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28/05/2014

70% of financial advisers say clients believe assets held overseas escape UK Inheritance Tax (IHT) according to new research* from Skandia International, part of Old Mutual Wealth. As this belief is totally incorrect for anyone UK domiciled (or deemed UK domiciled); investors should be warned that unless they take action, their overseas assets could be hit with an unexpected 40% tax on their death.

People holding assets outside the UK, such as investments, bank accounts or property, need to be aware that these assets do not fall outside the scope of UK IHT just because they are not held in the UK. Furthermore, any money held overseas may now need to be disclosed to HMRC anyway as part of the government’s clamp down on tax avoidance. People with overseas assets should firstly disclose the asset to HMRC then, once the asset is ‘visible’, steps need to be taken to make the asset as tax efficient as possible.

For example, if someone holds an investment outside the UK, they could restructure it to be an offshore bond written in a gift trust. This would effectively remove the asset from their estate after seven years, and any growth on the asset in trust is immediately removed from the estate. This is a good option for people happy to gift their investment and relinquish the benefit of the asset.

If giving up all the benefit of the investment is not suitable, there are other types of trust which allow some IHT mitigation whilst retaining access to some or all of the capital.

Trusts can also help provide ways to navigate complex family situations, as well as ensuring that funds are available without the delay of probate. They can assist with protecting the assets for the beneficiaries and can help ensure the right people get the right proportion of assets at the right time.

Using an offshore bond enables investors to gain control over the timing and nature of any events that are subject to tax. This means the investment can grow free from tax (other than withholding taxes on the underlying funds), making it a more efficient investment going forward. A Whole of Life plan set up under a suitable trust can also have a highly cost effective role to play in mitigating an IHT liability for clients with UK assets.

 

Steve Lawless, global head of banking distribution at Skandia, comments: 

“Tax and estate planning is now a core part of financial planning, used by thousands to help mitigate the impact of Inheritance Tax on death. However, people with overseas assets may not be aware that these assets could also fall within UK IHT and need to be treated with the same care and attention as their assets held in the UK. People shouldn’t just ignore their obligations on their overseas assets, not least due to the disclosure rules which require all overseas assets to be declared to HMRC. Financial advisers are best placed to assist anyone concerned about their obligations and can help put in place steps to mitigate the tax and administrative burden once assets become disclosed.”

*Skandia International Q2 2014 adviser survey, completed by 377 financial advisers from across the globe.

For more information contact

Sophie LentonOld Mutual Wealth02380 916 77007834 499 558
Amelie ShepherdOld Mutual Wealth02380 916 09107834 499 596

Notes to Editors:

Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Old Mutual Wealth oversees £131.3 billion in customer investments (as at 30 September 2017).

It has an adviser and customer offering spanning: Financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

Old Mutual Global Investors (‘OMGI’) is the asset management business of Old Mutual Wealth with £39.8bn funds under management (as at 30 September 2017). On the 19th December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Following managed separation from Old Mutual plc, Old Mutual Wealth will rebrand to Quilter plc. Each of the businesses within the Quilter Plc group will be rebranded over a two-year period, with the exception of Quilter Cheviot, which will retain its existing name.

Old Mutual Wealth is part of Old Mutual plc, a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million (as at 31 December 2016) customers across the world and has a total of £212.3 billion of assets under management (as at 30 June 2017).

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