RESIDENCE, DOMICILE & SUCCESSION PLANNING

Instruction received to provide residency, domicile and inheritance tax advice to a successful UK-based Russian entrepreneur, who was in the process of selling his substantial UK business interest.

We liaised with the client’s Family Office to enable us to undertake a thorough review of the client’s situation regarding his worldwide income, assets and liabilities. We informed the Family Office of our opinion on the client’s non-UK domiciliary status, together with the client’s eligibility to claim the remittance basis of taxation and the benefits of doing so.  We advised on a suitable bank account holding structure to receive the cash consideration from the sale of his business.

Having conducted a detailed review of the scope of the client’s worldwide estate we were able to offer the client practical solutions to succession planning.  Having been UK tax resident for at least 17 of the last 20 tax year the client was now deemed UK domiciled for inheritance tax (IHT) purposes and was therefore subject to IHT on his worldwide assets.  The client was keen to protect his significant wealth for the future interests of his family by passing them on to the next generation in a controlled way.

We advised on a mixed strategy involving the use of a Family Investment Company and a Qualifying Non-UK Pension Scheme (QNUPS).  The Family Investment Company satisfied one of the client’s key objective of retaining an element of control over the funds contributed to the company and an ability to direct which heirs benefited from income as their knowledge and experience of the investment business grew.  The future investment growth within the Family Investment Company is outside of the client’s estate for IHT purposes.

As the client had sensibly built up substantial pension savings through UK registered pension schemes, a QNUPS offered him an attractive way to fund an additional income in retirement, with the added benefit of being free from income tax and capital gains tax on growth, even on UK sited assets.  An appropriate level of contribution was made to a Maltese QNUPS, in order to secure long term benefits upon retirement.  These fund were immediately outside of the client’s estate for IHT purposes but also provided the client with a very flexible investment vehicle through which to invest in a wide spectrum of assets, including residential property.  The ability to withdraw a 30% tax-free lump sum at age 50, if needed, added to the flexibility and appeal of this strategy.

Please note that this case study reflects the facts, circumstances and tax position at the time the project was undertaken. It has not been updated for any subsequent change in tax law or practice and must not be construed as advice, or otherwise relied upon for any purpose.