It has been a turbulent week in UK politics. Following an outwardly positive Chequers Brexit meeting over the weekend, David Davis, Minister for Exiting the European Union, resigned on Sunday citing concerns that Tory promises over the shape of Brexit were not being kept, and this was followed swiftly by the resignation of Boris Johnson, Foreign Secretary, on Monday. By Monday evening, the 1922 Committee (at which a vote of no confidence could have been triggered) had come and gone and Tuesday brought with it a new day, and a ‘new-look’ Cabinet. At the time of writing, and it’s only Wednesday, already two Vice Chairs of the Conservative Party have resigned in protest at the Chequers agreement. The prospects of another General Election and a disorderly or hard Brexit loom.

There may be no need for concern: Arguably, those that remain in the Prime Minister’s inner circle are predominantly supporters of the softer Brexit put forward by Theresa May. However, future challenges to her plans in the Commons could ultimately threaten her leadership. 

What could this mean for clients and advisers? 

The latest developments are likely to feed any existing uncertainty around the state of the UK government and, for some, renew fears of a Labour, Corbyn Government. We looked back at previous Labour party measures and, while the shape of any such reforms is only speculative at this stage, clients will be weighing their options, which may include investment abroad in secure and efficient vehicles, or even relocation.

Not all wealth plans will withstand changes in client circumstances and some, such as trusts, are not widely recognised abroad. The treatment, in law and tax, of insurance on the other hand is relatively well harmonised across borders and an insurer with the right expertise can assist in solving any points of uncertainty and ensuring clients’ broader, and often complex, needs are met. These might include the intricacies of planning for family members living in multiple countries, varied and dispersed assets and holding structures, work commitments in other countries, and dual tax residence, to name a few.

Luxembourg, at the heart of Europe (and out of reach of the UK’s plans for its Overseas Territories and Crown Dependencies) is well suited as a hub for wealth management and wealth planning. The Grand Duchy benefits both geographically and in regulatory terms from ready access to the rest of the EU. When it comes to countries further afield, an insurer such as Lombard International Assurance, with more than 25 years’ experience in the field, is adept at working alongside clients with connections in major financial centres such as Hong Kong, Singapore, and a future UK, where perhaps there is no freedom of services and where catering to client needs requires a more detailed knowledge of local rules.

Whatever the latest events in the UK foretell, and whatever the ultimate shape of Brexit, Lombard International Assurance’s commitment to the UK and to both short and long-term UK residents will be unchanged. However, one further thing is clear: the instability currently felt in the UK is not over – in fact it may not have begun in earnest. Against this backdrop, a review of existing wealth plans is likely to be prudent. The exercise will logically include the identification of wealth solutions that are not only compliant and fiscally efficient today, but also sufficiently resilient in the long term to protect and enhance wealth for retirement and for the next generation. Insurance – a mainstay of wealth planning in the UK – may be such a solution. Lombard International Assurance’s UK compliant insurance solutions offer the following advantages:

Benefits of life assurance for UK residents

• Gross roll up is available in respect of income and gains (save for non-reclaimable withholding taxes);
• A cumulative 5% tax deferred withdrawal allowance applies for up to 20 years; 
• Policies are non-income producing assets;
• Generational planning: An entire Policy or Policy segments can be assigned by way of gift “in specie” to third parties (without tax consequence). Donees continue to  benefit from gross roll up and cumulative 5% withdrawals, and can encash the policy or individual segments, potentially paying lower rates of income tax;
• Policy profits are subject to income tax where the investor is UK resident at the date a chargeable event arises. Investors have the option of triggering substantial gains while non-resident for income tax purposes. In this context, an absence from the UK of 5 complete tax years is sufficient; 
• Statutory non-resident relief is available to mitigate a policy gain if the investor is non-UK tax resident during part of the ownership period;
• Policies can offer planning opportunities for UK resident and non-domiciled clients (RNDs) who do not wish to pay the remittance basis charge or longer term RNDs who are deemed domiciled in the UK for all tax purposes after April 2017;  
• Life assurance structures lend themselves very well to non-contentious inheritance tax mitigation arrangements e.g. Loan trusts and Discounted Gift trusts; 
• A breadth of investment choice is available.

Portability

Lombard International Assurance offers policies that are portable from one country to another. A UK resident investor taking a life policy today can leave the UK for another country in future without needing to dismantle or replace the investment at that time. The future tax treatment of policy gains depends on the tax regime in the new host country. Lombard International Assurance policies enjoy equivalent tax advantages to domestic policies in many other, European and non-European, countries. 

by Simon Gorbutt
Director - Regional Head of Wealth Structuring Solutions
Lombard International Assurance