I have been privileged to work for many decades with some of the wealthiest families in the world. Over these years I have observed what they do and how, which has allowed me to distil this knowledge and experience into two Protection Plans – one for UK resident non doms, and another for those who want to keep their trusts offshore. Both target the complexities surrounding privacy and asset protection.
In this Note I will focus on the Plan for UK resident non doms.
We have all gotten so used to setting up offshore trusts for UK resident non doms, that we sometimes overlook the huge advantages of bringing the trusts onshore. GFOS offers UK Professional Trustee services to individuals who can no longer benefit from having their assets in offshore jurisdictions.
As I have said in my previous Notes, there is a real concern that as and when HMRC receives information about trusts offshore, it will pick out the trusts which are weak and whose integrity can be questioned. HMRC knows that nobody who has worked incredibly hard their entire life to build an empire will just hand it over happily to a trustee offshore to own and control it. Investigators will want to set these trusts aside as formal or administrative shams - the more trusts that are considered sham, the more assets they will tax.
If you or anyone you know has been investigated, you will know that HMRC is ruthless and has deep pockets. It cares little that you have to incur huge professional fees to fight off allegations, not to mention the reputational damage you suffer along the way. It is concerned only with raising taxes; and if it is successful in setting aside your trust, they can charge you to tax on all the income and gains, and on the assets in the trust, as if there never was trust. This will be a catastrophe! Imagine you have had a trust for the last 12 years thinking it is all fine and dandy until 2017 when it is declared sham - it never existed, you've been the owner all along. The trust property can be used to pay off creditors, you will now not only be taxed on these assets going forward but you will have to backtrack 12 years and pay the tax for that period too.
The grass isn't greener on the other side as the trustees could be put out of business by having to pay back all the fees it earned as a trustee - if the trust never existed then the trustee has no right to keep those fees.
With the GFOS Protection Plan, the settlor can choose the people he wants to take the decisions in his trust. This is what I mean by getting back to basics. Trusts were always designed to be in the same place in which the family lived so that trustees that are known to the family can be chosen.
The family can choose its investment manager, lawyer and/or banker here in the UK. It also does away with the need for a Protector as this person can now be a Trustee - our plan makes sure that all trustees are protected from liability.
The third advantage, is that the income and gains are taxed in the trust on an arising basis, so there is no need to pay the Remittance Basis Fee. This has not been cheap. For non doms who have lived in the UK for more than 7 years out of the previous 9, it is £30,000 annually, for those who have lived in the UK for more than 12 years out of the previous 15, it is £60,000 annually and for those who have lived between 17 out of the previous 20 years it is £90,000.
Of course the income and capital gains will be taxed as these arise, but the beneficiary will then receive a full income tax and capital gains tax annual allowance, which is the fourth advantage.
The fifth advantage is that having the trust in the same country in which you live, means you can stay on top of your trustees and wealth, and as the saying goes – ‘You gain respect, for what you inspect.’
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Caroline’s Book ‘Who can you trust when you are Super Rich?’ can be pre-ordered from Svetlana and her book ‘Winning Business from Private Clients’ can be bought direct from the website.