Family Investment Solutions (Part 1) Structuring investment assets

Transcription

1 Family Investment Solutions (Part 1) Structuring investment assets Hayden Bailey Mark McMullen PRECISE. PROVEN. PERFORMANCE.

2 Next month Family Investment Solutions (Part 2) Focus on Family Investment Companies (FICs) Monday 13th November 2017 at Buzzacott, Speakers: Craig Rowlands, KPMG Deborah Clark, Mills & Reeve Invitation will follow

3 Know Your Client Purpose (asset protection / succession / nest egg ) Quantum Control Risk Regulation / confidentiality / complexity Jurisdictions Borrowings Restraints / conflicts (US / Sharia) Flexibility / ability to unwind

4 Basic menu Outright ownership (do nothing option) Co-ownership Trust Foundation Family Investment Company (FIC) Family Limited Partnership (FLP / FGP) Family Unit Trust Insurance wrappers Blockchain

5 Personal ownership and co-ownership Outright ownership Co-ownership Suitable for m Any Any Legal structure n/a n/a Cost set up n/a 1,000 Cost ongoing n/a n/a Regulatory requirements None None Other advisers needed (apart from investment managers) None Solicitor to draw up co-ownership agreement Tax position Individual rates of IT, CGT and IHT Potential for remittance basis for 15 years if nondom UK resident. Individual rates of IT, CGT and IHT. HMRC accepts different shares of income v capital in certain non-spouse situations. Form 17 may be needed in a spouse situation Crowe v Appleby situations for CGT Publicity None consider nominees None Liability Unlimited Potentially unlimited for each co-owner Beneficial ownership yes Yes undivided shares

6 A la carte menu - Trusts Basic flavours: Fixed interest / discretionary / bare Private or public (charitable) More exotic flavours: Offshore Revocable / Reserved power VISTA / STAR / Purpose (with enforcer) Side dishes: Protector / enforcer Corporate trustee Underlying company Letters of wishes

7 A la carte menu - Foundations Served: Offshore Civil flavours: Liechtenstein Stiftung (1926, amended 2009) (tax as trust) Bahamas Foundation Act 2004, amended 2012 Common flavours: Foundations (Jersey) Law 2009 Foundations (Guernsey) Law 2012 Isle of Man Foundations Act 2011 (tax as company) Side dishes: Protector / enforcer / guardian (can be a company) Foundation as trustee / Protector or holding the shares in a PTC

8 Trust or Foundation Onshore trust Offshore trust Foundation Suitable for m 1m+ 2m+ 1m+ Legal structure trust trust Foundation (trust or company for UK taxation) Cost set up 1, ,000 + High? Cost ongoing varies High? High? Regulatory requirements Trusts register (if UK tax) LEI if investing in UK PSC register if acting as shareholder / FATCA/ CRS Tax return Local requirements Trusts register (if UK tax) LEI if investing in UK FATCA / CRS depending where 50(FS) Local requirements Trusts register (if UK tax) LEI if investing in UK FATCA / CRS Other advisers needed (apart from investment managers) Legal, accountancy, independent trustees? Corporate trustee? PTC? Foundation? Purpose Trust? Board, legal, accountancy Tax position 45% income tax, 20% CGT (28% for property). Tax pool. R185 regime. IHT 40% (less NRB) Complex. Potential for IHT Excluded Property status (could be UK trust), Protected Settlement status Publicity Trust Register is private for now Trust Register can include Protector and letter of wishes. Banking requirements for UBO Liability Unlimited and personal subject to indemnities / exoneration Unlimited and personal subject to indemnities / exoneration Depends upon classification. Mixed funds issue if unclear segregation / treatment Potentially greater if no clear beneficiaries Depends upon classification and local law generally limited to value of the assets Beneficial owner No fiduciary No - fiduciary Yes separate legal personality

9 A la carte menu FICs Served: Hot in the UK Overseas Flavours: - Lux Societe de gestion de patrimoine familial (SPF) - Anstalt (hybrid with Foundation) - See company based funds (OEIC etc.) - Protected Cell Co (PCC) / Incorporated Cell Co (ICC) Side dishes: Share classes Growth shares Loans and redeemable shares Governance

10 Family Investment Company Onshore FIC Offshore FIC Suitable for m 1m+ 2m+ Legal structure UK Ltd Co Offshore Ltd Co Cost set up 5,000 3,000-5,000 Cost ongoing 5,000-10,000pa 7,500 minimum Regulatory requirements None Local requirements Other advisers needed (apart from investment managers) Solicitor to draw up articles and shareholders agreement Solicitor to draw up articles and shareholders agreement Local CSP Tax position Subject to CT Dividends taxed in the hands of UK residents Usually UK tax resident, so as left Publicity Accounts, PSC and Officers via Companies House Usually none in the UK Liability Limited or unlimited depending on structure Usually limited Beneficial owner Yes Yes

11 A la carte Family Partnerships Served: FPs - offshore and usually expensive Flavours Restrictions on capital withdrawal Withdrawal of capital with unanimous agreement limited liability for LPs (not GP) FLP raising funds for investment (compliance) FGP must be in business under PA 1890 FSA regulation for GP if CIS under FSMA 2000 Nominees / trusts as partners

12 Family Partnership Onshore FLP Offshore FLP Suitable for m 10m+ 5m+ Legal structure Limited or general Partnership, or LLP Limited or general Partnership, or LLP Cost set up 5,000 7,500 Cost ongoing 15,000-20,000pa 7,500-15,000pa Regulatory requirements Authorised Operator (FCA) Local requirements Other advisers needed (apart from investment managers) IFA to promote FLP Solicitor to draw up partnership deed Local CSP Solicitor to draw up partnership deed Tax position Transparent Transparent Publicity Capital contributions for LP. If the LP has a corporate GP, accounts LLP as for company Usually none in the UK Liability Unlimited if FGP, limited for LPs but not GP if FLP As for onshore Beneficial owner Transparent if FGP, LP still not separate legal entity As for onshore

13 A la carte insurance wrappers Served: UK and offshore Flavours: Qualifying / non-qualifying 5% withdrawals Chargeable events regime Personal portfolio bonds Segmented / single premium Assignable without CGT or IT charge

14 Offshore insurance bond Offshore insurance bond Suitable for m 1m+ Legal structure Insurance contract Cost set up 0.6% Cost ongoing AMC usually around 0.5% Regulatory requirements Other advisers needed (apart from investment managers) Tax position Ins Co is usually locally regulated IFA 5% tax free withdrawal of initial capital per year. Profits taxed as income Can give segments away as PETs without CGT NB IT and IHT on death Publicity Comments None Risk is on the insurance company s balance sheet

15 A la carte Funds Flavours: Can take the form of (open or closed ended) companies or a limited partnership: Lux SICAV RAIF, SIF, SICAR, SOPARFI, SPF UCITS (EU mutual funds) JPUTS, REITS, PE funds, Hedge funds OEIC (PAIF) Private Fund Limited Partnerships (PFLP) Reporting (UKRFS) / non-reporting status Or can be a trust: Unit trusts (AUT or UUT) / investment trusts

16 OEIC or Unit Trust Onshore OEIC Offshore OEIC Suitable for m 10m+ 10m+ Legal structure Special purpose Ltd Co Special purpose Ltd Co Cost set up 25,000 takes up to 6m 20,000 Cost ongoing 35,000+ (AMC usually around 1%) 35,000+ (AMC usually around 1%) Regulatory requirements Other advisers needed (apart from investment managers) Tax position Authorised Corporate Director (FCA) MIFID II Solicitor to draw up FCA prospectus Expenses offset within the OEIC. Net income paid out as dividend. Sales of shares subject to CGT. IHT free for non-doms who are not deemed UK doms Local requirements Solicitor If a reporting fund Net income paid out as dividend. Sales of shares subject to CGT. IHT free for non-doms who are not deemed UK doms Publicity Fund name and prices are public. Usually fund name and prices are public Comments EU protected and some doubt as to whether this will survive Brexit

17 Wider menu Discounted Gift Schemes (DGS) Gift and Loan Trusts Onshore & offshore pensions (QNUPS/QROPS) EIS / VCT / APR / BPR assets Life assurance (in trust)

18 Contact details Hayden Bailey, Partner, Boodle Hatfield LLP Blackfriars Road, London, SE1 8NW Mark McMullen, Partner, Moore Stephens LLP Aldersgate Street, London, EC1A 4AB

19 Disclaimer This presentation does not constitute investment advice. We believe the information in this presentation to be correct at the time of giving it, but we cannot accept any responsibility for any loss occasioned to any person as a result of action or refraining from action as a result of any item herein. Printed and published by Moore Stephens LLP, a member firm of Moore Stephens International Limited, a worldwide network of independent firms. Moore Stephens LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority for investment business. October 2017.