A QNUPS Trust Platform - Gresham Street...based in between Dubai and Geneva. He is a specialist adviser to expatriates all over the world in the very specialist field of transferring

Gresham Street Partners

A QNUPS Trust Platform

Moving Onshore Offshore Protecting Your Wealth and Securing Inheritance

May 2013

www.greshamstreet.com

The Problems You Face Inheritance Tax 3

Capital Gains Tax 3

Property Tax – New and Old 3

Our Solution for You QNUPS Trust 5

Best Structure for UK Prop Comparative Table 7

Reassuring You Legality 9

Credibility 9

Probity 9

Why does HMRC tolerate this? Tax Revenue Charts 10

Who are the Trustees? Responsible Financial Institutions 12

Who manages the Trust? You 13

Accessing the Funds From Age 55 14

Appendices CVs 16

Articles 18

FAQs 25

Contents


2

The Problems You Face

Source: 1 Daily Telegraph (www.telegraph.co.uk/finance/personalfinance) Article written by Howard Bilton – a Barrister

•  Inflexibility of UK pensions and degradation of value to wife on death and children on Inheritance

•  Capital Gain Tax (CGT) on Sale of Assets

•  Stamp Duty increases (SDLT) on property purchases

•  All the new property taxes

•  Inheritance Tax (IHT) on Estates over £325K on death – now frozen until 20191


3

The Problems You Face (cont.)

Source: 1 www.accaglobal.co.uk

Inflexibility of UK pensions •  Degrading returns created by Annuity rates

•  Poor investment conditions •  Retirees living longer – outliving guaranteed returns

•  Widows receiving just 50% - before tax •  Children receive Zero1

CGT on Sale of Assets •  28% on sale of Investments

Property taxes •  If in your name, IHT at 40% and CGT at 28%; SDLT at 7%

•  If in enveloped structure, 15% SDLT; CGT; Annual Charge; NO IHT •  No risk of Mansion Tax charges

Inheritance Tax •  If held personally 40%

•  If held in structure no IHT


4

A Qualifying Non-UK Pension (QNUPS) Trust

“A QNUPS is a form of Overseas Trust which qualifies as a pension for UK Tax purposes and it is afforded special IHT treatments”1:

•  More technically robust than individual discretionary trusts or double trusts schemes

•  Avoids the 10 yearly Trust charges of 6%

•  Avoids necessity of offshore company ownership which is no longer advisable

•  No risk of tax penalties under Benefit in Kind rules or shadow legislation1

•  Although structured as a pension, access to the funds is not tied to retirement

Source: 1 Inheritance Tax Act 2008 Schedule 29 http://www.gmrc.gov.uk


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The Best Structure for buying/holding UK property

The UK Government announced in early 2012 that the regime for taxing UK residential property valued at over £2m held through offshore entities was to be changed with effect from April 2013. Up to that point the best advice offered to non-UK residents was to use offshore companies to purchase UK residential property.

The main change is the introduction of a new category of owner called 'non-natural persons' (NNPs) and confirmation that all UK residential property valued over £2m and owned by such will be subject to the new regime. NNPs are considered to include all offshore, onshore corporate entities, collective investment schemes, certain partnerships and some Trust arrangements. The charges will consist of:


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•  Stamp Duty charge on all new real estate purchases of 15%. •  Capital Gains Tax at 28% on all gains arising after 6th April 2013. •  Annual Residential Property Tax (ARPT) based on the capital value of the property

which will be re-based every five years. The first payment will be due on 31st October 2013 and then annually thereafter. Current charges (which will increase with inflation) will be:

The Best Structure for buying/holding UK property (cont.)

Property Valued at £2 million to £5 million £5 million to £10 million £10 million to £20 million Greater than £20 million

Annual Charge £15,000 pa £35,000 pa £70,000 pa £140,000 pa

Source: http://www.alphamanagement.com from Corporate Advisors, Consultants and Administrators of Offshore Companies


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The Best Structure for buying/holding UK property (cont.)

There are several ways of holding property (+ through a QNUPS) and the charges applicable to each are:

INDIVIDUAL OFFSHORE Co TRUST QNUPS

Hold for own use: No restriction No restriction Possible Must have commercial element

Stamp duty charges: 7% 15% 7% Max 2%

Capital gains tax on sale: None 28% No – if held by trustees

None

Restrictions on sale None None None None

Annual tax charge: No Yes No – if held by trustees

No

Inheritance tax 40% charge:

Yes No No No

Bankruptcy exposure: Yes Yes Protected Protected

Cash withdrawal: Not applicable Not applicable Not applicable Over 10 years (with 30% in Y1)

Leverage facility: Yes Yes Yes Up to 60%

Annual maintenance costs:

None Approx. £1,000 pa Approx. £10,000 pa Approx. £1,500 pa

Source: http://www.alphamanagement.com for Corporate Advisors, Consultants and Administrators of Offshore Companies


9

Legality, Credibility & Probity

•  EU Directive in 2006 – Freedom to transfer capital across borders1

•  Cameron’s desire to create offshore wealth to supplement declining pensions’ provisions

•  The need to build up IHT protected wealth surplus to UK’s restricted limits

•  HMRC’s considerable benefit from such platforms (see table on page 10)3

•  Embodied in the 2010 Addendum to the 2008 Inheritance Tax Act1

•  Falls under Pension legislation approved by UK HMRC – not some flaky BVI platform2

Source: 1 http://www.hmrc.gov.uk Sec 271Aparagraph 18 Sch 29 Finance Act 2008 2 Sec 165 Finance Act 2004(b)

3 PwCs table comparing HMRC’s annual tax take. www.pwc.com


10

Legality, Credibility & Probity (cont.)

Why the government/HMRC tolerates this...

Age Year Yearly HMRC Revenue from funds Remaining Onshore

Yearly HMRC Revenue when 5% pa remitted onshore

Client’s net annual take from 5% remitted onshore

Estate Size

45 1 £40,500 Nil Nil £5,000,000

50 5 £47,250 Nil Nil £7,500,000

55 10 £65,000 Nil Nil £10,000,000

60 15 £72,500 Nil Nil £12,500,000

65 20 £81,000 £341,812 £408,188 £15,000,000

70 25 £89,500 £398,781 £476,219 £17,500,000

75 30 £98,000 £455,750 £544,250 £20,000,000

80 35 £106,500 £512,719 £612,281 £22,500,000

Assumptions: •  A client aged 45 takes £5Mn Offshore - pays no tax. •  The estate is made up of Two Buy-to-lets worth £1.25Mn each •  £1Mn in cash on Deposit with Lloyds bank yielding 0.25% •  £1Mn in Equities yielding approx' 1.6% Gross before Tax •  £500K in wine yielding Zero


11

Legality, Credibility & Probity (cont.)

•  He keeps it there for 20 years. This grows to £15Mn and this rate of growth continues.

•  He then starts to remit back to UK at 5% pa. He is a Top rate Tax payer.

Source: PwCs table comparing HMRC’s annual tax take. www.pwc.com


12

Who are the Trustees?

Reputable Global Financial Institutions

The backers of these services are far and wide. The list includes:

•  Sovereign – largest Trust group worldwide with 32 offices The main provider. www.sovereigngroup.com

•  Royal Bank of Canada – 12th largest global investment bank. Total fees in 2012 of $1.1bn www.rbc.com

•  Fairbairn Trust Company – Offshore fiduciary arm of Nedbank/Old Mutual Group, parent company a FTSE 100 company www.fairbairntrust.com

•  Castle Trust Group – The Gibraltar representative for the International Association of Practicing Accountants (IAPA) and Accountants Global Network (AGN) www.castletrustgroup.com


13

Who manages the Investments?

Your trust is ring-fenced and is solely in your name so you, or your investment manager manages everything.

You/them manages your investments and controls your money.

i.e. You

Your stockbroker – for your FTSE equity portfolio

Your accountant – for your private company shares

Your private banker or asset manager – for your discretionary portfolio management

Your IFA – for your mutual funds

Your property agent – for your investment property

Your wine merchant – to buy and sell your wine portfolio

Source: Sec 92, para 18 of Schedule 29 to Finance Act 2008. www.hmrc.gov.uk


14

Accessing the Funds

•  From age 55

•  30% Tax-Free Lump sum

•  Must commence drawdown of annual income by Age 75

•  Maximum amount of annual drawdown of 10%

And on death...

It passes directly to your named beneficiaries at once, outside of your estate, free of IHT.

Source: http://www.hmrc.gov.uk Sec271A Para’ 18 Sch 29 Finance Act 2008


15

Appendices


16

CVs

Christopher Coleridge Cole

Christopher has over 37 years experience in the financial planning industry, out of which 21 years were spent in the Far East, currently based in between Dubai and Geneva. He is a specialist adviser to expatriates all over the world in the very specialist field of transferring UK pensions out of Britain into registered trusts in Gibraltar (QROPS). Since 2010 he has focussed on the Transference of Investment Assets out of the UK, creating HMRC approved retirement trusts in Guernsey (QNUPS). Christopher is registered in the UK with the Institute Register of Insurance Brokers & the Chartered Insurance Institute. Christopher has recently been elected as a member to ORIAS, the European registered Regulatory body in France, sanctioning advice throughout the European Union countries. Gresham Street Partners are approved Fiduciary Introducers in Guernsey, Gibraltar and Malta - registered and authorised in both Dubai and Hong Kong.

[email protected]


17

CVs

Peter Beynon FCA

Peter is Regional Director for the Middle East for ICAEW (Institute of Chartered Accountants in England & Wales), a world leader in the accountancy and finance profession. Peter is a seasoned and commercially astute finance professional with a broad general management, business development and mergers and acquisitions background gained as an International Executive with Al Fahim in the UAE and Jardine Matheson based in Asia. In these roles obtained considerable experience working in change oriented multi-cultural environments with diverse private and public conglomerates while achieving stretched P&L and balance sheet targets. Peter has successfully completed significant business acquisition and property development projects in the Middle East, Asia, Europe and the United States and has independently undertaken a variety of business consultancy assignments in CFO and MD roles.

[email protected]


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http://www.greshamstreet.com/wp-content/themes/twentyten/images/1110_ab_magazine.pdf

Articles


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http://www.greshamstreet.com/wp-content/themes/twentyten/images/uksi_20100051_en.pdf


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FAQs

Further to our conversation about existing property being transferred into a QNUPS to avoid CGT, future Mansion Taxes, Annual Charges & IHT, the procedure for transferring existing property is as follows:

•  An existing QNUPS must have been set up in advance. All that is necessary to have in it to effectively register it is £10,000

•  If the property is in a BVI or SPV then those must be liquidated or closed & the property gifted into the QNUPS

•  If there is debt, this must be removed to avoid SDLT (Stamp Duty) falling due. Bridging Finance can easily be arranged

•  The Deeds are simply assigned by the Settlor's lawyers with the receiving Trustees' Conveyancing department

•  The QNUPS then becomes the legal owner of the property

•  Debt can then be reinstated up to 60%


26

FAQs (cont.)

•  All future Sale proceeds remit back to the QNUPS Trust without CGT payable

•  All future purchases have the reduced SDLT applied

•  In the event of a loan (not a mortgage) being outstanding to a QNUPS where the trustees have loaned the member up to 30% of QNUPS value, all loans on death would eventually be waived by the Trustees

•  On death of the settlor the proceeds fall outside the estate for IHT purposes

•  All rental income falls into the QNUPS. Income Tax of just 20% would be paid on the Net Residual income after expenses. All Debt repayment is made by the Trustees

A QNUPS Trust Platform

Moving Onshore Offshore Protecting Your Wealth and Securing Inheritance

May 2013

www.greshamstreet.com [email protected]


The information in this document is provided for informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this document is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information in and provided from or through this document is general in nature and is not specific to you the User or anyone else. YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED IN THIS DOCUMENT WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR. You understand that you are using any and all Information available in or through this document AT YOUR OWN RICK. 2013 Gresham Street Partners. All rights reserved. Please see www.greshamstreet.com/structure for further details

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A QNUPS Trust Platform - Gresham Street...based in between Dubai and Geneva. He is a specialist adviser to expatriates all over the world in the very specialist field of transferring