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UK still attractive for foreign investors with a benign tax system

Date: 05 Oct 2016

Citywealth

Ilda de Sousa, partner, and Daniel Brandon, associate at Kingsley Napley, say the government appears anxious to make it clear that, despite Brexit, the UK wants to attract investment from businesses and individuals abroad.

Following the Brexit vote, what is your advice for EU nationals?

It is very likely that transitional arrangements will be made for EU citizens in the UK at the time we departure from the EU and that these would be part of the negotiations triggered by Article 50. We now know following on from the Conservative Party conference over the weekend that Theresa May intends to trigger Article 50 around March 2017. Under these arrangements we anticipate that EEA nationals who have spent five years in the UK already and who have acquired permanent residence will be able to remain under similar terms. For EEA nationals who have not yet acquired permanent residence but are resident in the UK, it is likely that they will be permitted to remain in the UK and should ultimately obtain permanent residence status.

What’s the effect of the new non-dom rules?

Under the new rules, non-doms who are UK resident for at least fifteen out of twenty tax years will be deemed domiciled for all tax purposes in their sixteenth year of tax residence.As such, they will be subject to UK tax on their worldwide income and gains on the arising basis and their worldwide estate will be subject to inheritance tax.These individuals may be looking to take advantage of some of the planning opportunities offered in the latest consultation on the changes, for example segregating mixed funds. Those with offshore trusts will need to consider how those trusts and any underlying companies will be affected by the changes to the taxation of trusts. Other changes include bringing UK residential property held through offshore structures such as companies into the UK inheritance tax net. This change has removed the most significant UK tax advantage of holding UK residential property through a structure and is likely to result in more work on de-enveloping.

What’s the result of the combination of the two?

The government appears anxious to make it clear that, despite Brexit, the UK wants to attract investment from businesses and individuals abroad. Ultimately, the UK is still an attractive place for foreign investors with a relatively benign tax system; the remittance basis remains in place for non-doms and the corporation tax rate is set to be lowered to seventeen percent by 2020. The government is also looking at expanding the current business investment relief rules which allow remittance basis users to remit income and gains to the UK without a tax charge if they make a commercial investment in the UK.

What effect will Brexit have on UK businesses?

Businesses do not like the uncertainty that Brexit has caused. It makes it difficult to plan ahead when they do not know what the UK will look like outside of the EU. This also applies to the management of their EU staff, especially multi-national corporations who plan their rotations around their global locations years in advance.

Cameron doubled the required investment from £1m to £2m for the Tier 1 (Investor) visa application. How did that impact UHNW clients planning to invest in the UK?

The number of Tier 1 investor visa applications has dropped considerably. From our experience non-EU nationals are looking at other options such as the Tier 1 Entrepreneur, or citizenship by investment programmes in places like Malta or St Kitts.

What trends do you see in immigration?

Unsurprisingly large numbers of EU nationals have filed applications to the Home Office to confirm their right of permanent residence with the aim of filing British nationality applications, when they are eligible. Equally, some British nationals are now exploring the option of obtaining a passport from an EU member state. This will then give them the flexibility of free movement within the EU after we leave.

This article was published in Citywealth Weekly, our mid-week roundup of topical news and exclusive expert comments.Sign up here to start receiving the Weekly in your inbox.

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