European Union: Brexit - A Leap Into The Unknown - Considerations For Wealthy International Individuals And Their Families

On 23 June 2016, the UK voted to leave the European Union (EU) by a majority of 51.9% to 48.1% (of the 72.2% turnout of eligible voters). In fact, Scotland and Northern Ireland voted to remain in the EU, with 62% and 55.7% respectively of voters in favour of staying, but England and Wales took the opposite view.

Over the days that have followed, the position has become increasingly uncertain with upheaval in the markets, the resignation of the Prime Minister, David Cameron, and departure of many of the opposition MPs. Nothing is clear at the moment, either politically or economically, and it is likely that negotiations with the EU, whether formal or informal, will take months or years to resolve.

In the meantime, what are the potential consequences of the vote for wealthy international individuals and their families? While it is very hard to say anything of any value as so much remains up in the air, in this alert we endeavour to identify a number of issues and their possible implications, with a view to considering these further over the months to come as matters become clearer.

Immigration and migration

A key issue for the Leave campaign and a matter of debate following it: will citizens of the UK and other EU countries continue to be able to move freely between them? At the moment the consensus, insofar as there is one, would appear to be that it is likely that free movement of individuals will continue in some form. If this is not the case in the end, EU citizens will need to consider applying for a visa to reside in the UK, if this is desirable and, equally, UK citizens will need to consider doing so to live in other EU countries. It is not clear whether this would apply to those already in other EU countries.

For individuals from countries outside the EU who have applied, or might have considered applying, for residency in a jurisdiction within the EU other than the UK with a view to being able to reside in the UK under the existing rules, it may be necessary to re-think this approach and apply directly to the UK for residency if the rules change in this regard. Equally, a UK visa may no longer provide access to the wider EU in the future and, again, non-EU individuals will need to consider how this may affect them once the situation becomes clearer.

Tax - possible impact on proposed changes for (1) non-UK domiciliaries and (2) the structures of such individuals holding UK residential property

Following an announcement at the UK Summer Budget in July 2015, the Government has been consulting on proposals for changes to the taxation of non-UK domiciled individuals to take effect from 6 April 2017.

At the same time, they also proposed changes to the inheritance tax (IHT) rules in respect of UK residential property held by non-UK domiciled individuals through offshore companies and other entities, either directly or within trust structures. This proposal was effectively to look through such structures in order to tax the underlying residential property.

However, we still await a consultation on the details of the proposed new IHT rules, despite the fact that they were also due to be implemented in April 2017.

We expected that further details regarding the rules for non-domiciled individuals, and a consultation on the proposed IHT changes would be likely to be forthcoming after the EU referendum and before the Parliamentary Summer Recess in order to provide time for such proposals to be digested and commented upon with a view to properly informing the draft legislation.

However, the vote to leave the EU has understandably become the main priority of the Government, and, as such, it now seems likely that publication of further details on these proposals may be postponed, possibly until the Autumn.  If this is the case, it is possible that the Government may decide that it is necessary to postpone their implementation until 2018, or even later. Alternatively, it could perhaps decide to proceed with the proposed changes to the taxation of non-domiciliaries for implementation in April 2017, as they are at a more advanced stage, but delay the development and implementation of the proposed IHT changes to residential property held in offshore structures until the following year.

This is all speculation, of course, and, as such, for the time being, our advice for individuals considering investing in UK residential property or looking at re-structuring existing wealth holding structures is to plan on the basis that the current proposals are implemented, but to avoid making a decision until a clearer picture emerges later this year.

EU law

EU laws will continue to apply during the two-year negotiation process after the UK triggers Article 50 of the Treaty on the European Union notifying the European Council of the UK's intention to leave, or until a withdrawal agreement comes into force, whichever is earlier. This period can be extended by the unanimous decision of the EU Council in agreement with the UK government.

Following the relevant period, provided that the UK repeals the European Communities Act 1972 under which it is obliged to follow EU law, as it would be expected to do, EU laws, such as Regulations, that have not been written into UK law by way of statutory instrument or otherwise, will no longer apply to the UK unless the Government expressly chooses to retain them or to create similar legislation.

Alternatively, the UK might be required to apply EU law in some or all areas, either as a result of the terms of its withdrawal agreement or because it has joined another European association, such as the European Free Trade Association (EFTA) or the European Economic Area (EEA).

EU Succession Regulation

From the point of view of private clients and their wealth and succession planning, the EU Succession Regulation (or "Brussels IV"), which came into effect in August 2015, is probably the most significant piece of existing legislation in this area. This regulation aims to determine which jurisdiction's laws should govern succession to the estate of a national or habitual resident of an EU member state, as well as the appropriate courts in which any issues arising with regard to such an estate should be determined. It also provided for the creation of a European Certificate of Succession that would be accepted in all member states.

However the UK, in common with Ireland and Denmark, did not sign the regulation and, as such, following exit from the EU, the UK will continue to be a "third state" for the purposes of this law. Nevertheless, its provisions will still be potentially relevant to the estates of UK nationals who are "habitually resident" or have assets in an EU member state, as well as to those of nationals of participating Member States who are "habitually resident" in the UK but have property in other parts of the EU. As such, UK nationals and residents with cross-border interests, together with their EU counterparts, will continue to require advice on its provisions when considering the succession of their estates.

Conclusion

There is no doubt that we are living through interesting times. Our advice for the time being is to continue to review UK property holding structures on the basis that the promised tax changes will come into effect but, as far as possible, delay implementation of any re-structuring until the position is clearer.

Given the likely economic pressures on the UK as it begins the process of exiting the EU, some of which are already being seen, the Government may take a more welcoming approach to wealthy foreigners than it has done in the recent past. Its priorities may begin to shift from ensuring that such individuals are taxed to the fullest extent possible, to concern over their possible departure from the UK and that of their investment. Of course, there will continue to be a need to maximise tax revenue, and this may increase rather than decrease in the future, but the need for inward investment to build the economy may offset this where foreign investors are concerned.

Time will tell, of course, and we will report further as matters develop.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Borden Ladner Gervais LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Borden Ladner Gervais LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions