Paulo and South America

Very often GFOS clients want to compare jurisdictions once they have their sights on setting up a Family Headquarter offshore; all the usual names appear on our comparison tables - Bahamas, Switzerland, Jersey, Monaco etc.

Monaco is very special for Brits - the weather, security and to be surrounded by like-minded people. But it is not as easy as it used to be to become a non-UK tax resident.

The law changed in 2013 (Finance Act 2013 Schedule 43) and the statutory residence test is about as complicated as the UK Treasury could possibly make it.

Let’s take Paulo. He came to the UK from Central America twenty-eight years ago, and has lived in Belgravia ever since. His first child was born before he and his wife immigrated and she is now 31. Paulo then had a further two children. His business is food imports to Europe from his home country and he travels extensively, in particular to Central America, where he has a home.

His eldest is now married and living in Notting hill Gate with two young children, Emily and Francis. His second child is pregnant and due to get married this year and will continue to live in London. The third is likely to go into Paulo’s business and is not settled.

Paulo is very concerned about how Brexit will impact his business and is considering whether to reduce his imports to the UK and concentrate more on Eastern Europe. He has a UK passport, and a passport from his home country, but now fears that he may need another passport so that he can move freely around Europe post Brexit.

He has a trust in Jersey which he set up twenty years ago, but is now also concerned that his trustees will report to his home country, given his close connections there.

When he came to see me, Paulo wanted to know first how easy it would be to become a non-UK resident and to set up a bolt hole in Monaco.

I explained to him that in any year he spends 183 days in the UK, he will be automatically treated as UK resident, and will be treated as non-UK resident if he spends less than 16 days in the UK. This he said was not going to be possible, he and his wife wanted to see their grandchildren growing up.

The next question was whether he would keep a home in the UK – yes, he was quite decided. His wife would want to have her own home to be close to her children, but he could not see either of them neither spending three consecutive months of the year in the UK, they would always come and go.

In these circumstance Paulo and his wife would need to work out how many ties, they would retain in the UK.

Firstly, he would have tax resident children in the UK, so this is one tie, secondly, he and his wife would have accommodation in the UK, which would be another tie, however it was unlikely that he would work in the UK, but could not be sure. If not he would not have a work tie in the UK, if he did he would remain UK resident.

If not, he would need to be very careful not to spend more than 90 days in the UK, with family and friends. If he did, he would be treated in that year as being UK tax resident, and would remain UK tax resident for the following two years.

With regard to acquiring a home in Monaco, I told him that we could put him in touch with all the right property developers and if necessary the bankers we work with locally can arrange finance for him.

He then wanted to know what to do about his trust in Jersey and his concern that his trustees would report on his offshore finances to his home country in Central America. I told him that while he was UK tax resident we can advise on positioning his affairs in a way not to expose him in other jurisdictions.

If you have comments or would like to discuss matters relating to restructuring, control, trusts and protection of your assets please contact us direct.

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