwithstanding the above, the pathway for individuals seeking to obtain British Citizenship following the acquisition of
1 The Henley Passport Index – Henley & Partners
residency-by-investment in the UK and thereafter indefinite leave to remain carries with it a raft of uncertainties. This is due to the cessation of the Tier 1 (Investor) Visa and its replacement with the UK Innovator Founder Program, which requires applicants to set up a Home Office endorsed innovative and viable business with a potential for growth, coupled with the added complexities of navigating the upcoming (at the time of writing) Labour Government’s changes to the tax regime for non-domiciliaries when it comes to the treatment of income, capital gains and inheritance tax on account of their residence in the UK. Accordingly, the present reality has led to such individuals considering alternative pathways to British Citizenship which themselves do not require any physical residence in the UK itself during the entire process.
One such available pathway is through a Certificate of Permanent Residence for Persons of Independent Means (“Certificate”) in the Cayman Islands, an English-speaking British Overseas Territory that is
located an hour’s flight from Miami in the western Caribbean Sea (“Cayman”).
Every year, more individuals from an array of different jurisdictions develop a strong desire to take advantage of Cayman’s unique position of being able to offer tax neutrality alongside one of the highest GDP’s and standards of living in the world. These future residents are further attracted by Cayman’s natural beauty, traditional values of community and privacy, sophisticated infrastructure, stable government, strong rule of law, excellence as an international financial centre, elite health services and education, low crime rate, cosmopolitan outlook (with 135 recorded nationalities), and its position as the culinary capital of the Caribbean.
In recent times, Cayman’s economic stability has provided extra pull. Despite being tax neutral (there is no income, capital gains, property, estate, inheritance, wealth, sales or corporate taxes and no restrictions on foreign ownership of real estate), Cayman operates a highly efficient consumptionbased duty collection model ending 2022 with a c.US$58m operating surplus as a result of revenues reaching c.US$1.25bn. There is no sign of any slow down with current 2024 revenues forecast to reach US$1.34bn (and US$1.39bn in 2025) and current 2024 operating surplus forecast to reach c.US$52m (and c.US$65m in 2025). Such considerable operating surplus provides Cayman’s Government with an ability to continue spending significant sums on infrastructure, thereby directly benefiting residents and contributing to why Cayman is often described as the Singapore/Monaco of the Caribbean.
And so for many individuals and families looking for an alternative pathway to British Citizenship, the Certificate provides the ultimate option as not only does it grant a holder and spouse/civil partner with a lifetime grant to reside in Cayman for a minimum investment of £1.85m in developed property, it also gives them both an ability to work but crucially, provides the entire family with a pathway to Cayman and British Citizenship without any obligation to surrender existing residencies or citizenships.
There is considerable flexibility around the property purchase, with some highlights including:
• There are no specific residency-byinvestment properties so applicants have no limitations on their choices.
• Any or all of the properties can be treated as investment properties and rented on a short-term or long-term basis or placed in rental pools.
• Property purchased can be registered in the applicant’s name, in joint names, in the name of a limited liability company for asset protection reasons which is popular for those renting the property or wishing to settle the shares into a trust for succession planning purposes.
1. The first stage of that process requires each family member to obtain Naturalisation as British Overseas Territories Citizens on account of their legal and ordinary residence in Cayman during that prior 5-year period following the grant of their Certificates.
2. Once naturalised, the second stage requires each family member to apply for British Overseas Territories (Cayman Islands) passports.
3. Once acquired, the third stage requires each family member to apply for Registration as a British Citizen with all the rights and privileges that entails, including applying for and obtaining a full British passport following the issuance of their Certificates of British Registration.
In our experience, it is this defined pathway to British Citizenship that provides the greatest appeal. After a period of 5 years’ legal and ordinary residence (which for most families is the first 5 years following the grant of their Certificates), the following stages can all occur during that 6th year of residence in Cayman provided each application is submitted in a timely fashion and their considerations are not protracted:
Aside from all the wonderful lifestyle benefits available to residents of Cayman, there is a distinct added advantage of having a viable pathway to British Citizenship through a simplification of one’s life – purchasing property in a historically strong and buoyant market and then residing in a tax neutral yet sophisticated jurisdiction, whilst at the same time not having to traverse the intricacies of starting a viable, scalable business and considering one’s personal tax landscape on account of physical residence in the UK. It is evident that as the world becomes wealthier, more mobile and a desire to be genuinely offshore continues to grow, so will the trend towards obtaining an alternative right of residence in places like Cayman, even more so when considering the potential ancillary benefits of acquiring British Citizenship as a result.
Radcliffe Chambers Private Client
(Chancery:
We
Traditional, Chambers High Net Worth 2022)
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