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Dear Clients,

Welcome to our Autumn newsletter of 2016. 

 

New Additions to the Palladium Team

Since our last newsletter, there have been some positive changes to the team at Palladium, namely the expansion of our team.

Melloney Bond, Structure Advisor
Melloney Bond has joined us a wealth structuring advisor, having previously worked in Jersey for fiduciary firms specialising in the creation and administration of offshore structures for high net worth individuals and their families.  Immediately prior to joining Palladium, Melloney was part of the private client team at RSM where she worked mainly on tax compliance.

Shan Ahmed - Corporate Administrator
Shan has joined Palladium as a corporate administrator.  Shan has previously held senior administrative roles within the World Bank assisted public sector projects and consultancy services in the Maldives as well as administrative and Human Resources roles within UK companies for over 14 years. His extensive experience includes client relations management, top level executive support and an ability to handle complex organisational designs. He is a trained Project Management and Administration expert holding a Masters in Business Computing and has recently completed an MBA.

We are excited about the diverse skills and solid offshore experience the team have to offer and are looking forward to expanding our service lines in the next year!

 

Our Vision

We strive to deliver excellence at reasonable cost.

Running for Royal Marsden

On Sunday 9th of October, Palladium’s founder and director Stephen Abletshauser will be running a half marathon in support of the Royal Marsden hospital.  The Royal Marsden is a specialist cancer research and treatment centre who cared for Stephen’s father.

If you would like to support Stephen, his Just Giving Page can be found at the following address and all donations are greatly received:

https://www.justgiving.com/fundraising/thank-you-to-marsden

We wish Stephen the best of luck!

UK -  Tax Heavy or Tax Haven?

UK Res Non Dom Changes – So what is happening?
There have also been significant fiscal changes since our last news later, mainly aimed at UK Res Non Doms.  Perhaps the most significant one being the use of offshore entities to hold London property.

Prior to the introduction of ATED in 2013, one of the most common types of structures any fiduciary company would have implemented, was an offshore company holding prime London real estate. This made up a large amount of trust company business and was a nice little earner – minimum risk, very little administration (usually a quarterly payment of service charge and arranging insurance) and an ongoing fixed fee that could be increased slightly every year.

Whilst there were other reasons why a UK Res Non Dom may want to set up a structure up like this, one cannot deny that it did provide great tax advantages; mainly being able to benefit from the lower rate of corporation tax on purchase and disposal of the property. In addition, the shares in the offshore company fell outside the scope of inheritance tax charges for UK Res Non Doms, notwithstanding the fact that the real asset was UK situs property.

One could agree then, that the first ATED measures introduced were sufficiently justified in cracking down on the use of these structures and imposing, amongst other things, an annual charge on enveloped properties. In reality, however, it was still preferable for many wealthy UK Res Non Doms to pay the annual ATED charge rather than expose themselves to a 40% inheritance tax charge.

This last remaining tax benefit, however, is set to be abolished from 6 April 2017.  From then on, any UK Res Non Dom holding a UK property through an offshore entity will be subject to inheritance tax.  Shares in an offshore entity that derive its value from UK property can no longer be defined as “excluded property”.

 

Commercial Ethos

While the offshore world faces challenges and is subjected to more scrutiny than ever before, Palladium’s commercial ethos is centred on due compliance as well as efficiency and robustness in the delivery of its services.

Property Developer Clampdown

Making people pay UK tax on UK situs property is not just restricted to those holding residential property.

New anti-avoidance legislation has also been introduced that closes a well exploited loophole for property developers.   Previously, in order for companies to be subjected to UK taxation, they had to satisfy certain criteria, one of which focused on the concept of ‘Permanent Establishment’.

Property developers were able to skirt around UK taxes by using offshore companies in the Isle of Man, Guernsey or Jersey.  What these three jurisdictions had in common, was that they had Double Taxation Agreements with the UK that:
  • Did not define a building site as a permanent establishment
  • Provided that a resident of that territory cannot be charged tax in the absence of a permanent establishment
  • Did not include express provision allowing the source state to tax profits arising from land in its jurisdiction
From 5th July 2016, however, any trading profits are now taxable in the UK regardless of residence or whether it has a permanent establishment. 
 

Learn More

We hope that you find our website a helpful and informative introduction to our services. Please contact us if you have any questions.

CONTACT US


Game Changer?

The final fiscal change we feel it is worth mentioning, is the introduction of the ‘deemed domicile’ rule, set to come into play on 5 April 2017.   From here on, UK Res Non Doms who are resident for 15 out of 20 tax years will become subject to income tax and inheritance tax on their worldwide assets.   Not only this, but UK domiciles of origin who have acquired new domiciles of choice, will revert to being UK domiciled upon a return to the UK.

Whilst these tax changes seem somewhat harsh, one can see HMRC’s view that foreign individuals who are living the in UK for a long time, or who derive profits from UK situs assets should be subject to the same taxes as those companies or individuals who are domiciled in the UK. 

 


Excluded Property Trusts

This does not mean, however, that the UK is not still a great place for wealthy foreign investors.  There are still ways and means of sheltering offshore assets from inheritance tax, namely by setting up excluded property trusts prior to becoming deemed domicile.  These trusts, however, must not be ‘tainted’ by making additions after becoming deemed domicile – this could result in the entire trust property becoming subject to tax!

Palladium have trust companies in both BVI and New Zealand; two of the most modern and progressive jurisdictions in the world with regard to trust law.  Stephen and Melloney are also fully qualified STEP members, both having specialised in international trust management.

 


Corporation Tax Inducement

As for corporation tax, the UK has one of the most competitive rates out of the world’s largest economies.  Currently at 20% and set to go down to 19% from April 2017, with an eventual all-time low of 17% by 2020!

One can also not forget other incentives of HMRC which are great for genuine foreign investment, such as the Business Investment Relief Scheme which is aimed at UK Res Non Doms.

Palladium are confident that the UK is still a great place for high net worth individuals and entrepreneurs to centrally manage their wealth from.
 
We are able to assist our clients in all aspects of their international wealth management, whether it’s private equity fund raising, offshore fiduciary and corporate services or UK legal advice.

 


What do you think? We’d love to hear from you.

Our next newsletter will focus on Common Reporting Standard.

Palladium specialises in setting up and providing administration and corporate services to wealth structure vehicles from all major financial centres. Ask us to quote for a service and see how we compare. 

We hope you all have had excellent year and all the best toward the rest of the year, 

Palladium team (Melloney, Shan and Stephen)

Read More

Our Dealings
with the offshore fiduciary market, and our onshore commercial background in the City, have convinced us that we provide a unique and valuable service.

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