Miranda Fisher, partner in the family law team at Charles Russell Speechlys said: “Whilst Italy, Switzerland and Dubai are reportedly among the destinations of choice for those considering a move from the UK, the family law consequences for relocating can be complex, particularly around divorce and child arrangements.

“If one spouse is considering divorce, the timing of their move could affect where the divorce proceedings can be initiated. Moving abroad could potentially limit the ability to file for divorce in England, which might be strategically important if England is seen as a more favourable jurisdiction.

She further said: “The English courts are known for their discretionary powers in dividing marital assets and for a starting point of equality of division of all assets accumulated during a marriage. Once jurisdiction for divorce in England is lost, the financial settlement on divorce could be subject to the laws of another jurisdiction, which might be significantly less generous to the weaker financial party.

“Moving from England can raise important issues of living arrangements for children, including choice of school and potential international child abduction. In some cases, where one parent wants to relocate the children abroad and the other parent refuses to agree, we could see applications made to the Family Court for permission to remove the children permanently from England to another country, subject to the children’s best interests.”

He said: “We’ve seen an uptick in relocations to Italy among wealthy individuals. There has been significant interest in the Italian lump sum tax regime among private equity partners, particularly due to Italy’s favourable treatment of carry interest in contrast to the UK.

“It’s this favourable and simple tax regime coupled with an excellent lifestyle that makes Italy an attractive destination, and individuals relocating primarily target areas like Milan, Rome, Florence, Tuscany and the Como Lake. Milan is especially preferable among private equity professionals.”

He added: “We’re also observing a significant migration to Italy from other EU countries and Latin America. The upcoming French elections could trigger similar migration patterns.

“The government needs to strike the right balance to attract the wealthy to Britain but ensure that these proposals don’t accelerate peoples plans for relocation.”

This measure proposes that a member of an AE scheme would have the right to choose which scheme pension contributions will be made to instead of auto-enrolling into the employer’s scheme.

Emily Campbell lawyer at Charles Russell Speechlys said that this reform is likely to be popular among members who will feel they have more control of their savings.

However, she expressed her concern of how employers will be sure that their members have taken appropriate financial advice before making the decision.

She said: “One wonders how employers can be sure that members will have taken appropriate financial advice  especially given the types of free investment choices offered by SIPPs, which sometimes lead to heavy losses and complaints of misselling.”

Great idea ‘in theory’ 

Jamie Jenkins director of policy at Royal London pointed out that while the idea of allowing members to choose their own pension scheme is a great idea in theory, he believes that it could lead to a pensions system dominated by higher charges, prolific marketing and higher risk schemes.

He said: “Automatic enrolment into workplace pensions has been a huge success story and the relationship between employers and their employees is pivotal to this.

“A ‘pot for life’ model would significantly undermine this dynamic by requiring employers to navigate an increasingly complex array of payments to different providers. Ultimately, it may disenfranchise the very group of people we’ve relied upon to deliver the successful rollout of automatic enrolment.

“If we really want to engage future generations in their retirement savings and address the proliferation of small pension pots, we should focus on a digital solution by delivering a fully functional pensions dashboard.”

Lack of engagement

Jon Greer head of retirement policy at Quilter also highlighted that the new proposal may take a while to gain traction due to many people’s disengagement when it comes to their workplace pensions.

He commented: “Though this proposal sounds positive on the surface and will be useful for those members who are keen to take ownership, it has flaws.

“The ‘pot for life’ would likely take a long time to gain traction, not least because the majority of workplace pension savers are largely disengaged.

“They simply trust that their employer gets on with setting up their pension through the auto enrolment process and they therefore may not be keen to engage with a system that requires them to play a more active role.”

Andrew Tully technical services director at Nucleus suggested that to make meaningful positive change to long-term savings habits there needs to be more engagement from people about why they are saving.

He said: “Our recent Retirement Confidence Index highlights we need more people who save more into their pension, to understand why they are saving and what for, and are empowered to save in an environment of trust and stability.

“It is worth exploring whether a pot for life can help achieve those aims.”

However, it’s important to note these denials frequently refer to “current plans” which of course leaves the door open for a change of direction in the future.

With the next UK election to be held no later than January 2025, what can we expect in terms of personal taxation if the Labour party is elected?

What we won’t be seeing

No plans for a Wealth Tax

Rachel Reeves has made firm statements that there will be no wealth taxes repeatedly asserting that despite the UK being on track to having the highest tax burden since the Second World War she doesn’t believe the way to greater prosperity is through higher taxes which is also a message echoed by Sir Keir Starmer.

No plans to increase income tax or CGT

Even though Sir Keir Starmer pledged to increase the top (45%) rate of income tax in 2010, this proposal has now been shelved.

Previously Labour has opposed the 1.25% increase in dividend rates bought in as a health and social care levy. Will that opposition translate into reversal? Unlikely, if political history is anything to go by.

There has also been speculation regarding the equalisation of CGT and income tax rates following its appearance in the last Labour manifesto. In May, Reeves said she had “no plans” to equalise rates however, this doesn’t rule out rate increases to align the two taxes more closely. Nonetheless, many professional advisers remain nervous that CGT could be an area for potential reform.

No plans to change the pensions lifetime allowance (LTA)

In the Spring Budget, the lifetime allowance for pensions was scrapped with Labour almost immediately announcing that if it came to power it would reinstate the LTA.

Since then, indications have been that Labour has made peace with the scrapped LTA. However, Reeves did identify the £2trn of UK pension savings as a potential source for investment in UK listed businesses, so perhaps we will see some pension reforms under a Labour government.

No reduction in corporation tax rates

Although not strictly a personal taxation point, it does impact the way in which individuals decide to structure their wealth.

The Labour Party Conference 2022 indicated that Labour favours targeted investment allowances over lower corporation tax rates. Politically, making big companies “pay their share” has proved to be a popular message. It therefore seems likely that Labour will hold corporation tax rates at this level.

What can we expect

Limiting APR and BPR reliefs

Reeves announced that Labour will be looking to close tax “loopholes” with one area they are considering is “scrapping” agricultural property relief (APR) and business property relief (BPR).

It seems fairly unlikely that the reliefs would be scrapped in full as wholesale removal of APR and BPR would cause uproar from business owners and farmers and would seriously damage the UK economy.

However, we may expect to see a tightening of APR and BPR so that they only apply to genuine enterprises so that assets held solely for investment-purposes within these classes cannot benefit from these reliefs.

Removing, or limiting, the remittance basis

The remittance basis is an alternative tax treatment that’s available to individuals who are resident but not domiciled in the UK and have foreign income and gains.

Labour has indicated that it would bring in “a modern scheme for people who are genuinely living in the UK for short periods to allow us to continue to attract top international talent”. This may simply involve curtailing the remittance basis so that it is only available for a shorter period of residence.

Alternatively, or additionally, the concept of domicile could be removed altogether as being too subjective.

Charging VAT on school fees

The Institute for Fiscal Studies recently produced a study on the effects of this and concluded that this might result in an additional £1.3bn-£1.5bn of revenue, allowing for an extra 2% increase in state school spending. The likelihood of this policy being enacted by Reeves looks high.

Reversing stamp duty land tax (SDLT) cuts?

In 2022, the nil rate thresholds for SDLT were increased from £125,000 to £250,000. Labour criticised this change saying that it benefited buyers of second homes or buy-to-let property, a reversal may therefore be on the cards.

Tightening up on tax evasion / avoidance and increasing transparency

Labour’s Tax Transparency and Enforcement Programme includes several measures which erode the privacy of wealthy individuals and businesses.

These include policies requiring the public filing of large company tax returns at Companies House and the public filing of tax returns of wealthy individuals earning (a concept which is presumably wider than just salaries) more than £1m.

What’s next?

Currently, Labour’s strategy is to present itself as a moderate on matters of taxation. It remains to be seen whether Labour will indeed hold true to their promise not to increase taxation further given the very difficult economic climate, particularly if we see a second term for Labour in power.

This article was written for International Adviser by Sarah Wray senior associate at Charles Russell Speechlys.

It is far from uncommon, for example, for successful businessmen or women to have been married more than once (or even twice) and to have had several children from multiple marriages. In such families, where status can be of as much importance as the wealth itself, sibling rivalries will often exist to one degree or another. Events within the family can often cause tensions to boil over, not least on the death of a patriarch or matriarch who was also the principal beneficiary of the family’s wealth.

Settling family wealth on inter vivos trusts is generally an effective means of succession planning. By effectively divesting oneself of a substantial part of one’s wealth during one’s lifetime, the settlor can help protect assets against the various claims that can potentially arise on death, for example under the Inheritance (Provision for Family and Dependants) Act 1975 or a challenge to the validity of the testator’s last will.

Trusts also allow settlors to put structures in place that exert a significant degree of ongoing control over how their personal and business assets are administered long after their death in order to minimise the extent to which their wealth is dissipated by future generations.

But the settlor’s control is by no means absolute. Whilst they may continue to seek to influence the management of the trust during their lifetime, it is the trustees who are ultimately responsible for deciding how the trust assets should be applied in the best interests of the beneficiaries, both before and after the settlor has passed away. Between them, the beneficiaries may have vastly differing views on how their individual interests are best served. When conflicts amongst the beneficiaries arise, trustees face the unenviable (and often impossible) task of navigating difficult decisions whilst seeking to preserve their relationships with each of their beneficiaries.

The relationship between trustees and beneficiaries is often finely balanced: over-familiarity with some can lead to allegations of bias; whereas too much distance can give the impression of being out of touch with the family’s needs. Fault lines are easily exposed when difficult decisions need to be made, such as whether to make substantial distributions from the trust fund or whether an important trust asset should be sold. Trust assets, such as a family business or landed estate, commonly hold as much sentimental value as they do in financial terms (if not more), often leading to vehement and competing views amongst the beneficiaries.

Without careful management, disagreements can swiftly lead to a breakdown in relationships and trustees can even find themselves exposed to court proceedings, such as an application for their removal or a claim for breach of trust. Trustees owe their beneficiaries substantial fiduciary duties which it is the inherent jurisdiction of the courts to oversee and supervise. For example, when considering whether or not to exercise their powers, trustees owe a duty to (a) act reasonably and in good faith, (b) take only relevant matters into account and ignore all irrelevant matters, (c) act impartially, and (d) not to exercise their powers for an improper purpose. Any perceived failure by the trustees to comply with their duties can expose them to court proceedings and potential liability for their actions.

Members of the family who are also potential beneficiaries under the trust are particularly exposed to such allegations and possible claims. Even in the most functional families, having family members as trustees can lead to dispute. By way of example, where a trustee has a discretion in the exercise of their powers, we often see two patterns emerging where that trustee is also a family member. The family trustee can feel obliged to be generous to other family members, perhaps feeling awkward in benefitting themselves even though they are entitled.

Conversely, the family trustee can view their role as ‘guardian’ of their other family members which can lead to them overly protecting assets and not releasing funds where there is a disagreement about their proper use. There will also inevitably arise situations where a family trustee faces an inherent and unavoidable conflict between their own self-interest and the interests of the other beneficiaries, which can lead to family disharmony or worse a dispute over the trustee’s conduct.

The influence of other family members, such as spouses and children with differing financial outlooks or status, can also be very difficult to manage whilst seeking to preserve good relations. Should relationships break down altogether, this can lead to deadlock amongst the trustees (who usually must all act unanimously) and ultimately result in costly and potentially protracted court proceedings that can swiftly become out of proportion to the issue at hand.

It is for this reason that families are often well-advised to procure the appointment of an independent professional trustee (commonly a trust corporation), who will generally be better placed to seek to preserve the proper management of the trust and minimise areas of conflict. Depending on the situs of the underlying trust assets and the beneficiaries, there may also be sound fiscal reasons for appointing an independent trustee offshore.

Professional trustees are truly independent from the family and will not have any interest in or personal agenda regarding the trust assets. This in itself can take the pressure off family relationships and reduce the risk of power struggles arising.

This is particularly the case where the settlor of the trust, who kept members in line whilst they were alive, has passed away and left behind the next generation, who may be less willing to cooperate with each other than they were before.

Having a professional trustee to make the difficult decisions and be the one to say ‘no’ to beneficiaries’ requests can allow family members to all blame the professional – this can be a uniting experience for them. Even if there are family members alongside a professional, because trustee decisions usually need to be unanimous, these family members can still hide behind the professional trustee and thereby preserve their relationships with other family members.

Additionally, in certain circumstances, professional trustees may have had the opportunity to take instructions from the settlor or testator direct on the purpose of the trust and their wishes in particular scenarios. This allows professional trustees to understand the ‘spirit’ of their intentions, making it easier for them to know what actions the settlor may have wanted them to take (subject, always, to any relevant changes in circumstance and the trustee fiduciary duties).

Where any decision being made is a significant or controversial one, it is essential that the trustees – professional or otherwise – ensure they obtain the appropriate specialist legal, tax and/or investment advice, not only to inform their decision, but also so that they may demonstrate to their beneficiaries that there is a sound and reasonable basis for their decision.

The beneficiaries are usually also encouraged to take their own independent advice which may then also feed into the professional trustee’s decision making, if relevant. Good communication, sound advice and a strong relationship between the trustees and the beneficiaries will often go a long way to minimise areas of dispute, diffuse potentially emotional situations and ultimately achieve a consensus amongst all the relevant stakeholders.

Nevertheless, there will inevitably be situations where agreement on the trustees’ proposed course of action is not achievable. In those circumstances, the trustees may find they have no option but to initiate court proceedings of their own to seek the court’s blessing of the decision they propose to take. If the trustees’ have exercised their decision-making powers reasonably and in accordance with their fiduciary duties, the court may not interfere in the decision itself and should give its blessing.

In which case, the trustees are effectively protected from potential liability or an application for their removal as a result of carrying out the decision they have made. Whilst court proceedings of this nature should not be embarked on lightly, they can be an effective means of resolving deadlock and allowing the management of the trust to proceed on a more even keel.

This article was written for International Adviser by Sally Ashford and Oliver Auld of law firm Charles Russell Speechlys.