insideKENT Magazine Issue 36 - March 2015 | Page 145
LAW
INTERNATIONAL
TAX AND
SUCCESSION
The number of international tax and
succession issues affecting families
in the UK is growing. Amanda
Chapman, head of the International
Group at Cripps, highlights some of
those issues and explains why they
should be addressed.
Amanda Chapman
What do you mean by ‘international'?
With the increased mobility of individuals around the world, the ‘average’
family in Kent may find themselves facing issues arising in other jurisdictions.
A son or daughter may marry a French national; a grandchild might move
to the US to finish their studies; the family may buy a holiday home in the
Alps; or a family business may open an operation in Germany.
Why are these issues important from an estate-planning perspective?
In trying to mitigate tax exposure during lifetime or on death, the starting
point is always the residence and domicile status of the individual – all
planning flows from this and is impacted by it. Planning for the next generation
requires careful consideration where there may be a change of residence
by a child, or a marriage by a child to an individual governed by the laws
of another country. Complications may arise if an estate includes non-UK
assets. All possible ramifications must be considered and the appropriate
mechanisms put in place to protect the family assets. Advice should be
sought as early as possible in order for all possible changes in circumstances
of the family to be considered.
Why is this relevant?
Whatever the international element might be, the individuals or family must
be able to understand how the connection with the other jurisdiction may
affect their tax or succession status. An individual’s residence or domicile
status will have an impact on how they are taxed in both jurisdictions. The
location of a company may similarly give rise to complex tax issues. The
jurisdiction in which the holiday home is located may impose strict rules on
the inheritance of that property. It is very easy to be adversely affected by
the tax or legal system of another jurisdiction without realising it, and proper
care and planning may be required to mitigate any problems.
For individuals, are there any other international legal issues that
may affect them?
As well as all the tax and succession aspects of living, working and investing
in the UK, international issues may also have an impact on the breakdown
of a marriage where one or both of the spouses hail from another jurisdiction.
There may be a foreign nuptial or marital agreement that require consideration,
or one party may contest that their jurisdiction has authority over the divorce
proceedings (which may or may not be favourable to the other party).
Why are ‘residence’ and ‘domicile’ important?
These are tricky concepts. Fortunately we have relatively clear legislation
here in England, which determines where an individual is resident for tax
purposes; i.e. where they are living (and often working or bringing up the
family). The concept of domicile is more difficult, but in broad terms, it has
a higher degree of permanence and is often the jurisdiction from where
someone originates. In very simple terms, an individual’s residence status
will affect how they are taxed for income and capital gains tax. A person’s
domicile will have some impact on how they are affected by inheritance tax
on gifts that they might make, or their estate on death.
To discuss this further, contact Cripps partner, Amanda Chapman,
on 01892 506091 or [email protected].
About Cripps
How do succession rules in other countries differ from the UK?
We are very lucky in that for the most part we are relatively free to leave
our assets to whomever we choose. However, other jurisdictions may
impose restrictions on the beneficiaries to whom assets can be left; for
example, an individual owning a holiday home in France may not be able
to leave that property directly to a spouse if there are living children – the
children would be entitled to inherit a portion of that property too. A new
EU Succession Regulation will mitigate that restriction from later this year,
but not every jurisdiction will be affected.
www.cripps.co.uk
@crippslaw
Cripps is a key regional law firm
serving clients nationally and
internationally from offices in Kent
and London. Recognised countrywide
for both its commercial and private
client work and Legal Team of the
Year (Midsize) in the 2014/15 STEP
Private Client Awards, the firm focuses
on wealthier families , entrepreneurial
businesses and the real estate sector.
This article gives examples and is intended for general guidance only.
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