Investment Migration Tax Rules and Succession, UK Families in a Globalised World.

By Dmitry Zapol

This article provides a detailed discussion on the increasingly complex landscape for wealthy families with UK connections, whether residing in, moving to, or leaving the country.

It highlights three core areas: global mobility trends, UK tax changes and planning strategies, and succession planning for multi-jurisdictional estates.

1. Global Mobility Trends for UK-Connected Families

Troy Hanley from Henley & Partners - The Firm of Global Citizens® outlined three significant trends in global mobility affecting UK families.

Trend 1: Residence and Citizenship Planning (Without Physical Relocation) 

While the movement of wealth and people from the UK is accelerating, a more prevalent trend involves families engaging in residence and citizenship planning without physically moving from the UK. This long-standing practice, common in countries like Russia, China, Saudi Arabia, and Nigeria where families seek options and diversification due to governmental trust issues, is now becoming mainstream in the UK and the wider West.

Enquiries for such planning have surged, particularly from the United States (driven by fear of political infighting and violence) and the United Kingdom itself (accelerated by post-Brexit immigration changes and recent tax discussions). This planning typically begins with securing immigration access to other countries, such as a residence visa or a second passport, setting up bank accounts, or owning foreign assets, primarily to establish the right to reside elsewhere if needed.Key destinations for this type of planning include:

• The EU remains the top choice due to historical links, close proximity (1-3 hours flight), and the "huge optionality" provided by EU citizenship, granting access to 29 countries. Examples include Austria, offering citizenship in 2-3 years for ultra-high net worth clients with an investment starting at £3.5 million, and Portugal, which provides a residence programme with a direct pathway to citizenship (though the real estate option has been removed).

  
  

• The Middle East, particularly the UAE, offers opportunities to invest and obtain residence without physical relocation, boasting an interesting real estate market for diversification.

  
  

• The Caribbean is popular for citizenship, offering low tax and low regulation environments.

  
  

• Australasia also plays a role, though proximity to the UK can be a challenge.

  
  

This trend, where families secure future options without uprooting their lives, is considered much larger than often highlighted by the media.

Trend 2: Physical Relocation from the UK 

Physical relocation is undoubtedly occurring, though it represents a minority of clients for Henley and Partners. While the exact numbers are debated, the reality is that people are leaving the UK. The primary driver for this is taxation, specifically proposed tax changes and anxieties over an increasing tax burden falling on a smaller group of wealthy individuals, fueled by a public opinion that this cohort should fund struggling public services.

However, relocation is rarely based solely on tax considerations;

lifestyle also plays a crucial role. Individuals without strong ties to the UK (e.g., children in school, elderly parents, or business interests) are more likely to move to pursue a desired lifestyle alongside tax benefits.

Popular relocation destinations include:

• The EU continues to be a leading choice, offering diverse lifestyles and many countries. 

  Italy is frequently cited for its attractive lifestyle and favourable flat-rate tax regime, with a relatively straightforward investor visa starting at €250,000 or an elective residence visa for those demonstrating stable income. 

  Monaco is highly attractive as one of the lowest-tax jurisdictions close to the UK, offering a straightforward immigration programme based on demonstrating sufficient funds and acquiring real estate. Other mentions include Malta Residence and Greece, both real estate-based programmes with favourable tax conditions designed to attract retirees.

  
  

• The Middle East, particularly the UAE, primarily attracts highly paid professionals or what might be termed the "middle class," with the lifestyle less appealing to older, very wealthy clients.

  
  

• Australasia holds appeal for British English clients due to historical ties and family connections, though geographical distance remains a factor. New Zealand currently offers a good residence programme starting at NZ$5 million.

Trend 3: Inbound Migration to the UK (Not Dead) 

Despite recent negative developments, the UK still experiences strong global demand for inbound migration, particularly from Africa, the Middle East, and the USA. The UK's appeal stems from its stable political system, relative safety (fewer guns than some other countries), and a strong education system, which has consistently attracted clients from East Asia, Africa, and the Middle East.

However, a significant challenge lies in the unfavourable immigration settings, which are not conducive to high-net-worth migration. While there is clear interest, there are limited pathways for wealthy individuals to passively relocate or invest in the UK. US nationals, driven by political volatility and violence in their home country and global taxation on their passports, are particularly undeterred by potential UK tax changes and show significant interest, often migrating as skilled professionals sponsored by UK companies.

There is hope that the UK government will introduce more supportive visa programmes for entrepreneurs and investors, similar to New Zealand's successful investor visa scheme, which significantly boosted its economy after reducing investment levels and physical presence requirements.

2. UK Tax Changes and Planning

Dmitry Zapol of IFS Consultants focused on the profound changes to the UK tax landscape, particularly the abolition of the concept of domicile for tax purposes, rendering much previous knowledge obsolete.

Winners and Losers of the Changes:

• Surprising Winners: Typical British individuals with British domicile who remain non-UK resident for at least 10 years can now shed their worldwide inheritance tax liability, allowing them to freely pass on non-UK assets. For example, a high-net-worth individual who accumulated wealth in crypto can dispose of their worldwide estate as they wish after 10 years of non-residency.

  
  

• Newcomers to the UK also benefit from a four-year exemption on foreign income (excluding employment income) and capital gains, which can be brought to the UK tax-free. However, this four-year period is shorter than the five years typically needed for indefinite leave to remain or a passport, creating a gap.

  
  

• Biggest Losers: Individuals who have resided in the UK for 5-6 years, established local ties, and now lose access to the remittance basis of tax. They become liable for worldwide income tax unless they relocate.

Understanding Tax Residence: 

Tax residence is the cornerstone of planning. It's crucial to distinguish thatimmigration status or nationality has no direct bearing on tax status; however, immigration requirements for physical presence in the UK can inadvertently lead to UK tax residency.

• Planning Departure from the UK: 

  A common misconception is that spending fewer than 183 days in the UK guarantees non-residency. For those wishing to remain non-resident while retaining a UK home or children, the maximum time typically permitted is 90 nights per year, sometimes as low as 45 nights. Exceeding 1.5 months requires careful assessment. The "Home in the UK" test prevents individuals from being global nomads; if a UK home is maintained, a home abroad must also be established and used for at least 30 days a year.

  
  

• Planning Visits to the UK (for non-residents): 

  To maximise the four-year tax-beneficial regime, new arrivals should aim to avoid UK tax residency for as long as possible. Spending fewer than 90 nights per tax year typically avoids UK tax residency. However, full-time work in the UK is a "red flag," potentially triggering tax residency with as few as 46 days and starting the four-year period.

  
  

• Double Tax Treaties: 

  Non-residents maintaining tax residency abroad (e.g., in Cyprus or Dubai, both with UK treaties) can often avoid UK income and capital gains tax indefinitely by demonstrating central vital interests remain in their resident country and presenting foreign tax certificates. A critical limitation, however, is that after 10 years of UK residency, one becomes a long-term resident for inheritance tax purposes, which double tax treaties cannot override, resulting in worldwide inheritance tax liability.

Strategies for Former Non-Domiciled Individuals (Post-April 2025):

• Unremitted Foreign Income/Gains (Pre-April 2025):

  Income or gains earned before April 6, 2025, for which the remittance basis was claimed, will remain outside UK tax scope as long as they are not remitted to the UK. These funds can be spent abroad or gifted.

  
  

• Business Investment Relief (BIR): 

  This relief allows the use of pre-April 2025 unremitted foreign income to fund UK trading businesses without tax until April 2028. This applies to trading companies like consultancies or manufacturing businesses and, with caveats, can even extend to property portfolio companies. Crucially, this income cannot be used as security for Lombard loans, as this constitutes a remittance.

  
  

Challenges for New Arrivals (Four-Year Exemption): 

While new arrivals enjoy a four-year exemption on most foreign income, a significant "catch" is full disclosure. Unlike the old remittance basis, where unremitted foreign income did not need to be reported, new arrivals must fully disclose all sources of worldwide income and capital gains. A procedure exists to nominate income not to be taxed, but non-disclosure results in taxation. This transparency provides UK tax authorities with a complete picture of an individual's financial affairs, giving them "enormous powers" to pursue tax when the four-year exemption ends.

A complex area is the Transfer of Assets Abroad rules.

If a UK resident has financed a foreign person or company that then earns income from this investment, and the resident can benefit, that undistributed income must be reported as if it were their own from year one of UK residence. This applies even if no distributions are made. For example, if a UK resident has funded a foreign trading company, they must declare its trading income. To avoid taxation after the four years, one must demonstrate that the foreign company has proper economic substance and was not set up solely to avoid UK tax, filing a "motif claim". This area requires urgent attention for many former remittance basis users.

UK tax authorities are also enhancing their ability to track foreign assets through mechanisms like Common Reporting Standards and the upcoming Crypto Assets Reporting Network, with significant fines for non-compliance.

Inheritance Tax (IHT): 

UK assets remain subject to IHT. A detrimental change is the loss of Business Property Relief (BPR) for UK trading assets, which previously offered significant IHT reductions. While foreign assets are exempt from IHT for the first 10 years of UK residency, after this period, as a long-term resident, an individual's worldwide estate becomes subject to IHT.

Tax Blockers and Crypto Assets: 

For individuals approaching the four-year mark, simple trusts or companies are ineffective as "tax blockers" because they are fiscally transparent. Effective strategies include transferring assets to an offshore non-reporting fund (or establishing one's own) or using insurance products. Trusts can work if the individual and their spouse are fully excluded from benefiting, making them particularly useful for grandparents benefiting children and grandchildren.

Regarding crypto assets,

UK tax authorities deem them to be located wherever the owner is tax resident, impacting both disposal and remuneration. It is advisable to deal with crypto assets before moving to the UK. The most tax-efficient method involves moving crypto while non-UK resident into an offshore company managed from abroad, though this strategy ceases to be effective after four years of UK residency. The likelihood of an "exit tax" (tax on deemed growth of assets upon leaving the UK) is considered low due to practical challenges. Lastly, inheritances and gifts received from abroad are generally tax-free for the UK recipient, provided the deceased or donor was not a long-term UK resident.

3. Succession Planning for Global Families

Liz Palmer,Partner Head of Private Wealth at Howard Kennedy LLP,emphasised that effective succession planning is crucial for global families, irrespective of their mobility, as long as they hold assets in different countries.

The Central Role of the Will and its Complexity: 

The willtypically forms the centrepiece of succession planning. While lifetime trusts are an option, they can carry considerable tax implications. There is no "one-size-fits-all" solution for cross-border estate planning, as it depends on individual circumstances, asset locations, residence, nationality, and domicile. Navigating these "slightly overly complicated technical concepts," including forced heirship rules and potential claims against an estate, is challenging.

A Logical Three-Step Approach to Succession Planning:

1. Identify Assets and Value:

   The first step is to identify where assets are located and their value, focusing on countries with strong asset, business and commercial connections. For real estate, the laws of the country where it is located generally dictate how it is inherited.  its inheritance. For other assets, English law typically defers to the law of domicile to determine the legal system for inheritance.

   
   

2. Determine Domicile and Habitual Residence: 

   While domicile is no longer relevant for UK inheritance tax planning, it remains highly relevant for succession planning and for determining which laws apply to a will. For most European and civil law countries, habitual residence (a "much, much stickier" concept than nationality) is the primary connecting factor. The EU Succession Regulations aim to streamline inheritance across the EU, leading to one country governing succession and an EU succession certificate. In common law countries (e.g., England, North America, Australasia), domicile remains the most important connecting factor.

   
   

3. Assess Risk of Dispute: 

   Understanding where disputes might arise and building this into estate planning is vital. This includes considering forced heirship rules prevalent in civil law countries, which dictate specific proportions of an estate that must be inherited by key family members (e.g., children, spouse). In contrast, England offers complete freedom of testamentary disposition.

   
   

Structuring the Succession Plan: One Will or Multiple Wills? 

After assessing these factors, a lead jurisdiction for succession planning is identified, and a decision is made on whether to have one or multiple wills (often two or three). Frequently, two wills are needed: one for the lead jurisdiction covering most of the estate, and a second specifically for real estate in other countries (especially outside the EU). An example might be an English will (with an EU succession election) covering assets in England and Cyprus, alongside a separate US will for US real estate.

• Advantages of One Will: Reduces administration complexities across different countries and reduces friction and risk of accidental revocation that can arise when multiple wills are used.

  
  

• Advantages of Multiple Wills: Allows for simultaneous administration of different parts of the estate in various countries, potentially cutting costs and speeding up the process. However, it is essential that these wills are carefully coordinated.

  
  
  
  

Practical Considerations for Multiple Wills:

• Essential Validity: Wills must be legally valid in all relevant countries. The Hague Convention of 1963, signed by 42 countries, helps ensure the recognition of validity across signatory states.

  
  

• Forced Heirship: The effectiveness of a will can be limited by local forced heirship rules, which may dictate how assets are distributed regardless of the will's intent.

  
  

• Debt, Creditors, Liquidity, and Tax Liabilities: Different countries have varying approaches to who is responsible for paying taxes and debts upon death. A practical solution is to appoint the same executors for all wills, ensuring a single point of responsibility. A case example highlighted how an English will with an election for English law helped a client avoid significant Italian debt being imposed on her UK children, which would have been the case under Italian law where debt is inherited by heirs.

  
  

• Guardians: The appointment of guardians for minor children in an English will may not be recognised in other jurisdictions, requiring specific local provisions.

  
  

• Lasting Powers of Attorney (LPAs): LPAs are jurisdiction-specific; an English LPA is unlikely to be effective elsewhere, necessitating multiple LPAs for clients with assets in different countries.

Digital Assets and Cryptocurrency: 

The increasing relevance of digital assets, particularly cryptocurrency, necessitates specific consideration in estate planning. Key practical steps include:

• Ensuring the estate plan allows cryptocurrency to vest in the appointed executors.

  
  

• Maintaining a secure inventory of all owned cryptocurrency.

  
  

• Recording the private key in a secure format (e.g., on a USB drive).

  
  

• Providing executors with  access to the private key, as a grant of probate is not always required to access cryptocurrency. This prevents valuable digital assets from being controlled by individuals not responsible for the overall estate or its tax liabilities.

  
  

Looking ahead, some countries are beginning to accept digital currencies like Bitcoin as payment for investment migration programmes, indicating a growing trend in this area.In conclusion, for UK families navigating a globalised world, a holistic and "joined-up" approach to investment migration, tax, and succession planning is paramount, addressing both current realities and future contingencies across multiple jurisdictions.