Many international families require tax efficient structuring to
protect and enhance their diversified private fortunes, which have
accumulated over many years. The manner in which these assets are
to be held and how the chosen vehicles are to be administered
requires careful consideration of complex multi-jurisdictional
Numerous international families are in some way connected to the
UK, from global entrepreneurs who relocate, to tax exiles from
continental Europe. Having a property in London offers lifestyle
benefits and it can be argued that Britain's unusually
favourable tax regime entices people to live there. International
families choose Jersey as an offshore jurisdiction not only because
of its symbiotic relationship with the UK and close ties with the
City of London, but because of the professional expertise that
Jersey has to offer in the administration of tax efficient
structures for UK residents.
Where there is a UK connection, whether as a result of the
settlor or beneficiary, it is always prudent to have investment
restrictions on the investment portfolio.
Typical investment restrictions include:
No UK assets
Segregation of income and gains
Valerie Watson, Partner of Moore Stephens London, commented:
"Understanding the complexities that surround offshore
structures is vital to protecting the initial tax structuring. We
often come across structures where the Trustees have not correctly
segregated income and capital and this has had serious consequences
for the ultimate clients. The administration of an investment
portfolio catches lots of Trustees off guard."
The accounting for investment portfolios is often key in the
segregation of income and capital. There has to be physical
segregation at all levels. The capital account must only ever hold
clean capital and capital gains. All income, such as dividends and
interest coupons, must be credited to the income account.
Difficulties arise when income is incorrectly recorded in the
capital account and bond interest is not properly accounted for.
There can also be difficulties in holding particular assets where
capital gains are taxed as income, either in whole or in part, such
as offshore funds or bonds, and these must be managed carefully
where the investments are not restricted.
Jersey continues to be a highly attractive offshore jurisdiction
for many services and is now ranked in the top ten locations in the
world for providing wealth management services. Jersey's
ability to provide professional expertise in the administration of
tax efficient structures is just one of the reasons why affluent
families choose Jersey firms to structure their wealth.
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.
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