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. 145