Don’t make an awful year even worse…Separation and Capital Gains tax
The “secret” unit was created in 2019, when HMRC recognised that FICs had become an increasingly popular succession tool with high-net-worth individuals. The unit was to review the tax risks of FICs and in particular the associated inheritance tax (IHT) implications. The news of the unit only came to light following a Freedom of Information request, and its clandestine nature resulted in individuals reassessing whether a FIC was still an appropriate vehicle to set up and whether those who already had established FICs were going to be subject to attack by HMRC. However, since its creation little was heard about the unit or its activities.
Family trusts were the traditional vehicles used to achieve succession planning. However, FICs have become more increasingly more attractive over the last 10 years because of their structure and tax advantages.
A FIC is simply a private limited company that holds and manages investments. One of the main reasons for the use of a FIC is to protect family wealth for future generations in a tax efficient way. The benefits of a FIC are:
There are of course disadvantages so the structure needs to be carefully considered.
HMRC has quietly wound up the specialist FIC team, subsuming it into a wider unit. FICs will now be treated as ‘business as usual’ by HMRC, rather than be subject to the scrutiny of a dedicated unit. However, the government does not rule out bringing into play anti-avoidance rules for FICs in the future, especially considering the various small changes to the taxation of companies in recent years.
There is no ‘one size fits all’, however FICs can act as an effective succession planning vehicle where the structure is appropriate. In the meantime, those with FICs or planning FICs can proceed with a sigh of relief knowing the HMRC’s general view now appears to be that FICs no longer pose an investigative threat.
If you would like to discuss the use of trusts and FICs for your succession planning or have any other questions about this blog, please contact James Ward or Diva Shah.
James Ward heads the Private Client team at Kingsley Napley and is tasked with overseeing the continued development of the private client offering for both existing and new clients of the firm.
His objective is for the Private Client team to offer the highest quality legal, practical and commercial private client advice for both domestic and international families and individuals.
Diva Shah is an Associate in the Private Client team.
Diva acts for various clients including high net worth individuals, entrepreneurs, executors, trustees and individuals who lack mental capacity on a broad range of matters
Partner and Head of Department
We are pleased to announce that Laura Harper has joined the firm as a partners in the Private Client team.
James Ward, partner and head of our Private Client team, was quoted in ePrivateClient and thewealthnet on 25 March 2021. The article was about ‘Tax Day’ and the key takeaways from people in the private wealth industry. James was commenting on the reduced reporting requirements for most estates
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James Ward, head of our Private Client team, was quoted in Solicitor's Journal, Accountancy Daily, Professional Advisor, Investment Week and International Investment on 09 December 2020. James was commenting on a proposed wealth tax on UK individuals by the Wealth Tax Commission as a response to the effects of the Coronavirus Pandemic.
Kingley Napley's Private Client team have once again been named by eprivateclient as a top private client law firm.
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International clients with a UK footprint often like a good spread sheet: specifically, a spread sheet covering their days spent in the UK and those spent overseas in the period 6 April to the following 5 April. This period is the UK tax year, and well-advised international clients – those considered neither resident nor domiciled in the UK - are all too aware that not keeping track of their UK day count may make them UK resident and within scope of UK income and capital gains tax on their worldwide income and gains. Numbers matter.
The news is dominated at the moment with the dreaded C word – COVID-19. Our TV screens, phones and newspapers are filled with the death count, panic buying and now “lockdown”. For many, being isolated or maintaining social distancing means that you may well be thinking about your future.
In the current crisis, we find ourselves with time (perhaps too much time…) for worry and reflection over an uncertain future. That reflection could usefully and responsibly be channelled, in part, to issues of Wills, tax planning and general succession.
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