PraxisIFM’s Private Client & Corporate London office has expanded rapidly over the past two years. Donna talks to us about recent trends and moving to the city.
The UK’s trust and company service providers are having to deal with an increasing level of regulation and reporting obligations, which will inevitably force professional firms with modest books of trust administration business to consider whether they can afford to absorb the resulting extra compliance costs. This would appear to be a major opportunity for professional trust companies to take over the administration of those trusts. Are you seeing any sign of that yet?
We have definitely started to see a consolidation in the market in respect of corporate and trust business. This is mainly due to the increased regulations and fiduciary duties that are now associated with acting as a directors or trustees of UK entities. It was certainly the case in the past that lawyers would act as director/trustee for their clients as a favour and that this created small fiduciary departments within a large percentage of UK law firms.
However, we are seeing a number of these law firms looking to absolve themselves of these fiduciary roles because a) this is not their core business and the ever increasing regulations mean that more time and expense needs to be spent fulfilling these roles and b) it creates a potential conflict of interest when legal advice is being provided for the same client.
As a result of this, PraxisIFM is increasingly being asked to provide directorships and a corporate trustee in place of the legal firms which has been enabled us to grow our client base but also strike up some important relationships with the law firms in question who will continue to provide legal advice for the structures.
In recent years the UK has become an extremely attractive location for international holding companies through a combination of favourable tax law changes and a lower rate of corporation tax (now 19%). What are you currently seeing?
Yes, the fact that the UK has the largest number of double tax treaties compared to any other country and its competitive rate of corporate tax means that it is very attractive jurisdiction for international clients. We have seen a growing interest from US corporations looking to invest into the UK (whether that be property of private equity) or structure their affairs with the use of a UK company vehicle. However, it is not solely the US market that has shown an awareness of the UK market.
Given the UK’s favourable treatment in relation to withholding tax and capital gains tax when it comes to UK holding companies, it means that international clients are able to structure their affairs to take advantage of this. However, with Base Erosion and Profit Shifting (BEPS) legislation in force, we always advise clients to ensure they have taken appropriate tax advice when setting up structures in this manner as there needs to be a legitimate rationale for implementing a UK entity into a new or current structure and substance needs to be demonstrated.
PraxisIFM can assist with this as we have a great deal of experience in acting for these types of structures and ensuring full compliance with the relevant legislation and substance requirements is met.
Major changes to the UK’s property tax regime in relation to corporate and non-resident ownership, as well as amendments to the utilisation of the Crown Dependencies’ very favourable Double Tax Agreements with the UK, now result in structuring such developments and investments through UK companies or foreign-incorporated UK-resident companies. What services do you provide for such property-owning companies?
This has been a major change for foreign corporate owners of UK property and the proposed amendments to the legislation were one of many reasons that we decided to set up our private client office in London in 2017. We can provide a full suite of services for UK companies or foreign-incorporated UK resident property holding companies which include the following:
- Company secretarial services
- UK resident directors (individual and corporate directors available)
- Reporting and accounting services
- Corporation Tax return preparation and filing
- VAT services
We also have well-established relationships with intermediaries in the property sector for any external advice that might be required during the lifetime of the company.
Many foreign-domiciled UK residents have become deemed domiciled for UK tax purposes in recent years and have had to consider whether it is worthwhile retaining their trusts offshore. Some will have wound up their trusts, however have you seen many offshore trusts being repatriated onshore and retained for family succession planning reasons?
We have taken on a number of trusts from offshore jurisdictions following advice that there is no longer a rationale to retain the structure offshore and these trusts have therefore gained UK tax residence status by virtue of the fact that we are providing a UK Corporate Trustee and management services in the UK. This has allowed clients to have comfort that their structures are now being administered in line with UK tax legislation given the perceived perception that can sometimes surround the offshore centres (mostly unjustifiably), as well as enabling them often to save on costs as we can provide competitive pricing from our UK office.
However, I would say that the majority of structures have remained offshore as there is often still a benefit or rationale for retaining them offshore and unwinding them could trigger unwanted implications. More commonly, we are seeing clients set up new UK trust structures for their traditional purposes, being asset protection and succession planning rather than tax driven.
Alternative family wealth vehicles such as family investment companies and family limited partnerships have been extremely popular over the past decade due to increased anti-avoidance legislation to discourage the use of trusts. It was rumoured that some of the considerable benefits of family investment companies would be attacked in the last Finance Bill, however this proved to be a false alarm. Do you think that such vehicles will remain attractive?
I believe so yes. Not only do family investment companies provide a corporate wrapper for individuals, meaning that corporation tax applies rather than their personal rate of tax (which can be up to 45%), but there is also the flexibility that it provides compared to a traditional trust structure.
We have seen in the past where clients have opted to set up a trust but still want to maintain control over assets which can be difficult to facilitate without causing the trust to risk deemed to be a sham, whereas a family investment company allows clients to retain some level of control. They are also very simple vehicles which are easy to set up and are cost-effective. Subject to no changes in legislation, I foresee these type of vehicles remaining popular for family wealth preservation, business profit retention and inheritance tax planning.
Since moving over from Guernsey to set up and run the London office, you’ve overseen rapid growth, the acquisition of the JD Corporate Services business and now a move to new offices. You also won the prestigious Citywealth Future Leaders Editor’s Choice Award a few months ago. How easy did you find it to adapt from island life to big city life?
It has certainly been a very eventful two and a half years since I moved over to London from Guernsey and I definitely had a transition period to work through, having only ever left Guernsey previously to attend university in Exeter. Getting used to longer commutes, busy streets and a faster pace of life (both business and personal) was an adjustment in itself but building a new London team and transitioning a newly acquired business to integrate with ours did present its challenges.
However, that being said, I’ve always been one to embrace a challenge and it didn’t take too long before I realised that I was well suited to city life and have not only enjoyed (and feel very fortunate) for the experiences I have had exposure to since moving over, but I am also very proud of what we’ve been able to achieve in London. It was also made considerably easier by the support I received from the Group (in terms of personnel and resources) but also the team I had with me who continue to be the driving force behind the growth of the business.
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