Suggested changes to UK Domicile & residency Rules boost interest in Liechtenstein Foundations!!

SCF over the past few weeks has experienced significant increased interest in Liechtenstein Foundations, which would come as no surprise to those who have read the recent comments made by Labours new Chancellor, Mr Alistair Darling.

Mirroring the Conservatives suggestions, Alistair Darling has launched what would only appear to be an ill-prepared consideration to the advantageous domicile rulings with the only possible benefit of winning the layman’s vote. The UK has attracted a number of millionaires and billionaires, purely because of this unique tax law and any change would, in this writers opinion, be very much to the detriment of the country! Inward investment into London, property investment via offshore companies, and so forth would be severally affected.

In recent years, ever-increasing importance has been placed against the correct structuring of your offshore company to ensure basic compliance requirements are met. The SCF Group has always advised the importance of Management and Control and the correct management of your company can be the difference between legitimate tax avoidance and illegal tax evasion.

This has been given greater meaning recently with increasing news articles discussing the future of the UK’s very advantageous foreign domcilie laws. One such high profile case involved the popular MotoGP racer Valentino Rossi who was persued by the Italian tax authroities for a rather impressive €112m in outstanding taxes for the years between 2000 and 2004 [ read more ].

Essentially, the UK’s tax law recognises ones domicile, domicile uniquely referring to the birthplace of ones father. Those who’s fathers were not born in the UK may be able to claim Foreign Domicile, or ‘Non-Dom’ status. Non-Dom’s are essentially only taxed on a remittance basis, i.e. they are not taxed on a worldwide income basis, but rather only on those monies earned within or remitted back to the UK. [ Lambert warns of backlash over tax inequality ] | Non-domiciled residents face Revenue queries ]

As SCF highlighted in its Spring Newsletter, it is important to react quickly to any potential changes and to bear these, as well as future changes, in mind.

SCF would suggest that, in light of these possible changes, the position of ‘beneficial owner’ of your company is assessed and one of the below changes considered.

1. Changing one’s residence: in changing one’s residence, many factors of course would need to be considered, however, from our perspective, the tax law of the country you move to is the most important. For this reason, a natural alternative to the UK often presents itself in the form of The Republic of Ireland. Due to Irelands historical connection with the UK, the ‘Non-Dom’ principal also generally applies and as such presents a natural alterantive residence. However, for those who changing residence is not feasible, Trusts/Foundations then become an option.
2. Employ additional levels of protection: Due to increasingly sophisticated anti-Trust legislation, SCF would typically suggest for the use of Foundations. Foundations have UK case law (see: Carl Zeiss Stiftung (‘Stiftung’ is German for a Foundation) v. Rayner & Keeler (1967) App. Cas. 853 PC 1967) recognising them as companies, therefore instantly not making them subject to the anti-trust legislation, but also Foundations uniquely give the Founder, the ability to control ones assets during ones life-time. The Foundation, as a non-commercial entity, would then maintain an underlying company through which the trading activity would typically be carried out. Finally, Foundations can also provide for future planning for asset protection, pre-nuptial ‘tools’ and inheritance and capital gains tax mitigators.

This article is not meant to be a full description of the implications and solutions and we would like to suggest that our clients contact Charles Baker charles@scfgroup.com Tel:+44 (0) 207 731 2020 to discuss further.

UK No Longer Europe’s Entrepreneurial Home

The UK has long been the centre of Europe’s entrepreneurs. Through calculated control of personal and corporate tax rates the UK has positively encouraged the influx of foreign wealth and enabled small businesses to grow and thrive. However recent political manoeuvring (probably in light of the approaching general election) threatens to bring this to an end and has re-established the Republic of Ireland as the foremost European Business Centre.

The UK has seen substantial growth through the investment of high net worth individuals. By allowing special tax dispensations to the wealthy foreign elite, London have become the home to more millionaires than any other city in Europe. Just ask Lakshmi Mittal, the worlds third richest man, if the UK tax system can be beneficial. This influx of wealth has fuelled British Banks with the likes of HSBC, Barclays and RBS announcing record profits and becoming the cornerstone of the UK economy.

However, in the present political climate it appears the leading parties are more concerned with the upcoming general election than with the continual prosperity of Britain. Recent changes made by the Labour Government under Gordon Brown, and perhaps more surprisingly policy announcements by the Conservative opposition, have seen opportunistic tax rates imposed on North Sea oil, taper relief for commercial investments abolished, corporate tax rates have now been increased twice in the last three years as marginal starting rate relief on amounts up to £50,000 were abolished in 2006 and the small business rate has this year been increased by 3%. Furthermore, proposals are now also being made for a flat tax of £25,000 to £30,000 on non domiciled individuals to be introduced similar to those offered in Gibraltar.

As a result of such continual tax rate increases a recent EU report has shown the UK’s tax as a percentage of GDP has risen to an estimated high of 37.4%. This means that the UK will have overtaken the likes of Germany, Spain and Ireland, three countries, Germany in particular, whom are willing and able to take London’s investment banking sector to their own cities.

It is perhaps ironic though that, where UK tax changes have historically been to the severe detriment of it’s Celtic neighbour, all recent machinations have been very much to the benefit of Ireland, leading many a scribe to wryly suggest that Ireland may have ‘Agents’ at the highest levels of UK Government. With a flat corporate tax rate of 12.5% and the same non domiciled tax benefits for wealthy individuals, Ireland offers the great advantages once monopolised by the UK. In fact, the same EU report shows Ireland’s tax as a percentage of GDP is at 30%, a full 7% lower than the UK.  

Why Ireland Is Best

Although the lowest corporate tax rate within the EU belongs to Cyprus, where the SCF Group keep an active local presence, Ireland provides the lowest corporate tax rate of all the developed EU nations. In addition Ireland has an abundance of highly skilled professionals, highly advance Corporate Law and it’s favourable tax treaty with the US has made it the leading EU nation for US investment.

The SCF Group have been following these changes for quite some time and will shortly be announcing the opening of it’s new Dublin office to help our clients take advantage of the most beneficial tax regime in the EU. In addition we have also updated our website to show how UK individuals can secure their assets before the new changes come into full effect, those of you owning commercial property please take note.  If you would like to discuss how you could take advantage of these great opportunities please contact the SCF Group today.

THE SCF COLLECTION

SCF is delighted to confirm that it has moved offices after many successful and happy years on Sydney Street, and relocated to Imperial Wharf, next to Chelsea Harbour.

To assist clients in getting to our offices, we are providing to all offshore and Full Management clients a free chauffeur service from the following designated points:
SCF is delighted to offer all offshore and full management clients free chauffeur or personal collection from the following designated points

  Earls Court - Fulham Broadway - Parsons Green
 Clapham Junction
 Chelsea Harbour Pier - The Thames Riverboat system is the ideal way to reach us from Central London
 The London Heliport in Wandsworth

Our new address is:

SCF Legal & Corporate Management Services Limited
3 The Fountain Centre, Imperial Wharf, Fulham, SW6 2TW
Tel: +44 (0) 207 731 2020, Fax: +44 (0) 207 731 7144