Equiom Solutions’ Tax Planning Breakfast Briefings - Channel Islands

Tuesday 08 March 2016

Tax and estate planning specialist Equiom Solutions Limited, part of the Equiom Group, recently held two breakfast briefings for Channel Islands residents, their advisers and relevant intermediaries.

The briefings, entitled ‘The UK Summer Budget – Implications for Channel Islands Residents’, were held at The Royal Yacht Hotel, Jersey, on 23 February and Old Government House Hotel, Guernsey, on 24 February.

Both events were well attended, attracting more than 130 delegates including individuals from the legal, finance, property and wealth sectors. The Jersey event was opened and chaired by Hiren Mistry, Legal Counsel for Equiom (Jersey) Limited, while Rick Brooks, Managing Director for Equiom (Guernsey) Limited, opened and chaired the Guernsey event.

The speaker line up included Helen Woods, Managing Director of Equiom Solutions, and Tax Director Kevin Renshaw.

Helen began with an explanation of residence, including a review of the old rules for residence and a summary of the changes that came into effect in April 2013. She provided an overview of the automatic tests, namely The Automatic Overseas Tests (AOT) and The Automatic Residence Tests (ART), and detailed the Sufficient Ties Test which comes into effect when neither of the automatic tests are satisfied.

‘The Sufficient Ties Test looks at a combination of the number of days you can spend in the UK in the tax year and the number of ties you have with the UK,’ she explained. ‘The ties you need to consider are family, accommodation, work, UK presence and country.’

Helen continued her presentation by detailing the rules for domicile, with particular reference to the new guidelines applying to returning non-UK domiciliaries that will be effective on or after 6 April 2017.

Providing a practical example, she explained:

‘Mr Smith was born in the UK, with UK-domiciled parents. He moved overseas when he was three months old and has remained outside the UK for 70 years. While away from the UK, he set up a trust. If he now decides to move back to the UK, he will immediately be classed as UK domiciled and his trust and any personal assets will come within the scope of Inheritance Tax (IHT).’

The presentation then moved on, outlining the possible planning opportunities for considering a return to the UK.

‘The good news is that the provision is not permanent; the trust and any assets are only within the scope of UK taxes while the settlor is UK resident,’

Helen said, before concluding by posing the question:

‘Do you need to reorganise your financial affairs before returning to the UK?’

The second part of the briefing involved a review of the issues a Channel Islands resident would need to consider when devising an estate planning strategy to minimise exposure to UK taxation. Helen reiterated the three key changes that were announced in the 2015 UK summer budget, explaining the impact of the changes and providing some planning options for Channel Islands residents and domiciliaries with UK connections. She looked at the proposal to treat long-term residents of the UK as UK domiciled for all taxes, and also made reference to owning UK property, whereby ownership via an offshore company will soon no longer provide the IHT shelter that it had previously.

This led seamlessly into Kevin’s presentation, which expanded on this topic and addressed future planning opportunities for individuals with property in the UK. 

On addressing the ownership of UK residential property, Kevin commented:

‘There are shafts of sunlight among the storm clouds and there are still benefits to be had from offshore company ownership, including privacy, reduced tax rates on rental income, unchanged relief for interest payments and opportunities to come outside of CGT and Stamp Duty Land Tax (SDLT).’

The continuing advantages of company ownership for the acquisition of commercial and mixed use property were summarised for delegates. Kevin explained:

‘It is very much “business as usual” when it comes to ownership of commercial property via an offshore company. It remains outside of the scope of CGT, IHT, and the Annual Tax on Enveloped Dwellings (ATED). It also continues to be possible to limit SDLT to 4% and income tax to 20% or less in some certain circumstances.’

He finished by providing alternative strategies including ‘lend to buy’ and life cover, which may play a key part in future succession planning strategies.

Both seminars concluded with opportunities for delegates to question the speakers.

Reflecting on the briefings, Helen said:

‘Following last year’s UK summer budget, there is still a great deal of uncertainty regarding the tax impacts affecting offshore residents with UK assets or investments and non-domiciliaries who are UK resident. As we await the release of further information, we can only speculate on some areas. This briefing was intended to inform individuals and their advisers on what the changes could actually mean to them and how they can start planning now. We were delighted to receive a great deal of positive feedback from delegates regarding the content and format of the briefings and we plan to keep the momentum going with future events of this nature.’ 


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