CALLING ALL INDIVIDUALS DOMICILED IN INDIA, PAKISTAN, FRANCE AND ITALY!

So, what do all of these countries have in common?  No, it’s not about holidays or food or distance from the equator or levels of rainfall during summer months.  It’s about tax, more specifically Inheritance Tax.  Please read on and all will become clear…

1) Inheritance Tax (“IHT”) – a general overview

IHT is chargeable at a rate of 40% on an individual’s estate to the extent that the chargeable value exceeds the nil rate band (currently £325,000).  It is, therefore, a tax which can take an enormous bite out of a family’s wealth.  This may be particularly galling given that such wealth will have been established out of income and gains which have already been subject to tax.

There is, however, plenty of planning that individuals can do to mitigate IHT and, contrary to popular belief, this does not have to involve making generous gifts to family members during one’s lifetime.

Domicile is a significant factor in determining an individual’s exposure to IHT and the types of planning available to them.  This article focuses on some specific IHT planning which is available to individuals who are domiciled in particular jurisdictions (namely India, Pakistan, France and Italy).  Where an individual is domiciled in one of these four countries, they are able to take advantage of certain “special” IHT planning opportunities.

2) Domicile generally

When considering any individual’s exposure to IHT we must first consider the individual’s domicile. Broadly speaking, an individual is domiciled in the country which they consider to be their permanent home or in the country where their father was domiciled when they were born (though there are numerous factors which may have an impact on an individual’s domicile and matters must be considered on a case by case basis).

Further, for IHT purposes there is an added element. An individual will be ‘deemed domiciled’ if they have been resident in the UK for at least 17 out of the last 20 tax years at the relevant time (i.e. their death).

Please note that the deemed domicile rules apply to IHT only and do not affect the position as far as other taxes (i.e. Capital Gains Tax and Income Tax) are concerned.

3) Domicile and IHT

If an individual is UK domiciled or deemed domiciled, they are subject to IHT on their worldwide assets. If they are non-UK domiciled and non-UK deemed domiciled they will only suffer UK IHT on any assets that are situated in the UK.

This is the basis for any IHT planning involving non-domiciled individuals.

4) Double Tax Treaties

The call for attention at the start of this article may seem like a strange target list but the thing that all four countries have in common is a particular interaction of the UK legislation and the double tax treaties with those countries.

Such interaction means that the deemed domicile provisions described above are disapplied in certain circumstances. This effectively means that, provided a person’s estate is organised correctly, an individual may make significant IHT savings because non-UK assets will not be charged to UK IHT, even if the individual has been long term resident.

5) Conclusion

This article highlights one particular aspect of IHT planning which might be available to certain individuals but there are many more options.  Those who are not domiciled in one of those four countries (whether the UK or elsewhere) also have plenty of planning opportunities available and should take steps to ensure that as much of their wealth as possible remains in the family.

I suspect that it is unlikely that the question of what these four countries have in common will ever come up in a pub quiz but, if it does, now you know.

Please contact Julia Rosenbloom on 0121 633 2000 or julia.rosenbloom@friendllp.com for further information.

Our dedicated and experienced tax team at Friend LLP are armed with the necessary tools to advise professional sportsmen and sportswomen on a wide range of taxation issues and opportunities.

Our proactive approach to understanding our clients’ needs sets us apart from other advisers.  We provide you with the highest quality of advice, matched by the highest level of service and at a competitive price.

Listed below are some of the areas in relation to which we may be able to help:

Image Rights

Image right structures can be valuable planning tools when used correctly and in the right circumstances.

We can advise on when and how such structures should be established and how they should be operated, at all times taking into account the client’s ultimate goals and “exit” strategy.

Residency and Domicile

We can advise individuals coming to the UK and leaving the UK in order to ensure a smooth transition from a tax point of view and ensure any planning opportunities are exploited.

We can advise non-domiciled individuals on any tax planning opportunities available to them and any issues facing them.

We can manage their UK tax compliance (in conjunction with overseas advisers if applicable), which can be especially daunting for individuals unfamiliar with the UK tax system.

Tax efficient remuneration

We can advise on the tax implications of contract offers and propose alternative structures that can benefit both parties.

Pensions

We advise on how pension arrangements can be used to provide tax efficiency as well as providing for your retirement.

Tax Compliance

Tax compliance is an unfortunate necessity and we can deal with all of this on your behalf.

This is not just a “form filling” exercise for us and we use it as an opportunity to proactively look at ways to make your affairs more tax efficient.

Consultancy

Throughout a sports professional’s life they will need advice whether it is buying a property, establishing a business or planning for their children’s future.

We can offer ad hoc tax advice that relates to life outside the sporting arena as well.

Our tax expertise in addition to our other service lines such as Audit and Accountancy, Corporate Finance and  our experience within the Sports, Media and Technology sector put us in an ideal position to advise.

For help and advice on the matters outlined above please contact:

Julia Rosenbloom LLB CTA TEP, Tax Director, on +44 121 633 2009 or julia.rosenbloom@friendllp.com

Stephen Pell BA(Hons) ACCA, Assistant Tax Manager, on +44 121 633 2048 or stephen.pell@friendllp.com

Friend LLP advise Solar Capital on a major solar panel deal.

Mark Scotter and Georgina Clark lead the Friend LLP team which advised Solar Capital throughout the deal process; the first of a significant multi-stage deal with Downing LLP through their Low Carbon Investors venture capital fund.

The investment will fund the installation of photo-voltaic solar panels on residential roof spaces in order to benefit from Government Feed-In-Tariff (“FIT”) income.

The proposition

Solar Capital installs and provides long-term management of photo-voltaic solar panels on commercial and residential roof spaces, which generate electricity that qualifies for the Feed-In-Tariff (“FIT”) scheme.

Following completion of the deal, Solar Capital have already commenced their solar panel installation programme, having developed a pipeline of qualifying and approved roof spaces across the UK prior to Completion.  They are continuing to source suitable roofs and are now negotiating several high volume, single landlord roof lease agreements.

Deals in this sector are under particular pressure due to the limited time frame for receiving the current FIT unit prices.  These unit prices are only guaranteed until 1 April 2012 and installations approved after this date run the risk of receiving a lower rate of income.

Friend LLP acted quickly and decisively to ensure that the deal process ran as smoothly and quickly as possible, in order to maximise solar panel installation time prior to the April 2012 deadline.

About Solar Capital

Solar Capital are high-quality, low-cost, ethical providers of solar energy.  They source only high quality UK manufactured panels, use highly accredited installers and maintenance providers and have secured considerable discounts on retail prices.  In addition, Solar Capital hopes to boost local economies by using local companies and by providing apprenticeships on accredited training schemes to young adults.

Solar Capital is jointly owned by Angus Fraser and Dr Henry Clemmey.  Angus, Managing Director of Solar Capital, said:

“Whilst we created the holistic framework to support our UK communities and businesses with low cost renewable electricity, I wish to credit our professional advisors Friend LLP. Their rapid intellectual engagement and response was crucial to ensuring that our concept was commercially viable and progressed through to reality. Our investors Downing LLP responded with equal speed and we were ably supported by both legal teams, helping us to complete this transaction in record time. We now have a solar energy framework in place with unlimited potential.”

Solar Capital’s advisory team

Friend LLP advised Solar Capital throughout the deal process and will continue to be involved in its future investment activity and the day to day accounting of the company. Legal advice was provided to Solar Capital by Ateeq Ahmed at Harvey Ingram LLP.

Georgina Clark commented; “Downing and LCI have shown a great understanding of the sector and were immediately impressed with the Solar Capital team and their strong relationships with third parties across the solar energy market.  Our in-depth knowledge of the renewable energy sector has been invaluable in enabling us to advise Solar Capital on the complex aspects of this deal, and we will continue to advise Angus and Henry during what will be a very busy year for Solar Capital as they endeavour to secure further investment funds to make use of the pipeline of roof spaces that they have in place.”

Ateeq added: “With renewable energy becoming increasingly important and the impending changes to the FIT scheme, timing was essential. It is a credit to all the parties involved that the structure and commercial terms were agreed and then implemented in such a short timeframe. It’s always a pleasure to work with entrepreneurs like Angus and Henry and we are very much looking forward to working alongside them as further investment is secured and more panels are installed.”

For more information, please contact Mark Scotter or Georgina Clark on 0121 633 2000.

The non-UK domiciled individual has, for some time, enjoyed a magical tax status in the United Kingdom.  Whilst new legislation introduced over the last few years has eroded some of the benefits, the mythically named “non-dom” still has preferred tax treatment over and above the “UK dom” and they should take steps to exploit all the opportunities available to them.

This article will highlight some areas of interest from a tax point of view in the context of non-doms acquiring UK property.

Who is a non-dom?

In a logical world, this would be an easy question to answer given its significance from a tax point of view but, alas, the tax world is rarely logical. There is no statutory definition of domicile but there are various factors that are taken into account.

Individuals are born with a “domicile of origin” and, in this regard, individuals acquire a domicile at birth that matches their father’s (whilst sex discrimination law has infiltrated many areas, the law of domicile is not one so the mother’s domicile is not relevant). This means that even if one was born in the UK, it is still possible to establish a non-UK domicile. A non-dom living in the UK will need to demonstrate an intention to return to or settle in the other country as well as strong and sustained links to that country in the interim.  A non-dom actually living in that country is obviously in the strongest position.

A person who has a UK ‘domicile of origin’ will have to show that he or she has left the UK behind once and for all and put down roots permanently in another country in order to cease being UK-dom.

Domicile should not be confused with residence. An individual may be domiciled in one country and resident in another for tax purposes.

UK tax issues on acquiring a property

Everyone (whether non-dom or UK dom) should consider tax when they acquire a property.  They should consider taxes on acquisition, taxes during the course of their ownership and the taxes that could apply when they sell.

The table below summarises the major taxes as relevant to non-doms (both resident and non-resident) acquiring UK property directly in their own name:

Tax planning opportunities

The exact acquisition structure to be recommended when acquiring a UK property depends on a variety of factors and there is no “one size fits all” option. The intention of this article is to highlight a few key areas.

Inheritance tax (“IHT”)

IHT is payable at 40% on death to the extent an individual’s chargeable estate exceeds £325,000 (being the nil rate band). What a non-dom could decide to do to counter this IHT charge is to move the UK property overseas. Such suggestion is often met with a confused look until I explain that they can do this by holding the UK property in a non-UK resident company. The non-dom, therefore, holds a non-UK asset (shares in an overseas company) which, in turn, saves them 40% IHT. This only works if the non-dom is not long term resident in the UK (which, for these purposes, broadly means 17 out of the last 20 tax years). If they are long term resident, they are deemed domiciled (for IHT purposes only) and alternative methods must be considered.

An individual who is not deemed dom but could become so in the future because of a longer term intention to reside in the UK may also consider including a trust (of which they are a beneficiary) in this arrangement i.e. as a shareholder of the overseas company. This ensures that the “excluded property” status of the asset is preserved even if the individual becomes deemed dom in the future.

Capital Gains Tax (“CGT”)

From a CGT point of view, it may be that using a “standard” offshore company means that, if the company sells the property at a gain, the gain is attributed to the non-dom anyway for CGT purposes (if they are UK resident). This attribution can be avoided by using a special type of offshore company, known as a “Protected Cell Company” or “PCC”. Such a company can also be used by UK doms for CGT mitigation.

There may also be CGT advantages to including a trust. Where a non-dom establishes a non-UK resident trust, it enjoys its own special CGT regime. If the non-resident trustees sell the UK property at a gain, no CGT is payable at that time. Rather, the gain is “stockpiled” (which, in layman’s terms, means “the trustees keep a note of it”) and then it is only if the trustees distribute capital to a UK resident beneficiary that CGT becomes payable. So, the trustees could either reinvest the sale proceeds in other assets or distribute at an appropriate time and/or to an appropriate (i.e. non-resident) beneficiary.

As far as the non-dom is concerned, they could break the structure if they wish and permanently avoid CGT either during a period of non-UK residence or during a year in which they have made a remittance basis claim (in the latter case, provided they are prepared to leave the funds offshore).

Income Tax (“IT”) and Stamp Duty Land Tax (“SDLT”)

I have not made any detailed mention of IT or SDLT. The UK tax regime seeks to charge IT on UK source income and rental income from a UK property falls within this category. There is a raft of anti-avoidance legislation which makes it difficult to avoid the IT charge but this should be considered on a case by case basis.

As far as SDLT is concerned, the top rate of SDLT is now 5%.  SDLT is a value based tax and the 5% rate kicks in at £1 million for acquisitions of residential property.  SDLT planning is a whole separate article but it may be possible to mitigate this liability and specific advice should be taken.

Conclusion

This has been a relatively quick canter through what is a very complex area.  Non-doms continue to enjoy significant tax planning opportunities and these should be exploited as much as possible.  Ideally such matters would be considered as part of the acquisition process but they can also be considered where a non-dom already owns a UK property personally but wishes to now take some planning steps.

For more information, please contact Julia Rosenbloom at julia.rosenbloom@friendllp.com or on 0121 633 2000

To read more articles by Walls and Futures Limited please visit http://www.provesco.com/

In continuation of our popular ‘Breakfast with Friends’ seminar series,  Friend LLP were pleased to welcome Oscar Jazdowski from Silicon Valley Bank (“SVB”) on 11 May to discuss their ‘Game Changing Approach to Technology Financing’.

(l-r) Elly Gilbert (SVB), Mark Scotter (Friend LLP), Oscar Jazdowski (SVB) and Georgina Clark (Friend LLP)

About SVB

Founded in the U.S. in 1983, SVB began as an alternative bank for technology start up companies.  Supporting entrepreneurs shortly after they received a first round of venture-capital investment, SVB offered a buffer of venture debt and commercial banking services in order to help allow the fledgling companies to develop.

Today, SVB has worked with over 30,000 technology companies across the globe and have an impressive client portfolio including; Zoopla, Wonga, OpenCloud, Digg and Twitter.

Globally, SVB offers a full range of banking services tailored to the needs of technology and venture capital firms:, Commercial Banking, including credit, global treasury management and investment services , Funds Management and Valuations, Benchmarking & Capitalisation Table Management.

Sector focus

Working exclusively in the technology, life science and venture capital industries, SVB offers services and financing to all sizes of company, and emphasises support on companies that have venture-capital backing, particularly if they are in early-stage growth. SVB then works with the companies as they grow and throughout their lifecycle.

As Oscar explained, SVB is uniquely placed to support technology companies as “losses don’t scare [them]”. For the first ten years that SVB were supporting start up companies, many had little or no revenue. The support of venture capital and SVB funding allowed the companies the breathing space they needed to develop unique and innovative products. As well as financial support, SVB also offer their clients the expert knowledge they’ve gained through thirty years of experience in the sector.

Silicon Valley Bank is already lending money to UK companies and entrepreneurs and plans to roll out a full range of FSA licensed services for corporate customers at the beginning of 2012, pending approval.

The UK technology market

Having been educated in the UK before moving to America, Oscar has been very impressed by the rapid development of the UK technology market over the last few years. In his experience, one of the most distinguishing features of industry in this country is the focus on innovation.

Our experience in the technology sector

Friend LLP’s developing relationship with Silicon Valley Bank comes at an exciting time for our firm as in April 2011 we launched a specialist Technology, Media and Entertainment division with the aim of advising these specialist industry sectors that are often poorly understood by the majority of professional advisors.

What sets us apart from other accountancy firms is not just our determination to provide sound and commercially minded advice to businesses operating in these sectors, but that we have actual experience in the day to day operation of businesses in these sectors through our associated company Friend Media Technology Systems Limited (Friend MTS).

Friend MTS provides a variety of software-based services to companies (global and national) that operate in the digital media, security, marketing and entertainment industries.  Our close affiliation with Friend MTS means that a high percentage of our employees have a cross-section of skills and understand how these companies and these sectors work.

More information about our Technology, Media and Entertainment division can be found here.

Our thanks go to Oscar Jazdowski for a compelling introduction to Silicon Valley Bank. More information about Silicon Valley Bank can be found via their website: www.svb.com/UK/

Friend LLP is delighted to announce that Julia Rosenbloom has been promoted to Director in the firm’s tax department.

Julia joined the firm in early January 2011 to expand the firm’s private client offering with her extensive experience in tax planning for high net worth individuals, owner managed businesses and entrepreneurs.

Julia expressed “I am delighted to have been promoted to Director, especially so soon after joining the firm.  This demonstrates the firm’s commitment to expanding its taxation services and I look forward to playing a key role in that process”.

Managing partner Malcolm Friend agreed that “the tax advisory element of the practice is one which we are keen to develop and with Julia’s qualifications and experience, she is extremely well placed to play an important part in that development.”

For more information, please contact Julia Rosenbloom on 0121 633 2009 or julia.rosenbloom@friendllp.com

Accountancy expertise in the sectors of Technology, Media and Entertainment is severely lacking, particularly to SMEs and start-ups.  Very few advisors operate in the right market position and have appropriate skills to service the multitude of truly innovative companies based here in the Midlands.

A gap in the market?

Big 4 accountancy firms may have appropriate knowledge and expertise in these sectors, but their market focus is to service the needs of global players.  Conversely, smaller and independent accountancy firms may operate in the right market space to service SMEs and start-up companies, but lack the knowledge and expertise to advise these companies correctly.

The pace of change in these companies is often very quick, and as such, accountants and advisors with SME and start-up clients in these sectors need to be pro-active in maintaining client relationships, and be able to react quickly and incisively to time-pressured situations.

The solution

At Friend LLP, we fill that gap in the advisory market.  We provide Technology, Media and Entertainment companies with high quality, sector-specific advice; adopting a holistic partner-led approach without costing the earth.

What sets us apart from other accountancy firms is not just our determination to excel in these sectors and provide quality advice to these companies, but our actual experience in the day to day operation of these businesses through our associated company Friend Media Technology Systems Limited (Friend MTS).

Friend MTS provides a variety of software-based services to companies (global and national) that operate in the digital media, security, marketing and entertainment industries.  Our close affiliation with Friend MTS means that a high percentage of our employees have a cross-section of skills and understand how these companies and these sectors work.

Not only are we market-leaders in our advice and thinking, but we have developed a trusted network of non-financial advisors (lawyers, funders, engineers, industry consultants etc) enabling us to assist companies at every stage of their development.

Recent experience

Over the last 18 months, Friend LLP has undertaken a significant amount of work in these industry sectors, and has seen considerable demand from both new and existing clients for knowledgeable, well-thought out advice.

We commonly assist our clients with issues such as;

• Company and share valuations
• Financial due diligence (vendor and acquirer)
• Monthly reporting to funders
• Forecast models
• Management of cash flow constraints
• Correct treatment of taxation (R&D tax credits etc)
• Capitalisation of Intellectual Property
• Availability of UK and European Government grant funding

If you have any questions or would like to enquire about our services and expertise, please contact Georgina Clark on 0121 633 2034 or georgina.clark@friendllp.com

Overview

These days the government – Coalition or Labour – tends to consult about tax changes far more than in the past. It’s harder for the Chancellor to spring surprises on Budget Day, because many of his measures are no longer secret. Even so, every Chancellor seems to relish the theatrical occasion and wants to pull a rabbit out of the hat. This time it was cuts to fuel duty, which allowed Mr Osborne to finish with the claim that he had put fuel into the tank of the UK economy. As he had started the speech by downgrading growth forecasts for 2011 and 2012, we can only hope that the engine doesn’t stall.

The wealth of consultation and advance exposure has created a different problem – keeping track of what’s being implemented when, and what’s been discussed but rejected. Many important details are hidden in over 200 pages of explanation issued by HM Revenue & Customs and the Treasury after the Chancellor sat down. For the first time, these have been helpfully divided into things announced today to be implemented now; things announced in the past to be implemented now; and things announced now or earlier which are to be implemented later. There is also a sprinkling of things which are being abolished and things where the decision has been made not to make a change.

We have gone through the papers and sorted out the major points from the technical detail. This booklet summarises the significant issues and outlines their likely effect on the average taxpayer.

Significant points

• Personal allowance increased by £1,000, but higher rate threshold lowered
• Increases in NIC rates from April 2011 confirmed
• Measures to tighten up rules on Employee Benefit Trusts
• Changes to relief for pension contributions and taking pension benefits from April 2011 confirmed
• Increase in Enterprise Investment Scheme relief from 20% to 30% from April 2011
• Entrepreneurs’ Relief lifetime limit increased from £5m to £10m from April 2011
• Main corporation tax rate cut by 2% to 26% from 1 April 2011 (1% was expected); small profits rate cut by 1% to 20%
• New Enterprise Zones created with relief for business rates and easier planning regulations
• E-filing of corporation tax returns required from April 2011.

Detailed analysis

Budget Summary 2011: Overview

Our popular ‘Breakfast with Friends’ series continued with a second instalment entitled ‘Healthcare in Flux’.

Over fifty healthcare professionals and business leaders from the Midlands area braved the elements to hear our speaker, Mark Goldman, reflect on the Secretary of State for Health’s white paper; ‘Equity and Excellence. Liberating the NHS’.

Mark, who was the Chief Executive of the Heart of England Foundation Trust from 2000-2010 and is an expert advisor to Friend LLP, began his presentation by outlining the proposals which have been described as the “biggest shake-up of the NHS since 1948”. Mark voiced his concern that the new structure of the NHS could lead to a dislocation of primary care, acute care and social care. He predicted that whilst there will be a growth in primary care, funded by newly empowered GP commissioning consortia, this could come at the expense of social care which is essential to the maintenance of appropriate hospital admission rates.

Given the importance of the topic, we filmed the event to enable the wider business community to benefit from Mark’s insights.  A 3 minute clip is available for viewing below.  If you would like to see the full 15 minute film of the presentation, please fill out the form at the end of this article and we will send it to you.

Mark is not alone in his uncertainty about the white paper, which has been received critically by a number of public and professional bodies. Question marks have been raised about whether funding organisational change at a cost of £1.8bn during a period of financial instability is appropriate. It was further suggested that the ‘real-terms’ increase of  0.1% per year in NHS funding,  as included in the Comprehensive Spending Review, was inaccurate as NHS inflation costs are on average 3.5% above the national level.

Quoting Rahm Emanuel, who said that “you never want a crisis to go to waste”, Mark outlined potential opportunities for private organizations and social enterprise that will occur as a result of the NHS ‘shake-up’. In addition to business created for human resources and financial consultants, who will be needed to advise on a 45% cut to management costs, there will be opportunities for IT companies whose services will be used to help improve communication and information transfer between doctors and their patients.

Whether the white paper will create a crisis or an opportunity is yet to be seen. If Mark is to be believed, collaboration between different sectors, businesses and individuals will be essential for progress to be made.

Our thanks go to Mark Goldman for a very stimulating presentation and to Lloyds TSB for their support in organising the seminar. We look forward to welcoming you at the next ‘Breakfast with Friends’ event.

For more information please contact Toni Palmer, Marketing Manager at Friend LLP on 0121 633 2014 or at toni.palmer@friendllp.com.

Our inaugural Breakfast With Friends event was a great success.

Frank Upton provided useful insights on the topic of “Extracting cash and assets” from companies in a tax efficient manner, to a full house of corporate and professional contacts.

The slides used in the presentation are available for download here.

Extracting Cash and assets

If you are interested in attending future “Breakfast With Friends” seminars, please take a look at our News and Events page, where you can sign up to receive more details on future events.