Embed Size (px)
Citation preview
Wealth Management Planning
The UK Tax Principles
Malcolm James Finney
A John Wiley and Sons, Ltd, Publication
Further praise for Wealth Management Planning
“A comprehensive bang-up-to-date tour de force with practical examples to help andguide with all tax problems for the international client with UK connections. Mycopy is to be kept by my desk at all times.’’Stephen Arthur, Barrister, Lincoln’s Inn
“This book gives comprehensive coverage to the complicated subject of taxation forFinancial Planners. Many clients increasingly have diverse and complex needs oftenspanning different fiscal regimes and to meet their goals and objectives need agreater level of support. This book will be very valuable to all those FinancialPlanners who wish to extend their learning and reference and desire to meet theneeds of such clients.’’Nick Cann, Chief Executive of the Institute of Financial Planning
“In this book, Malcolm Finney presents a comprehensive summary of the UK taxrules in straightforward language and with many practical examples. It is a notableachievement to put incomprehensible tax legislation into such readilyunderstandable terms; anyone advising on wealth management will find this to be aninvaluable guide to the subject.’’Malcolm Gunn, Consultant, Squire, Sanders & Dempsey LLP
“The author demonstrates considerable skill in explaining complicated tax rulesin a manner that makes them easy to assimilate and understand. The everyday,‘jargon free’ language of this book, coupled with the lack of references tolegislation, make it very easy to read and digest. The book contains chaptersummaries, useful appendices and numerous worked examples, which provide avery clear, helpful explanation of some difficult tax rules. The book’s contents coverwide areas of the tax system, and yet provide sufficient technical depth to be avaluable point of reference for those involved in wealth management and financialplanning.’’Mark McLaughlin, CTA, Mark McLaughlin Associates
“A valuable new text explaining the tax treatment applicable to financial planningproducts and strategies for UK domiciled persons (UK resident or expats) and nondomiciled UK residents. This book will be of interest to a wide readership rangingfrom students of law and tax, the interested layman seeking in depth knowledge andprofessionals including solicitors, accountants, financial planners, private bankersand trustees. Although there are more detailed specialist textbooks on individualsubjects covered in this volume such as trusts or non domiciliaries, the value of thisbook is it brings all elements of personal financial planning together in one volumeand is written in a lucid clear style with practical examples included at every step toillustrate the points being made. Of particular interest is the updated coverageincluding the complex rules on inheritance tax and trusts in FA 2006 and nondomiciliaries in FA 2008. Malcolm is to be commended on distilling a vast amountof detailed material into a logical and well ordered framework.’’Andrew Penney, Managing Director, Rothschild Trust Corporation Ltd
“Malcolm Finney’s book is stimulating, innovative and refreshingly practical.Anyone wanting either a high-level understanding of tax principles involved inwealth management or a deeper insight should read this book.’’Jacob Rigg, Head of Policy, Society of Trust and Estate Practitioners, STEPWorldwide
Wealth Management Planning
Wealth Management Planning
The UK Tax Principles
Malcolm James Finney
A John Wiley and Sons, Ltd, Publication
Copyright © 2008 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester,West Sussex PO19 8SQ, England
Telephone (+44) 1243 779777
Email (for orders and customer service enquiries): [email protected] our Home Page on www.wiley.com
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in anyform or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under theterms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the CopyrightLicensing Agency Ltd, Saffron House, 6-10 Kirby Street, London, ECIN 8TS, UK, without the permission in writingof the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & SonsLtd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to [email protected],or faxed to (+44) 1243 770620.
Designations used by companies to distinguish their products are often claimed as trademarks. All brand names andproduct names used in this book are trade names, service marks, trademarks or registered trademarks of theirrespective owners. The Publisher is not associated with any product or vendor mentioned in this book.
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered.It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professionaladvice or other expert assistance is required, the services of a competent professional should be sought.
Other Wiley Editorial Offices
John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA
Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA
Wiley-VCH Verlag GmbH, Boschstr. 12, D-69469 Weinheim, Germany
John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia
John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809
John Wiley & Sons Canada Ltd, 6045 Freemont Blvd, Mississauga, ONT, L5R 4J3, Canada
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not beavailable in electronic books.
Library of Congress Cataloging-in-Publication Data
Finney, Malcolm.Wealth management planning : the UK tax principles / Malcolm Finney.
p. cm.Includes bibliographical references and index.ISBN 978-0-470-72424-8 (cloth)1. Wealth tax—Law and legislation—Great Britain. 2. Income tax—Law and legislation—Great Britain.3. Capital gains tax—Law and legislation—Great Britain. 4. Inheritance and transfer tax—Law andlegislation—Great Britain. 5. Tax planning—Great Britain. I. Title.KD5533.F56 2008343.4106′2—dc22
2008047073
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN 978-0-470-72424-8 (HB)
Typeset in 11/13pt Times by Integra Software Services Pvt. Ltd, Pondicherry, IndiaPrinted and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire
This book is dedicated to my late mother, Audrey Finney,and my late father, Alfred James Finney
DISCLAIMER
The views expressed herein are exclusively those of the author. Neither the authornor the publisher can accept any responsibility for any loss occasioned as a result ofany action taken by any person in reliance upon the contents hereof however suchloss may arise. No comments made herein should be construed as offering advice.Independent professional advice should always be taken.
Contents
About the Author xxvii
Preface xxix
Abbreviations xxxiii
PART ONE: THE BUILDING BLOCKS 1
1 Tax Systems and their Bases of Taxation 3Background 3Categories of Tax 4Capital v. Income Distinction 5Worldwide v. Territorial Tax Systems 5
(a) Income and Capital Gains Taxes 5Worldwide Basis 6Territorial Basis 6Territorial Basis plus Remittances 6Residency 6Citizenship Test 6Source Basis 7
(b) Inheritance Tax 8Trailing Tax Imposition 9
Summary 9
2 UK Taxation: An Overview 11Background 11Domicile, Residence and Ordinary Residence 11
Domiciled Individual 11Non-domiciled Individual 12
Persons Other Than Individuals 13UK Taxes and Law 13
x Contents
Capital v. Income Distinction 14Rates of Tax (2008/09) 15
Income Tax 15Capital Gains Tax 17Inheritance Tax 18
Allowances 18Tax Returns 19
Income and Capital Gains Tax 19Inheritance Tax 19
Timing of Tax Payments 20Income and Capital Gains Tax 20Inheritance Tax 20
Summary 20
3 Domicile 21Background 21Concept of Private International Law Not Taxation 21English/Welsh, Scottish or Northern Irish 23Importance of Domicile for UK Tax Purposes 24Categories of Domicile 25
Domicile of Origin 26(i) Legitimate v. Illegitimate Child 26(ii) Father Dead at Date of Birth 27(iii) Parents Married but Separated 27(iv) Legitimation 27(v) Loss of Domicile of Origin 28(vi) Resurrection of the Domicile of Origin 28(vii) Adoption 29
Domicile of Dependence 30(i) Children and Domicile of Dependence 31(ii) Married Women and Domicile of Dependence 32
Domicile of Choice 35(i) Misleading Nature of the Word “Choice” 36(ii) Age Requirement 38(iii) Two Basic Requirements 38
Non-UK Domiciled Individuals Spending Significant Time inthe UK 51
UK Domiciled Individuals Failing to Acquire Non-UK Domiciles ofChoice 55
UK Domiciled Individuals Successfully Acquiring Non-UK Domicilesof Choice 58
Abandonment of a Domicile of Choice 65Special Categories of Individual and Domicile of Choice 67
Contents xi
(i) Individuals of Ill Health 68(ii) Employees 68(iii) Member of the Armed Forces 69(iv) Diplomats 69
Deemed UK Domicile 69(i) Three-year Rule 69(ii) 17 Out of 20 Tax Year Rule 70(iii) 15 Tax Years Plus Two-Day Trap 70(iv) Dealing with Deemed UK Domicile Status 71
(a) Avoidance 72(b) Plan Accordingly 72(c) “Split” Domicile 72(d) International Dimension 73
Summary 73
4 Residence and Ordinary Residence 75Background 75Lack of Definitions and IR20 75Dual Residence 76Split Tax Years 76
Income Tax 77Capital Gains Tax 78
Temporary Non-UK Residence 79Capital Gains Tax 79Income Tax 80
Residence Rules and IR20 81Short Absences 81The 183-day Rule 81Arriving and Departing the UK 82
Arriving in the UK 82Departing from the UK 87
Summary 90
5 Residence, Ordinary Residence and Domicile: SomePractical Points 91Background 91The Tax Return 91
Domicile 93Claim for the Remittance Basis to Apply 94
IHT Return 95Domicile and Residence Rulings 95
Domicile Ruling 96Residence Ruling 96
Summary 98
xii Contents
6 Income Source and Asset Situs 99Background 99Income Source 99
Rental Income 99Dividends 100Authorised and Unauthorised Unit Trusts 100
Authorised 100Unauthorised 100
Interest 101Mutual (Offshore) Funds 101
Asset Situs 101Inheritance Tax 102
Tangible Property 102Registered Shares 102Bearer Shares 102Intangible Property 102Ordinary Debts 102Speciality Debt 102Bank Accounts 102Unit Trusts 103Nominees 103Life Policies 104
Capital Gains Tax 104Tangible Property 104Registered Shares 104Bearer Shares 104Ordinary Debts 105Unit Trusts 109Life Policies 109
Summary 109
7 The Principles and Implications of Joint Tenancy and Tenancy inCommon Ownership for Spouses and Non-Spouses 111Background 111Legal Title 111Beneficial Ownership 111Land 113
Legal Title 113Equitable Interests 113
Tax Issues 114Inheritance Tax 115Income Tax 116
Contents xiii
Spouse Joint Ownership 116Non-spouse Joint Ownership 117
Capital Gains Tax 118Spouse Joint Ownership 118Non-spouse Joint Ownership 118
Non-UK domiciled Individual 118Spouses 119Summary 121
PART TWO: THE MAJOR TAXES 123
8 Capital Gains Tax 125Background 125Basics 126Inter-spouse Transfers 127Calculating the Tax 129
Annual Exemption 129Payment of the Tax 130Year of Death 130Pre FA 2008 Reliefs 131
Indexation Allowance 132Taper Relief 134Business Asset 136
Taper Relief and Share Sales 136Gifts of Assets (not Inter-Spouse) 138
Non-resident Recipient 139Precipitation of an Immediate Inheritance Tax Charge 139Business Assets 142Effect of Gift Relief 142Non-UK Situs Assets 144
Impact of FA 2008 145Introduction of New 18% Rate; Abolition of Indexation Allowance
and Taper Relief 145Higher Rate Taxpayer 146Employees Owning Shares in the Employer Company 149Sole Trader 149Buy to Let 149
“Banking’’ the Indexation Allowance/Taper Relief 150Capital Losses 152
UK Domiciled and UK Resident Individual Capital Loss Utilisation 152(1) Connected Person Capital Losses 154
Non-UK Domiciled and UK Resident Individual Capital LossUtilisation 154
xiv Contents
(1) Overseas Capital Loss Utilisation for the Non-UK Domiciledbut UK Resident Individual pre FA 2008 154
(2) Overseas Capital Loss Utilisation for the Non-UK Domiciledbut UK Resident Individual post FA 2008 155
Entrepreneur Relief 162Disposal of the Whole or Part of a Business 162Disposal of One or More Assets in Use for the Purposes of the
Business at the Time at Which the Business Ceases to beCarried on 163
Disposal of One or More Assets Consisting of Shares orSecurities of a Company 163
Disposal Qualifying as an “Associated” Disposal 163Relevant Business Assets 164Claim for, and Amount of, Relief 164
Offshore Companies 165Leaving/Arriving in the UK 167Summary 168
9 Inheritance Tax: The Basics 169Background 169Territorial 170
Domicile 170Deemed UK Domicile 170
Rates of Inheritance Tax 171Lifetime Gifts 172
Chargeable Lifetime Transfer (CLT) 172Potentially Exempt Transfer (PET) 173Quantum of a Transfer of Value 173
Taper Relief 175PET 175CLT 176
Seven-year Cumulation Period 177Lifetime 177
CLTs Only 177CLTs and PETs 179
Persons Responsible for Payment of Inheritance Tax and “Grossingup’’ on Lifetime Transfers 179
CLTs 179Additional Inheritance Tax Liability 180Grossing up 180
PETs 182Death Estate 182
Assets 182
Contents xv
Assets Beneficially Owned 182Gifts with Reservation 183Qualifying Interests in Possession 184Assets not Forming Part of the Death Estate 185Liabilities 185Reliefs 187Rate on Death and the NRB 187Death Estate 188
Payment and the Bearing of Inheritance Tax on Death 188Payment of Inheritance Tax on Death 188Bearing of the Inheritance Tax Charge on Death 190
Gifts with Reservation 190Qualifying Interests in Possession 190Beneficial Asset Entitlement 191Specific Gifts Bear Their Own Inheritance Tax on Death 193Inheritance Tax Liabilities on the Lifetime Transfers 194Inheritance Tax Liabilities on the Lifetime Transfers Due to Death 195Death Estate 196
Planning Considerations: Initial Thoughts 197Summary 198
10 Inheritance Tax: Exemptions and Reliefs 199Background 199Exempt Transfers 199
Lifetime only Exempt Transfers 200Annual Exemption 200Normal Expenditure Out of Income Exemption 201Gifts in Contemplation of Marriage Exemption 202Gifts for Family Maintenance Exemption 203
Death only Exempt Transfers 203Transfers in Lifetime or on Death Exemptions 203
Inter-spouse Transfers 203Inter-spouse Transferable NRB 204Miscellaneous Exemptions 209Ordering of Exemptions 209
Reliefs 210BPR 211
Relevant Business Property 211Businesses not Qualifying 212Pro-rata BPR 213Ownership Requirements 214
Inter-spouse Transfers 216BPR and Death within Seven Years of a Transfer 217
xvi Contents
Order of Transfers 219Settled Business Property 220
Pre 22 March 2006 Created Interest in Possession Trust 220Post 22 March 2006 Created Interest in Possession Trust 220Discretionary Trusts 221
Agricultural Property Relief 221Ownership Requirements 222APR and Death within Seven Years of a Transfer 222
Quick Succession Relief 222Summary 223
11 Inheritance Tax: Gifts with Reservation 225Background 225Exemptions 228
Exemptions 228Inter-spouse Gifts 228Full Consideration 228Co-ownership 228
Trusts 229Pre-Owned Assets 229Summary 231
12 Inheritance Tax: Excluded Property 233Background 233Non-settled Property 233Settled Property 233Excluded Property and the Non-UK Domiciled 234Non-UK Situs Property 235
Minimum Length of Time to Hold Assets 236UK Situs Assets 236
Authorised Unit Trusts (AUT) and Open Ended InvestmentCompanies (OEIC) 236
UK Government Securities or Gilts 236Foreign Currency UK Bank Accounts 238
Channel Islands and the Isle of Man 238Settled Property 239
UK Situs Trust Assets 241AUTs and OEICs 242UK Government Securities and Gilts 242Foreign Currency UK Bank Accounts 242
Mixing UK Situs and Non-UK Situs Property in a Trust 242Excluded Property and Gifts with Reservation 243“Excluded Property Trusts’’ and FA 2006 244Summary 245
Contents xvii
13 Inheritance Tax Administration 247Background 247Lifetime Transfers 247
CLT 247PET 247Excepted Transfers 248Excepted Settlements 248
Death Estate 249Excepted Estates 249
Low Value Estates 249Exempt Estates 250Foreign Domiciliaries 251
Transferable NRB 251“D’’ Forms 251Clearance Certificate 251
Penalties 252Non-UK Resident Trusts 252Obtaining Information 252Summary 252
PART THREE: TRUSTS 253
14 Trusts: An Overview 255Background 255The Trust 255Equity 257Trusts Today 257
Protection of Minors 257Bankruptcy Protection 258Will Substitute 258
Tax Aspects 258Discretionary Trust 258Interest in Possession Trust 259Lifetime and Will Trusts 259
Summary 259
15 Inheritance Tax: Trusts 261Background 261Discretionary Trusts 261
Exit Charge before the First 10-year Charge 262Ten-year Charge 263
Interest in Possession Trusts 265Immediate Post Death Interest (IPDI) 266Transitional Serial Interest (TSI) 267
xviii Contents
Accumulation and Maintenance Trusts (A & M) 268Discretionary v. Interest in Possession Trust 268
Pre FA 2006 268Post FA 2006 269
“Excluded Property’’ Trusts and Domicile 270Summary 270
16 UK Resident Trusts: Income and Capital Gains Taxation 271Background 271UK Resident v. Non-UK Resident Trusts 272
Pre 6 April 2007 272Capital Gains Tax 272Income Tax 272
Post 5 April 2007 272FA 2008 Impact 273
Income Tax 274Capital Gains Tax 274
Income Tax 274Discretionary (and Accumulation and Maintenance) Trusts 275Interest in Possession Trusts 275
Beneficiaries 276Discretionary Beneficiaries 276
UK Resident Beneficiary 276Non-UK Resident Beneficiary 277
Interest in Possession Beneficiaries 278UK Resident Beneficiary 278Non-UK Resident Beneficiary 279
Capital v. Income 279Capital Gains Tax 280
Pre FA 2008 280Post FA 2008 280
Anti-avoidance Provisions 281Income Tax 281
Settlor Interested Trusts 282Discretionary Trust 283Interest in Possession Trust 283
Income of Trust Paid to or for Benefit of UnmarriedMinor 284
Bare Trusts for Unmarried Minors 285Capital Payments to the Settlor 285
Capital Gains Tax 286Settlor Interested Trusts post FA 2008 286Settlor Interested Trusts pre FA 2008 286
Contents xix
UK Resident Trust for Non-UK Domiciled but UK ResidentIndividuals 287
Income Tax 287Capital Gains Tax 288Inheritance Tax 288
UK Resident Trust for UK Domiciled and UK ResidentIndividuals 288
Income Tax 288Capital Gains Tax 289Inheritance Tax 289
Summary 290
17 Non-UK Resident Trusts: Income and Capital GainsTaxation 291Background 291FA 2008 Impact 291
Income Tax 292Capital Gains Tax 292
Income Tax 293Discretionary Trusts 293Interest in Possession Trusts 294
Beneficiaries of the Non-UK Resident Discretionary Trust 295Anti-avoidance Provisions 296
Settlor Interested Rules: Income Tax 297Sections 720 and 731 ITA 2007 297
Settlor Interested Rules: Capital Gains Tax 301Section 87 TCGA 1992 (Charge on Beneficiaries) 303
Transitional Provisions 308“Washing out” 310
Offshore Income Gains 311Interaction of the Various Apportionment Rules with Respect to
“Capital Payments’’ 314Non-UK Resident Trusts for Non-UK Domiciled but UK Resident
Individuals 314Income Tax 314Capital Gains Tax 315Inheritance Tax 316
Non-UK Resident Trusts for UK Domiciled and UK ResidentIndividuals 316
Income Tax 316Capital Gains Tax 318Inheritance Tax 319
Summary 319
xx Contents
PART FOUR: INVESTMENTS AND PROPERTY 321
18 Investments 323Background 323Deposit-based Investments 323Money Market Accounts 324Fixed Interest Securities 325Shares (Including AIM Shares)/Options 325
Ordinary Shares 325Zero Coupon Preference Shares 327Alternative Investment Market (AIM) Shares 327
Individual Savings Accounts (ISAs) 327Post FA 2008 328
Self-select ISAs 328Pre April 2008 329
Maxi ISA 329Mini ISA 329
Packaged/Insurance Investments 329Term and Whole of Life Assurance Policies 329
Term Assurance 329Whole of Life Assurance 330
Husband and Wife 330Single Premium Bonds 330
Venture Capital Trusts (VCTs) and Enterprise Investment Schemes(EISs) 336
Enterprise Investment Scheme 336Income Tax Relief 337Capital Gains Tax Relief 337
Venture Capital Trust 338Income Tax Relief 338Capital Gains Tax Relief 338
Chargeable Gains Deferment Possibilities (EIS only) 338Collective Investments 339Offshore Funds 339
Tax Treatment 340Distributor/Reporting Status Offshore Fund 340Non-distributor Status Offshore Fund 341
Irish Offshore Funds 342Structured Products 342Limited Partnerships 343
Private Equity Funds 343Property Funds 344
Limited Liability Partnerships (LLPs) 344
Contents xxi
Real Estate Investment Trusts (REITs) 344Self-invested Personal Pensions (SIPPs) 344Summary 344
19 Main Residence or Home 347Background 347Capital Gains Tax 348
Overview 348Two or More Residences of the Individual 348Non-UK Property 348Married Couple and Cohabitees 349Total v. Partial Capital Gains Tax Exemption 349Profit Motive 351
Residence 351Deemed Periods of Residence 351More Than One Residence 352
Electing Main Residence 353Planning and the Election 354
Married Couples 355Inter-spouse Transfers 356Lettings Relief 357Trusts and Sole or Main Residence 358Death and Sole or Main Residence 359Inheritance Tax 360
Lifetime Planning 361Joint Ownership Arrangements 361Cash Gift 362Sale 363Gift plus Rent Payable 363General Comments 364
Death Planning 364Summary 366
20 Non-UK Domiciliaries and UK Homes 367Background 367Ownership 367
Individual 367Non-UK Resident Trust 368Non-UK Registered Company 369
Financing the Acquisition 370Preliminary Conclusions 370Summary 371
xxii Contents
21 Stamp Duty and Stamp Duty Land Tax 373Background 373Stamp Duty/Stamp Duty Reserve Tax 373Stamp Duty Land Tax 374Matrimonial Home 374
Purchase of House plus Chattels 375No Consideration 375
Linked Transactions 376Matrimonial Breakdown 376Trusts 377
Interest of Beneficiaries 377Appointments 377Non-UK Resident Trusts 377Bare Trusts 378
Death 378Instruments of Variation 378
Life Policies 378Summary 379
PART FIVE: THE INTERNATIONAL DIMENSION 381
22 Non-UK Resident Taxation 383Background 383General Rules 383
Income Tax 383Capital Gains Tax 384Inheritance Tax 384
Types of UK Source Income 384Trading Income 385Property Income 385Employment Income 385Savings Income: Interest and Dividends 385
Interest 386Dividends 386
Some Points to Note 387Summary 387
23 Accessing Offshore Monies: The Non-UK DomiciledPerspective 389Background 389Categories of Non-UK Domiciled Individual 390
Consequences of A Claim 393£30 000 Charge 395
Contents xxiii
Nomination 395Where no Claim is Necessary 401
Remittances to the UK 401Alienation of Income and Gains and Asset Purchase 403
Conditions A/B 403Condition C 404Condition D 404Extensions of the Definition of “Remittance to the UK’’ for Each
of Conditions A/B, C and D 404Conditions A/B 405Condition C 407Condition D 408Transitional Provisions (pre 6 April 2008 Income/Gains) 408
Income or Gains (Other than RFI) Arising pre 6 April 2008 408RFI Arising pre 6 April 2008 409
Pre 12 March 2008 Condition 410Pre 6 April 2008 Condition 410General Transitional Rule 412
“Relevant Debt’’ and “UK Services’’ 413Exempt Property 415
Clothing, etc. and the “Personal Use Rule’’ 415Property Below £1000 Rule 416Temporary Importation Rule 416Repair Rule 417Property and Public Access Rule 417Exempt to non-Exempt Property 417
Offshore Income Gains 418Mixed Funds 419
(i) Arising Basis and Remittance Basis Mixed Income 420(ii) Income and Capital Gains Taxable on Remittance 420(iii) Tax-free Capital and Remittance of Taxable Income 420(iv) Tax-free Capital and Taxable Chargeable Gains 420
Segregation of Income and Capital Gains 422Gifts of Assets Precipitating Foreign Chargeable Gains 424Cessation of Source 425Offshore Mortgages 426
Grandfathering Provisions 427Loans Secured on Property: IHT Impact 428Loans Secured on Property: Capital Gains Tax Impact 428
Temporary Non-UK Residents 428Income Tax 428Capital Gains Tax 430
Summary 431
xxiv Contents
24 The Offshore Dimension 433Background 433The Offshore Financial Centre 434Offshore Financial Centre Vehicles 438
Companies 438Trusts 439
Offshore Financial Centre Uses 442Tax Planning 442Probate Mitigation/Will Substitute 442Asset Protection 443
Choosing an Offshore Financial Centre 443UK Tax and Information Disclosure Requirements 445Tax Exposure of Trust Settlor 446Relocation to an OFC 447Summary 448
25 International Taxation 449Background 449Double Taxation 449Double Tax Agreements 450
Income and Capital Gains Tax Agreements 450Inheritance Tax Agreements 452
Pre 1975 Agreements 453Post 1975 Agreements 454European Union/Community 456EU Savings Directive 456
Background 456Savings Income 457
“Interest” only 457Information Exchange 457Withholding Tax 458Withholding Tax v. Information Supply 458Non-Member States and TIEAs 459Switzerland and the USA 459Savings Directive and Directive 77/799/EEC 460Implications of the Savings Directive 460Human Rights 462
Summary 463
PART SIX: WILLS, PROBATE AND TAX ISSUES 465
26 Wills 467Background 467Requirements for Valid Will 467
Contents xxv
Types of Will 468Marriage 469Separation/Divorce 469Revocation 469Intestacy 470Types of Gift 470
Failure of Gift 470Survivorship Clause 471Witnessing the Will 474Capacity to Inherit 474UK “Forced Heirship’’ 474Foreign Aspects 475
Succession 476Capacity 477Formal Validity 477Material Validity 477Construction 477Revocation 478
Miscellaneous Matters 479“Forced Heirship’’ 479
Probate 480Inheritance Tax 480
Excepted Estates 481Assets not Requiring Probate 481
Jointly Held Assets 482Life Policies 482Pension Death Benefits 482Chattels 483Bare Trusts 483Small Payments 483
General Tax Issues 483Inheritance Tax 483Capital Gains Tax 483Income Tax 484Inheritance Tax Planning: Some Thoughts 484
Married Couples 487Cohabitees 488Single Persons 488Charitable Giving 488Foreign Aspects 489
Post Death Issues 490Deeds of Variation and Discretionary Will Trusts 490
Deeds of Variation 490
xxvi Contents
Capital Gains Tax 494Discretionary Will Trusts 495Capital Gains Tax 496
Intestacy 496Some Points to Note 496Summary 497
Appendices 499
Bibliography 539
Index 543
About the Author
Malcolm Finney, B.Sc. M.Sc. (Bus Admin) M.Sc. (Org Psy) MCMI C Maths MIMA,runs his own tax consultancy and training firm, Pythagoras Training.
Malcolm’s previous experience has included working for the international financeand international tax consultancy J.F. Chown & Company Ltd (now Chown DewhurstLLP); as partner and head of international tax at the international accountancy firmGrant Thornton LLP; and as head of tax at the London-based law firm NabarroNathanson.
Malcolm has written extensively on tax matters, has spoken at tax seminars bothin the UK and abroad and has been a visiting lecturer at the University of GreenwichBusiness School.
