Tim Searle, chair of international advice firm Globaleye, has seen a number of families take professionals to court in recent years over failures to provide up-to-date advice which could have saved them millions of pounds.
“These multi-million and billionaire families use a private bank, they have some lawyers, an auditor, a fiduciary. It’s a set-up which becomes complicated and siloed very quickly,” Searle explained.
“Things like life insurance, liquidity solutions, these are the mundane things at the bottom of the pyramid but you’ve got to have them.
“These wealthier clients don’t get any of that. All the banks want is their assets to charge fees on, while family offices are paid a bonus if they make 40 per cent net guaranteed. For them, 40 per cent saved is 40 per cent earned.”
Searle is aware of at least two ongoing court cases where professionals are being accused of failing to make their clients aware of key inheritance tax changes in the UK.
Back in April 2017, changes to the Finance Act meant any foreign national owning UK residential property, regardless of their offshore structure, would become liable for 40 per cent tax on death.
This particularly impacts those families who do not live in the UK, but still hold UK residency status.
Despite the change coming into effect nearly six years ago, many of these families still do not have plans in place and face paying millions of pounds to HM Revenue and Customs, according to Searle.
He met with someone last month he described as “a very senior banker in Saudi Arabia”. The banker was about to deploy more assets in the UK, but was unaware that inheritance tax would apply to it.
Another rich individual, an Emirati client of Searle's, told him his wife had a Barclays account outside Harrods with £1.6mn sitting in it.
“I said 'why have you got it there? God forbid anything happens, they'll [HMRC] have 40 per cent of her £1.6mn'.”
If a client is made aware of the tax’s application - often dubbed the ‘death tax’ - earlier on, invariably Searle’s firm will be asked to create a liquidity solution.
The policies Globaleye puts together can go to the age of over 100, guaranteeing families a payout which is designed to cover increases as the asset and tax exposure increases.
£10mn tax bill could have been halved
In one case Searle is aware of, a family had £50mn in trust, half of which was UK property.
