Brexit: what might this mean for the Private Wealth sector?
The withdrawal of the UK from the EU will have consequences for individuals, families, their personal and business interests and the entities that protect their key assets.
The nature of these consequences will depend on the outcome of negotiations to leave the EU. For the purposes of this article, therefore, we are commenting on areas that may come under closer scrutiny going forward.
Non-doms and related tax
Changes to the UK tax treatment of non-UK domiciled individuals were being proposed before Brexit. We are currently awaiting draft legislation and guidance in relation to a number of tax changes, not least the proposed changes to render non-UK domiciliaries "deemed domiciled" for all tax purposes once they are UK resident for 15 out of the last 20 tax years. Given the demands that Brexit will make on the Treasury, many are asking whether this new legislation will be delayed. However, steps might need to be taken relatively quickly once more information is available and it would be prudent for non-domiciliaires to continue to plan for an April 2017 change to the rules.
Moreover, we may see the government re-tuning its efforts to attract foreign investment. The independence to set tax rates without reference to EU restrictions is an obvious area to develop a competitive advantage. George Osborne has already signalled his aspiration to reduce corporation tax to 15% - while not a tax that is directly limited by the EU it is perhaps a sign of things to come.
It is clear that the UK's tax treaty network will continue to be a focus for many UK resident tax payers as developments unfold.
Changes to immigration rules are likely to be introduced. It would seem natural for expats currently living in the UK or elsewhere in Europe to be granted permission to remain where they have settled. However, the extent to which EU nationals presently outside the UK may enter the UK following Brexit will depend in part on the trading position which is agreed. The outcome of these negotiations will also have a bearing on non-EU nationals' ability to move to the UK going forward.
The scope of the EU regulation known as "Brussels IV" will be significant for many individuals. This regulation allows individuals to elect the law that will apply to the assets in their estates. The regulation was not binding on the UK although it was expected that the English courts would recognise a suitable election; many individuals have made such elections under their wills and clarity will be needed.
Similarly, the so called EU "Brussels II Regulation” sets out rules regarding the recognition across jurisdictions for the enforcement of judgments in respect of matrimonial matters and parental responsibility. The English courts have a leading reputation as a jurisdiction that provides predictable and fair outcomes. It will be interesting to see whether that reputation alters given the present uncertainty. For more information on how Brexit may effect Family law more generally click here.
Mark Carney has indicated that interest rates may fall to avoid an economic slow-down. While this can be inflationary, many private companies will see this as a time to refinance or to take further borrowing to lock in lower borrowing costs. Further, a corresponding fall in sterling may lead those who can export to look to new markets to support their future growth.
There has been less talk about what the vote means for holiday homes in the EU than the UK's property market. Some countries in the EU already impose different tax burdens on non-EU property owners (both on an acquisition and a sale) and British owners of holiday homes could now find themselves within this group and subject to these additional rates.
We will continue to view our planning with an eye to the long term, keeping matters simple where we can and as flexible as possible. By watching closely events as they develop we are well placed to help your personal situation and to make the most of opportunities as they arise.