Sultan is flying from Qatar next week to meet with us. He has a home in Knightsbridge worth roughly £10 million where his daughter Farah lives.
She is a student at the London Business School. Sultan travels extensively but dislikes living out of suitcases so whenever possible he arranges to have business meetings in London so he can see his daughter and travel light.
Last year he paid the Annual Tax on Enveloped Dwellings (ATED) which is a tax to compensate the Government for being outside the scope of Stamp Duty Land Tax (SDLT). A sale of the shares in his Jersey Company would not attract SDLT so instead owners of residential properties owned by companies pay ATED. He decided to pay the tax this year rather than liquidate the company, because the Jersey Company was still effective at protecting him and his family from Inheritance Tax on his death. On a £10 million home owning the apartment through a Jersey Company would save his estate £4 million.
However, in the summer George Osborne announced that residential properties owned by offshore companies would soon be subject to inheritance tax. In August Sultan visited his lawyer to ask what he should do and was told to wait until more was known. Since then he has heard nothing which is why he came to me. He was concerned. Christmas was fast approaching and then everything would stop until the middle of January. It would then be only ten weeks before the deadline of 1 April and another year’s charge in excess of £100,000. None of his friends and contacts wanted to pay this charge again and Sultan did not want to get caught in the rush in the run up to de-envelope ahead of 1 April.
Sultan’s friend, Osama, who he worked closely with in Qatar, also owns a property in London of a similar size and quality to the apartment owned by Sultan. He also has children the same age as Sultan’s daughter Farah. His advisor had suggested he transfer the apartment into the names of his children and then stay in hotels when he visits London so as not to fall within the ‘Gift with reservation of Benefit’ inheritance tax anti avoidance rules. Osama and Sultan were both irritated by this suggestion. Neither Osama nor Sultan want to transfer valuable properties in London to their children and then not be permitted to stay there.
I explained to Sultan that he needed to liquidate the company to eliminate the ATED charge. He could do this immediately; there were plenty of ways we could then mitigate the inheritance tax exposure.
In my meeting with him we could then run through his options. I was confident that we could reduce his exposure to Inheritance Tax significantly, certainly by 50% and if the circumstances were favourable up to 100% without compromising his enjoyment of his apartment. He was delighted.
I told Sultan that Garnham Family Office Services specialises in succession and estate planning, but we do not implement any solution. Once a solution has been identified we instruct a suitable professional to work with us. There are many professionals who are highly skilled at delivering the final results, but prefer acting for a family through their family office rather than with the family direct. Garnham FOS offers a culture of care identifying the priorities of our families before suggesting a solution. We then instruct, monitor progress and report to our family giving as much detail as they want. In this way both the family and the professionals save time and money and the family has then top quality advice at the best possible price.
If you or your contacts or clients have similar concerns to Sultan and Osama, please contact svetlana@garnhamfos.com or phone on 020 3740 7423 to arrange a meeting