CASE STUDIES
The following case studies are representative of the work we do and the way in which we can add value in various areas. They have been drawn from real examples but names have been changed.
1. Returning to the UK
After nearly 15 years in Singapore, Andrew and Sarah were planning to relocate to the UK with their three children, Abi, George and Jonathan. Abi was about to enter university in the UK and the boys were entering secondary school. Andrew had been offered a redundancy package from the bank he worked for and Sarah was in negotiations to sell her recruitment practice. Both planned to retire and whilst they owned their home in the UK, they did not have a plan for putting their investments and cash to work tax-efficiently.
We were asked to provide a report on the tax implications of returning to the UK. We worked with them to identity the optimal timing for their relocation so as to enjoy Split Year Treatment. We made recommendations for vested share options to be sold prior to this as well as to liquidate certain existing investments which would have been taxed punitively. We established the tax treatment of the on-schedule vesting of Andrew’s Long Term Incentive Plan after arrival in the UK and recommended the optimal timing for the payment of his Termination Settlement. We advised Sarah as to the optimal positioning of the proposed earn out from the sale of her business.
We recommended a tax-led strategy for the re-investment of their private wealth and cash and we worked with their existing financial adviser to put this into practice. The strategy involved the full use of all available tax allowances, the generation of dividends and gains as well as the use of certain investment structures which carry both Income Tax and Inheritance Tax advantages.
Finally, we clarified the Capital Gains Tax position in respect of the existing property, which they decided to keep and re-occupy after substantial remodelling. We outlined tax planning options in case Andrew and Sarah decided to do some consulting, which so often happens after people relocate to the UK. We also provided a comprehensive overview of their current Inheritance Tax position with a set of action steps to bring liabilities down to far more manageable levels. We also provided them with a long-range net retirement income forecaster.
The upshot of this advice is that they now enjoy a net retirement income of over GBP 125,000 per year after paying Income and Capital Gains Tax of just 2.71%. The remaining tranches of Sarah’s earn out will be delivered to her without an exposure to UK taxation, as will Andrew’s continuing LTIP payments. Approximately 50% of their invested wealth is held within Inheritance Tax efficient structures.
The cost for the written report and follow-up consultations was approximately SGD 8,500, which was a fixed fee agreed at the outset. We also now prepare their annual UK tax returns and manage their relationship with HM Revenue & Customs.
Fixed Fee SGD 8,500
2. Inheritance Tax and Domicile Planning
Gerald and Su Li approached us as they were nervous about their exposures to UK Inheritance Tax. Their friends had been speaking to them about this and googling the subject had left them both more confused. Gerald was originally from the UK but moved to Singapore in his early 30s. Su Li is a Singapore national and they married in Singapore. Having already retired both Gerald and Su Li intend to remain in Singapore permanently but also wish to travel extensively, also to the UK where one of their children and grandchildren live. During successful careers in Oil and Gas and Medicine respectively, Gerald and Su Li have been able to amass a healthy portfolio of financial and property assets totalling approximately SGD 10m, some of which are in the UK.
We provided three main things to Gerald and Su Li. First, we wrote a detailed report outlining how the Inheritance Tax system works, when tax is triggered, how exposures to IHT are determined and outlined a range of planning solutions before making a specific recommendation. Secondly, we prepared a long-range set of Inheritance Tax projections on the basis of conservative growth and drawing assumptions both without tax planning and with the planning proposed. Thirdly, we provided a thorough case law based analysis of Gerald’s potential claim for a Domicile of Choice in Singapore and prepared a detailed Statement of Domicile to sit alongside amended wills for Singapore and the UK that they have since drawn up.
The outcome of our advice is that Gerald has a strong and credible claim for a Domicile of Choice in Singapore, but it is a claim that he must continue to work on strengthening and document – something we will be helping him with regularly. This alone promises to save his estate nearly GBP 1.5m in Inheritance Tax. However, as there is always a possibility of unexpected events causing his relationship with Singapore to end and his Domicile of Origin in the England and Wales to revive, we have also recommended a series of ‘fall back’ planning options – steps which save Inheritance Tax even if he were domiciled in the UK. As a consequence, we worked with Gerald and Su Li’s financial adviser to put in place a number of trust-based solutions, a modest redistribution of wealth from Gerald to Su Li and to their children as well as the use of a non-UK pension arrangement.
We estimate that this has saved their estate Inheritance Tax of around GBP 2.1m in total, with only a very modest exposure remaining in respect of UK property holdings. The total cost of this advice was SGD 7,750 which was a fixed fee agreed at the outset.
Fixed Fee SGD 7,750
3. UK Property Consulting
Ming Hui and Angelina are, like many Singaporeans, attracted to property investments. Having already acquired and number of property investments in Singapore, as well as their main home, and having accumulated a large cash deposit, they were keen to look at property investment in the UK and approached us to full advice and recommendations.
Initially, they were looking at acquiring three off-plan properties in London and Edinburgh but were unsure about the tax implications, planning opportunities and their tax filing obligations.
Once we had understood more about the properties they intended to purchase, we provided Ming Hui and Angelina with a personalised report covering the various taxes, the order in which they apply and a variety of recommendations. The advice covered the following areas:
- Stamp Duty Land Tax and Land and Buildings Transaction Tax
- A full overview of Income Tax, deductions, calculation of profit and filing obligations
- A full overview of Capital Gains Tax in respect of the assignment of contracts and the sale/gift of property
- A full overview of Inheritance Tax and options to mitigate this
- The tax implications of various forms of ownership – jointly, UK company, non-UK company and trust
- An overview of Corporation Tax if the company route was to be followed
- The tax implications of taking a mortgage and other financing options
Based on a number of agreed assumptions on capital growth and income yield we also provided a set of detailed calculations to show net returns after all taxes and costs over a 15 year period, which gave Ming Hui and Angelina more conviction in their decision-making.
We recommended a mixture of mortgages secured against the properties as well as Lombard lending with their financial adviser. We recommended a 15 year policy of life assurance in Singapore to cover unexpected Inheritance Tax liabilities. Whilst the decision was finely balanced between purchase through a company and in their own names, we finally agreed to proceed on the basis of joint ownership with these initial purchases and the use of a company for future purchases.
The total cost of our advice to Ming Hui and Angelina was a fixed fee of SGD 2,500. We have also promised to update our advice once a year to account for changes in the law, for which we will make a modest charge. We have also been engaged to prepare their UK tax returns.
Fixed Fee SGD 2,500
4. Bringing Tax Returns up to Date
We were contacted by Ellen who had received a notice from HM Revenue & Customs requiring her to file Tax Returns for the previous 5 years. By her own admission she had simply not gotten around to doing these Returns because she didn’t think she had to. However, HMRC had accessed data provided by her rental agent under the Non-Resident Landlord Scheme and had spotted that she had not been filing the returns. Her approval to receive rental income gross from the agent had been rescinded. HMRC had issued tax returns for the years concerned, however Ellen had not been updating HMRC with her new addresses whenever she moved. Furthermore, she also sold one of her two properties three years ago.
First of all, we reassured Ellen that HMRC was simply seeking compliance and, of course, and tax, late filing and payment penalties which might have been due. When everything has been brought up to date, the matter would be settled and she should simply ensure that she continues to file on an annual basis.
Secondly, we registered Ellen under the Let Property Campaign – a scheme to facilitate multi-year disclosure of unpaid tax liabilities from rental income. We worked with Ellen and her property agent to prepare the rental statements, the calculation of tax and made an offer under the Let Property Campaign for full and final settlement of tax, late payment and filing penalties which was accepted by HM Revenue & Customs. Ellen paid this settlement in full, after which we prepared and filed the Tax Return for the prior tax year in the normal way.
Thirdly, Ellen was also required to make a Non-Resident Capital Gains Tax disclosure in respect of the property that she had sold three years ago. After obtaining a valuation of the property as at 6th April 2015, we were able to prepare that disclosure and calculated that, after fees and charged, a modest capital loss had arisen. HM Revenue & Customs accepted the disclosure and Ellen only needed to pay the associated late filing penalties.
We are now engaged to prepare and file Ellen’s annual tax returns and we work closely with her and her agent to ensure that her tax obligations are met each year.
The total cost for our input was, in this case, SGD 3,750 – a fixed fee that we agreed at the outset to bring her affairs up to date.