issue 84 FiNANCiAL suPPORT AND GuiDANCe … Shoreline 84.pdfAlthough India remained the biggest...

shorelineissue 84

FiNANCiAL suPPORT AND GuiDANCe ACROss THe GLOBe | 2012

a very taxing question what price lineage? the sport of kings

+

where the

livingis easy

shoreline magazine issue 84 2

07 WorKliFe WHERE THE LIVING IS EASY What makes the perfect city? A place to lay your

head or make a living?

11 Wealth A VERY TAXING QUESTION How the new Statutory Residence Test will affect

anyone living and working overseas.

14 liFestYle cONdITIONAL GIVING Today’s philanthropists want to give more than just

their money, bringing their boardroom experiences to bear on their approach to giving.

18 FamilY matters WHAT PRIcE LINEAGE? The ever increasing costs of children and

grandchildren necessitate some strategic thinking when it comes to savings.

22 inVestments A TRIEd ANd TRUSTEd APPROAcH The devil really is in the detail when it comes to setting

up a trust to look after your loved ones in the future.

25 CUstomer ProFile LIVING TO A SPANISH BEAT Retired policeman Gordon Maddock lives his life

to an entirely different beat in Almeira, Spain.

28 liFestYle THE SPORT OF KINGS Shared ownership can make the sport of kings more

affordable and less risky than you might imagine.

WelCome to this latest edition of shoreline Magazine. as ever we’ve filled the magazine with articles of interest to our international audience including an appraisal of the world’s most liveable cities and the potential ramifications of the new statutory residence test.

we’ve also looked at the changing face of philanthropy in light of Bill gates’ living pledge initiative. his approach has inspired today’s philanthropists to take a far greater interest in exactly what happens to their money.

our feature on the real cost of the next generation marks out a number of milestones when financial intervention by parents or grandparents could be a very welcome boost indeed. however, if direct financial support isn’t appropriate, we’ve explored the pros and cons of trusts as a way of securing your loved ones’ future.

Former policeman gordon Maddock shares his experiences of swapping the beat for an altogether different life pursuing his artistic dreams in spain’s almeria.

shoreline’s online presence continues to evolve so please bookmark the site to access the latest content. this, combined with a wealth of information our colleagues have published online on different parts of the world, forms a valuable resource for our international clients. please take a moment to explore lloydstsb-offshore.com/guidance

on page 32 you’ll find details of a new foreign exchange service which should make living abroad that little bit easier.

please remember that this magazine together with shoreline online is for you. as always we would love to hear from you, so let us know what you think.

c o n t e n t s

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This publication is produced on behalf of Lloyds TSB International by Editions Financial and contains financial promotion content. The greatest care has been taken to ensure the accuracy of materials contained in this publication. This issue was prepared for publication in February 2012. Shoreline is a registered trademark of Lloyds TSB Bank plc. Printed on FSC chlorine-free paper.

NIcHOLAS BOYS SMITH Managing director,International Wealth

Fiona nicolson is a freelance business and finance writer and communications consultant.

Claire locking is a former Managing Editor of GQ Magazine and Editor of Scottish Field and has spent the past 5 years as an expat living in dubai and Hong Kong.

alan Dron has worked on newspapers in the UK and Middle East and now specialises in writing for the aerospace, defence and financial sectors.

contriButors

[ regulars ]

[ features ]

Essentials 03 Foreign Exchange 32 Worldwide Offices 33 crossword 34

www.lloydstsB-oFFshore.coM 3

e s s e n t i a l si n s i g h t / i n t e l l i g e n c e / F i n a n c e / l i F e s t y l e

>>

all the gold in china

769.8 tonnes of gold sales to

China in 2011

[ intelligence ] In 2011, gold sales to China rose by 20% to 769.8 tonnes according to the World Gold Council’s (WGC) annual report. While jewellery sales have risen steadily in China over the last few years, the fastest growth has been in sales of gold bars and coins which increased by 69% to 258.9 tonnes, worth 84.5bn RMB.

Although India remained the biggest market for gold in 2011, demand actually shrank by 7%. Marcus Grubb, the WGC’s managing director for investment, says that every indication is that “China will emerge as the largest gold market in the world for the first time in 2012”.

Globally gold has benefitted dramatically from volatile stock

markets and weak property prices reaching a record $1,895 an ounce in September 2011. Investors buying gold as a safe haven, according to the WGC’s report, have pushed global demand over the $200bn mark for the very first time.

Back in China evidence suggests that the nation’s new rich are investing in gold to protect their wealth as the government tries to regain control of increasing property prices. The administration has tightened up on housing loans and second homes to deflate the potential property bubble without destroying the cement, steel and construction sectors. So far it seems to be working: real estate prices fell by 27.9% in 2011 and are expected to fall a further 18% this year.

[ insight ] plans for Keystone Xl, a 1,700 mile pipeline from alberta in canada to oil refineries in texas, has put the obama administration in a tricky position. with capacity to ship more than 700,000 barrels of tar sands’ oil into the us every day, it might seem on the face of it like an attractive proposition, but this method of extraction is notoriously inefficient in energy terms and emits large amounts of co2. the project which would inevitably stimulate the economy by providing jobs is being built by transcanada and is scheduled to cross 1,500 us rivers. Balancing the economic pros against the environmental cons continues to present the president with a challenge.

More www.transcanada.com/keystone.html

oil anD

quicKsand

the syncrude open pit oil excavation mine in canada


e s s e n t i a l s

[ insight ] New tax laws recently introduced in Monaco have made property a good deal more attractive to expats looking to invest in Europe. Called 1381, the law has reduced the registration tax on sales to 4.5% with the added bonus that any subsequent rental income will be tax free.

Next door in France while they have cut the top rate of wealth tax from 1.8% to 0.5% and reduced the overall rate of wealth tax by 50% on a Euro 10m property, they have tightened the fiscal rules around property ownership via companies and trusts. They also have very strict inheritance tax rules and their position on capital gains tax and allowances changed substantially in 2011.

Already a popular destination for the wealthy to reside or to own a property in, this new legislation seems to have made Monaco an even more attractive option. According to John Busby, director of French Private Finance, “we are now seeing an increase in activity and enquiries after an exceptionally quiet last quarter of 2011 for Monaco”.

SoUrCe www.whichoffshore.com, www.telegraph.co.uk

25% Renewable capacity now comprises about

a quarter of total global power-generating capacity.

119 By early 2011, at least 119 countries had some type

of policy target or renewable support policy at national level,

twice as many as in 2005.

$143bn Money invested in renewable energy

companies, in utility-scale generation and biofuel

projects increased to $143bn in 2010, with developing

countries surpassing developed economies for the first time.

GLOBAL FAcTS

16% In 2010, renewable energy supplied an

estimated 16% of global final energy consumption.

r e n e w a B l e e n e r gy

monaCo property shines Brightly

i could end the deFicit in Five Minutes. you just pass a law that says that any tiMe there is a deFicit oF More than 3% oF gdp, all sitting MeMBers oF congress are ineligiBle For re-election.warren buffet on the us deficit

[ insight ]


i n s i g h t / i n t e l l i g e n c e / F i n a n c e / l i F e s t y l e

>>

[ lifestyle ] sotheby’s has announced that edvard Munch’s masterpiece the scream will lead its impressionist & Modern art evening sale in new york on 2 May 2012. the iconic work is one of the most instantly recognizable images in both art history and popular culture, perhaps second only to the Mona lisa.

this version of the scream, one of only four dating from 1895, is currently owned by norwegian businessman petter olsen whose father thomas was a friend, neighbour and patron of Munch.

simon shaw, head of sotheby’s impressionist and Modern art department in new york, expects the scream to raise in the region of $80m. Mr olsen plans to use the proceeds to establish a museum, an art centre and a hotel in hvitsten, norway.

SoUrCe www.sothebys.com, www.reuters.com

Munch’ssCream

[ technology ] having sworn never to invest in technology on the basis that he didn’t understand the industry well enough, warren Buffet’s investment arm Berkshire hathaway has amassed a $12bn stake in iBM and dipped his toe in the water still further by investing in other smaller tech stocks.

the oracle of omaha, as Buffet is widely known on account of his astute stock-picking abilities, has historically focused on household names such as coca-cola, american express and many of the larger us insurers.

Back in 1998 at the start of the technology boom, Buffet said, “i don’t want to play in a game where the other guy has the advantage.

i could spend all my time thinking about technology for the next year and still not be the 100th, 1,000th or even the 10,000th smartest guy in the country in analysing those businesses.”

Buffet’s apparent u-turn came about in early 2011 when, according to a report by cnBc, he had been “hit between the eyes” by the iBM business model and what it offered existing and potential customers.

since March Berkshire hathaway has been buying shares in iBM and only recently announced that it had acquired 64 million shares – about 5.4% of the outstanding stock. Berkshire hathaway has also purchased shares in intel corp, directv, general dynamics and cvs caremark corp.

SoUrCe http://money.cnn.com, www.bbc.co.uk, www.guardian.co.uk, www.businessweek.com

Buffet breaks his own rules

Big in chinaonly three years after Beijing’s capital airport opened the world’s largest airport building – bigger than all five heathrow terminals combined – construction on an even bigger airport has already begun. Beijing daxang international airport, which is expected to be approximately the same size as Bermuda, will have nine runways and will instantly become the world’s busiest aviation hub.

european rightsa special ‘eurobarometer’ on citizens’ rights shows that for 48% of european citizens, the right to move and reside freely in the european union is the most important citizens’ right. the second most important is the right to good administration by the eu institutions (33%), followed by the right to lodge complaints with the european ombudsman (32%).

More http://europa.eu/rapid/

Buffet amassed $12bn stake

in IBM


e s s e n t i a l s

FOReiGN POsTiNG[ insight ] A new Cartus Corporation report shows that the US and the UK are the top destinations for companies transferring employees around the world, with Singapore in third place, outpacing China – relocation volume to Singapore has more than doubled in the last five years.

Though the top 10 destinations have remained fairly constant over the last five years, several locations in the top 25 have seen dramatic

increases in global relocation volumes. Relocation volume has more than doubled in the United Arab Emirates, for example, while Brazil climbed 10 places to number 14. New locations appearing on the Cartus list include Panama (No. 18), South Korea (No. 23), and Poland (No. 25). Meanwhile, the three destinations that appeared on the 2006 Top 25 list but dropped off in 2010 due to volume declines were Saudi Arabia, Austria and Thailand.

[ finance ] shortly before steve jobs, the maverick mastermind behind apple, died last year, it was revealed that the computer giant had cash reserves of $76.4bn; more than the operating cash balance of the us treasury: $73.7bn. this staggering admission coincided with standard & poor’s downgrading of the us credit rating from aaa to aa+. unsurprisingly, this created a drop in investor confidence and within weeks it was revealed that the markets considered no fewer than 70 large us companies to be a ‘better credit bet than the american government’.

Apple had cash reserves of $76.4bn

us creditConCerns

glencore and Xstrata merger[ finance ] having floated in what was a record share offering in london in May 2011, the world’s biggest commodity trader glencore has announced plans to merge with mining giant Xstrata. the deal would value the combined new business at £56bn and would create the world’s biggest exporter of coal for power plants and the largest producer of zinc.

the two companies are understood to have been working towards this point for some time but the announcement has divided shareholders. standard life and shroders who own 3.6% of Xstrata shares between them believe that, in its current form, the deal undervalues Xstrata shares.

“this is a fabulous deal for glencore,” said richard Buxton, fund manager for schroders, “it’s probably a great deal for the Xstrata management, but it’s a poor deal for Xstrata’s majority shareholders.”

Meanwhile Blackrock, the world’s largest money manager, with a 5.8% stake in Xstrata as of 14th February, is understood to be more receptive. Blackrock are the second largest shareholder after glencore but it already has an existing relationship with glencore chief executive ivan glasenberg.

shares in Xstrata, which initially rose 15% on news of the potential merger, promptly fell by 4.9% and shareholders’ disapproval effectively wiped £2bn off the company’s valuation.

For the merger to go ahead 75% of shareholders need to vote in favour. shareholders cannot vote on the merger until april once glencore has delivered full year results.

SoUrCe www.bbc.co.uk,http://online.wsj.com, www.telegraph.co.uk

£56bn the value of combined

business after the merger

where the livin’ is what makes the perfect city? apart from being able to make a living and lay your head, what sets one place above another? claire locKing discovers the world’s most liveable cities and finds out what makes them tick. easY >>

7 www.lloydstsB-oFFshore.coM

liveaBility

t housands of expats, who currently call one of the world’s major cities home, can perhaps be forgiven for feeling a little

smug. As well as living in the heart of a vibrant population, they’re probably paying less tax and, depending on their location, can spend weekends on a beach and evenings sipping cocktails, enjoying exciting nightlife. The weather will also, most likely, be better.

But what makes contented urbanites living in the great cities of the world consider their home to be the perfect place to live? A Londoner will wax lyrical about ‘Cool Britannia’ and the thriving arts scene, not forgetting the city’s history and culture; a New Yorker will claim to live in the most fashionable city on earth, and a Parisian will respond with the arrogance of someone who knows they reside in one of the most beautiful places created by modern man.

Yet, despite the undisputed ‘greatness’ of these exciting metropolises, not one of them makes it into the recently released Top Ten of the World’s Most Liveable Cities, a survey by the Economist’s Economic Intelligence Unit. London, host of this year’s Olympic Games, worryingly makes it only to number 53, perhaps penalised for last year’s widely

eConomiC intelligenCe Unit toP 10 liVeaBle Cities (out of 100)

Melbourne – 97.5vienna – 97.4vancouver – 97.3toronto – 97.2calgary – 96.6sydney – 96.1helsinki - 96perth – 95.9adelaide – 95.9auckland – 95.7

merCer 2011 Cost oF liVing resUlts (most expensive)

1 luanda, angola2 tokyo, japan3 n’djamena, chad4 Moscow, russia5 geneva, switzerland6 osaka, japan7 Zurich, switzerland8 singapore9 hong Kong10 sâo paulo, Brazil

publicised riots. New York, the Big Apple and city of big dreams, comes only 56th. Only Paris fairs slightly better at 16th, in recognition, no doubt, of the city’s concerted efforts to raise its game in terms of urban planning.

World’s most liveableSo which of the globe’s great cities, according to the Economics Intelligence Unit, does deserve the accolade of the world’s most liveable? For the first time in a decade, Vancouver has been knocked off the top spot by worthy successor Melbourne, a city that 200 years ago was considered to be on the edge of the world, an isolated settlement that only really flourished as a direct result of the Victorian Gold Rush of the 1850s.

More than two centuries on and ‘Marvellous Melbourne’ is still flourishing and scored a near perfect 97.5 on the survey’s ratings for stability, healthcare, culture, environment, education and infrastructure. Melbourne is booming and seems to provide the complete package to over four million contented Melbournians who enjoy a fabulous lifestyle in a perfect sun-kissed Down Under metropolis. In fact, the city’s near perfect mix of swim suit and business suit is seeing

“everYthing has its own celebration or festival froM food, filM, art and

Music to big naMe events such as the australian grand Prix.”

1/ the restaurant alimentari at the corner of greeves and Brunswick street in Fitzroy, Melbourne. 2/ queen victoria gardens, Melbourne.3/ Beachside living.

3/

1/2/


liveaBility

the number of new residents wanting to call the place home rising by a staggering 1,000 every week.

Along with its beaches, mountains, booming arts scene, excellent educational establishments and two centuries worth of history, Melbourne has a thriving and diversified economy with particular strengths in finance, manufacturing, research, IT and education. Ten of Australia’s top five corporations have their headquarters in the city, Melbourne has Australia’s largest and busiest seaport and it is the centre of the country’s manufacturing industry. It is also an environment that nurtures and encourages entrepreneurs and holds the accolade of number 1 of the Top 20 Global Innovation Cities in the world.

Melbourne is also a city where people know how to live and how to live well. Often referred to as the ‘cultural capital’ of Australia, everything has its own celebration or festival from food, film, art and music to big name events such as the Australian Grand Prix.

Location v organisationBut this recent survey isn’t just all about who has the cleanest beaches or the most vibrant café culture; the results have serious implications for companies the world over. The survey is often used as a benchmark on which to base expat relocation packages and hardship allowances. In an age of advanced communications and remote working, a city’s rating becomes increasingly important as more and more talented high fliers, with the freedom to work almost anywhere, prioritise location over organisation. A landmark study by the Chicago-based CEOs for Cities found that 64% of highly mobile and experienced workers were more likely to choose a job because of where an organisation was located than because of the organisation itself.

For the first time in history, the world is seeing over 50% of the population living in cities and, as the planet is becoming more

urban, the key to ensuring our cities are safe, pleasant and inspiring places to live has become increasingly important. Unfortunately, while Melbourne, Vancouver and the other thriving cities at the top of the list are managing to tick almost all the boxes, there are an alarming number of cities in other continents which have rushed, for what appeared to be good economic reasons at the time, headlong into urbanisation, and who are now paying the price. Many of China’s largest cities suffer from appalling air quality and high population densities. Expat residents of many African states have to be compensated for the lack of healthcare and security and even so-called great European capitals such as London are being marked down for their social unrest and high terror threats. Harare, the lowest-scoring city in the survey scores just 25% for stability and 25% for healthcare, statistics that do little to improve the city’s bleak prospects.

So what exactly does constitute a great place to live in today’s modern world? What are we searching for when it comes to choosing the perfect city in which to base our families and feel happy, secure and content? Charles Landry, an independent consultant and writer, has spent the past 30 years debating just that. His consultancy, Comedia, has worked

4/ sebastian vettel celebrates winning the australian Formula one grand prix 2011. 5/ aerial view of sandringham, Melbourne.6/ venus williams at the australian open, Melbourne.

4/

5/ 6/

FantastiC FaCts

paris it has the world’s biggest bike hire scheme with 20,000 in the city’s streets.

copenhagen it takes less than five minutes by bike to reach a green area from any point in the city.

helsinki the city’s state schools have repeatedly been voted the best in the world.

MelBourne house prices in the city rose 25% last year.

tokyo By 2013 200 hectares of green space along with 200,000 new trees will have been planted.


with regional authorities and planners from Adelaide to Augusta and is the brains behind the reinvention of Glasgow into a City of Culture and the transformation of Calgary from an oil town to a lifestyle destination.

Landry believes that cities are at a crucial stage in their history. The sources of wealth, talent and potential, cities also reflect the worst aspects of modern life in their crime, neglect and excesses.

Landry’s theory is simple. He believes that the key to a great city is in creating a place where people want to be, and where they hope to flourish. Aesthetics, culture, opportunities, as well as practicalities such as transport, healthcare and education, are all essential components of the modern urban dream.

His views are echoed by another great force in city regeneration, Danish architect and urban designer Professor Jan Gehl. In a recent Economist conference in London, ‘Creating Tomorrow’s Liveable Cities’, Gehl criticised the development of cities over the past 50 years where all too often economic considerations have taken precedence over the needs of the people. Gehl advocates a simple ‘people first’ approach where good public transport, ample opportunities for walking and cycling, and the creation of attractive inner city lifestyle spaces will all help create an urban

environment that is more enticing, healthier, vibrant and, consequently, successful. Put simply by Gehl himself: “First life, then spaces, then buildings – the other way around never works.”

Melbourne, and indeed most of the cities at the top of the Economist’s liveability list, seem to have put many of these theories into practice with spectacular results. Melbourne is very much a cycle-friendly city with over 670 km of bike paths within the city limits, and Vancouver is leading the continent in addressing climate change with 7% fewer cars making the daily commute last year.

And it will always be a source of comfort to live in a city like Vienna, where only 18 murders were reported in 2010, or Copenhagen where they’ve created 100,000 square metres of car-free streets and squares. Even remote outposts such as Helsinki seem to have got their house in order with a recent waterfront redevelopment and the total regeneration of the city’s harbours.

An individual’s relationship with, interaction with, and response to their chosen city is a little bit like a marriage. It’s unique, intense and ultimately personal. Some may like the grittiness of downtown LA, while others thrive in the clinical, ordered streets of Singapore. Population migration is increasingly demonstrating that urban spaces are going to define the future of our planet and while we should celebrate their individuality we also need to ensure that each and every one of them offers both quality of life and quality of place.

1/

2/

“first life, then sPaces, then buildings – the other waY around never works.” proFessor jan gehl, architect and urban designer, denmark

1/ hire bike, paris. 2/ vancouver, British columbia, canada.

Moving or indeed just living abroad for a shorter period of time perhaps because of work can be an exciting step. we know you’ll want to plan your move well in advance and give yourself the best chance of a smooth transition but at the same time protect any interests you might have retained at home. so we’ve collated a sizeable bank of information on living, working or retiring abroad at lloydstsb-offshore.com/guidance we’ve also launched a range of interactive �info-graphic� tools at lloydstsbexpat.com which provide details of international schools, global property prices, rents and city guides including the cost of living in 50 cities around the world.

M

hoMe is where…

[ Money Matters ]

shoreline magazine issue 84

liveaBility

10

www.lloydstsB-oFFshore.coM

statutory residence test

11

“a re you actually here?” It sounds like the sort of question that would appear on page 157 of The Hitch-Hiker’s Guide to the Galaxy.

It doesn’t, but if it did the novel’s cosmic computer, Deep Thought, would probably give you as good an answer as any decent tax adviser: “Not necessarily”.

These days it’s perfectly possible to conduct regular business in London, New York or Geneva, but for tax purposes, be resident in the Malagasy Republic... if you want to be particularly exotic.

Tax authorities, however, for fairly obvious reasons, like to know exactly who falls within their ambit. Despite this the UK, oddly enough, has never had a formal means of determining for tax purposes exactly who resides within its borders.

That is all due to change in April 2013 when – if current plans remain unchanged – the country’s first Statutory Residence Test is due to become law.

The proposed new legislation effectively sets out a series of tests that will determine for the vast majority of people whether or not they are liable for UK tax.

A veRy TAxiNG

questionexisting rules around uK residency for tax purposes have historically been very ill-defined. all this is set to change next year when the statutory residence test becomes law. alan dron outlines the new rules and explains how it might affect those living and working overseas.


Parts A and B of the test will contain ‘conclusive factors’ that show whether a person is definitely a resident or not. Part C aims to sort out those people who fall into the ‘fuzzy’ area between the two.

Fiscal nomadsStephen Travis, Senior Product Manager, International Wealth, at Lloyds TSB, believes that, “in the past many people have just drifted into non-resident status”. If working overseas they have assumed they are not tax-resident for UK purposes. If their job has taken them around the globe, they may even have assumed they have become what’s termed a ‘fiscal nomad’, with no single country’s tax inspectors able to lay a hand on their assets. However, tax authorities are rapidly closing loopholes in their payment regimes and this ‘nomadic’ status is now largely a thing of the past.

A rude awakeningBut, rather perversely, the introduction of self-assessment in the 1990s, developed to help clarify most people’s tax position, has actually muddied the waters when it comes to questions of residency.

“If you go back before the introduction of self-assessment in the 1990s,” says Stephen, “the Revenue provided a residence ruling. Basically, they were the arbiter; they would have made a determination as to your residency status and it was very difficult to go from one year to the next without knowing precisely where you stood.”

However, “Once self-assessment came in, it was up to individuals to decide their own status, without any real guidance.” And what little guidance the Revenue did provide changed several times over the years, largely as a consequence of a number of successful legal challenges, making for an even messier situation.

For some expats, a combination of lack of knowledge of tax legislation and wishful thinking means they believe they are non-resident when this is in fact not the case at all. They could be due for a pretty rude awakening when the Revenue comes knocking at their door.

The proposed new rules on statutory residence also have some interesting sidelights. One is the adoption of the principle used by the French tax authorities that a person is resident wherever he or she spends most days in any one tax year.

So, under the proposed rules an expat might only spend 75 days in the UK – well below the current threshold for tax liability – but if he spends even less time in other countries, then he will become subject to UK tax.

Stephen doubts whether the new rules will make more people liable to UK tax, “but it will certainly give people greater certainty when it comes to tax planning. I think for most working expats it will just tighten up some very loose rules.”

Trevor Sherlock, Partner, Financial Services – Personal Tax Centre with Ernst & Young, agrees: “These new regulations aren’t in fact designed to ensnare more people in the UK tax system, but rather to provide greater clarity over their affairs. People can determine their residence position with a much greater degree of certainty.”

Most people, whether resident or non-resident under current rules, are likely to remain so. Those whose status is unclear will be able to undertake a series of simple tests to determine the strength of their connection to the UK and therefore which category they fall into.

so, what are the tests?If an individual satisfies any of the conditions in Part A of the test they will be ‘conclusively non-resident’ in that tax year. Those conditions are:• if they were not resident in the UK in all of the

previous three tax years and they are present in the UK for fewer than 45 days in the current tax year; or

• if they were resident in the UK in one or more of the previous three tax years and they are present in the UK for fewer than 10 days in the current tax year; or

• if they leave the UK to carry out full-time work abroad, provided they are present in the UK for fewer than 90 days in the tax year and no more than 20 days are spent working in the UK in the tax year.

If Part A does not apply but the individual satisfies any of the conditions in Part B, they will be ‘conclusively resident’ in that tax year. Part B’s conditions are:• if they are present in the UK for 183 days or more

in a tax year; or• if they have only one home and that home is in the

UK (or have two or more homes and all of these are in the UK); or

• if they carry out full-time work in the UK.


statutory residence test

13

“PeoPle can deterMine their residence Position with a Much greater degree of certaintY.”trevor sherlocK, partner, Financial services – personal tax centre with ernst & young

Don’t fit either of these categories precisely? Then Part C is for you.

Basically, this says that the more time someone spends in the UK, the fewer connections they are allowed to have with the UK if they wish to be viewed as non-resident.

There are five ‘connection factors’: • family (spouse, civil partner or minor children

resident in the UK);• accommodation (the individual has accessible

accommodation in the UK and makes use of it during the tax year);

• ‘substantive work’ in the UK (the individual does substantive work in the UK, but does not work there full-time);

• ‘UK presence’ in previous years (spending 90 days or more in the UK in the previous two tax years); and

• if the individual spends more days in the UK than any other country.

These ‘connection factors’ would be combined with days spent in the UK and measured against a sliding scale to determine whether the individual is indeed resident or not.

For example, if an individual spends fewer than 10 days in the UK, they are clearly non-resident. If they spend between 10-44 days in the UK, they need four of the ‘connection factors’ mentioned above to change their status to resident. If they spend between 45-89 days in the country, then they become resident if three of those factors apply. And so on. Spend more than 183 days here and they are resident, full stop.

There are different scales for people leaving or entering the country, reflecting the principle that it should be more difficult to relinquish UK residence than attain it.

Even if the proposals gain the status of law in roughly their current form then some quirks and peculiarities will inevitably be thrown up, admits Sherlock, particularly as court cases are raised to clarify arcane sets of circumstances.

Hopefully, however, the vast majority of people will be able to define their tax status with much more clarity than could be afforded by Deep Thought.

For further information on Tax residency please visit: www.lloydstsb-offshore.com/guidance

lloyds tsB international and ernst & young have combined their talents in the tax field to provide specialist advice for expat personnel. it will be the first time that this level of service has been available to individual customers.

“if you’re leaving the uK to live in another country there are some very specific things you need to do at the point of leaving the uK,” comments lloyds tsB’s stephen travis. “some of it is straightforward form-filling, such as the p85 when you leave the country and the non-residents landlord scheme, which allows your rental agent to pay the rent on your uK property gross of tax.

“equally, you’ll want an overview of your new country’s tax system. until now ernst & young have provided this only at the corporate level. what we’ve agreed is that they will now offer it to retail customers. previously, individuals couldn’t go to ernst & young to talk them through the process.”

now, a structured interview will take people about to become expats through the intricacies of tax and national insurance requirements, with a convenient print-out of results at the end of the process, telling them what factors they need to consider.

the service will be available for a

flat fee of £120 for an hour. initially available only in the uK, talks are underway between the partners to make it available in other countries.

other available services will include the completion of tax returns in various overseas jurisdictions, plus ‘departure’ and ‘arrival’ briefings for people moving between countries. this latter service is already available in several countries.

the new arrangement will also give lloyds tsB access to ernst & young’s tax library, from which it can download information on the tax regimes of individual nations and provide that to clients.

lloyds tsB relationship managers will be the conduit for customers wanting to take advantage of these services. they will also be able to put clients with individual problems in touch with ernst & young specialists, with the clock only starting to run on fees once ernst & young actually begin working on the problem.

to arrange an appointment contact your relationship Manager today or call the premier service team +44 (0) 1624 641931. Further information on the tax implications of living or moving abroad can be found within our tax guidance section lloydstsb-offshore.com/guidance

M

our new international taX service

[ Money Matters ]


philanthropy

14

need to understand. This is not an area of the wealth

management relationship that should be trespassed by traditional product pushing. It is a sensitive field. It touches the heart of wealth. It touches the heart of the industry’s future.”

In the last few years, such ‘traditional product pushing’ is beginning to give way to better engagement with clients as a new group of philanthropic high net worth individuals has emerged. These typically want to give away their wealth within their own lifetimes, ask for more accountability from charities and demand to see the impact of their donations.

Dan Corry, CEO of New Philanthropy Capital, a think tank dedicated to helping funders and charities achieve a greater impact, says: “There has not been enough sharing of knowledge (in the UK). The decision as to where to invest is a very personal thing, which could be motivated by one’s own experiences. Philanthropists are people who tend to have been very good at business and so you’d expect them to want to ask a lot of questions.”

Giving White PaperThe UK Government’s recent Giving White Paper launched in May 2011

today’s philanthropists are part of a new breed entirely. dina Medland explores the

changing face of philanthropy and how today’s entrepreneurs are bringing their experiences in the

boardroom to bear on their approach to giving.

givingconditional

Philanthropy – and the language around it – has undergone something of a global sea-change in the last five years. There has been a change of tone and approach by both individual philanthropists and more than a few multinationals. Against

a background of economic downturn, both demand results that can clearly be measured, but both also increasingly involve active emotional commitment.

Proctor & Gamble, for example, the world’s biggest consumer goods company, has put its $9bn Pampers nappies brand behind a joint campaign with Unicef to help protect 100 million women and babies from tetanus. For each pack of nappies sold, P&G donates a tetanus vaccine.

According to Matthew Price, the executive at P&G who heads up the initiative, “This is an emotional

story and baby care consumers want a clear idea of the benefits”. P&G also recoups 7 cents for every vaccine it donates,

so its motives aren’t entirely altruistic. Nonetheless the company appears to have found

a philanthropic initiative that strikes a chord with the target audience.

Today’s true corporate benefactors are starting to look for a commercial strategy that addresses some of the wider challenges faced by society and helps fulfil them in a personal capacity as donors.

Sebastian Dovey, Managing Partner of Scorpio Partnership, the wealth management consultancy, says: “An individual’s emotional connection to their philanthropy is the critical factor that wealth managers


illu

stra

tio

n: K

ate

Mill

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philanthropy

16

toP 10 uk PhilanthroPists (courtesy of The Sunday Times Giving List)

01[ anurag dikshit ] Wealth: £35m

source of wealth: Gambling indian-born dikshit

sold his remaining shares in the internet gaming site party gaming in 2010 for £105m. he is transferring most of his money to his charity, the Kusuma trust, which benefited to the tune of £172m last december.

02[ Bart Becht ] Wealth: £90m

source of wealth: Cleaning products Becht, 54, is stepping

down from reckitt Benckiser, the slough-based cleaning giant he has a near-£45m stake in the company and has transferred reckitt shares worth £95m to his charitable trust.

03[ christopher cooper-hohn ]

Wealth: £85m source of wealth: Finance

london hedge fund manager chris cooper-hohn, 44, continues to make huge donations to the children’s investment Fund. in 2008, he gave £499.3m to the foundation run by his wife, jamie, which benefits projects across the developing world.

04[ richard ross ]

Wealth: £58m source of wealth: Property

ross, 68, chairs regentsmead, a london-based property and financial group, created in 1934

by his father, nathan rosenbaum. ross’s parents established rosetrees to support life-changing medical research. donations in 2010-11 were £1m and about £1m of its seed funding has led to £22m of research grants.

05[ daMe vivien duffield ]

Wealth: £40m source of wealth: inheritance

duffield’s father, sir charles clore, was one of the great post-war property developers of london. she recently gave £8.3m to various arts charities, and was reported to have donated more than £400m since clore’s death. she boosted the coffers of oxford university by an estimated £1bn when she ran its fundraising campaign from 2008-10.

06[ diana Ballinger ] Wealth: £58m source of wealth: Transport

Ballinger’s late husband Martin led a management buyout of the newcastle-based northern general bus firm in 1987. the business, renamed go-ahead, floated on the stock market in 1994, valued at £40m. today it is worth £600m. the family does substantial charity work through the Ballinger charitable trust.

07[ lord fink ]

Wealth: £120m source of wealth: Finance

Fink, 53, is regarded as the father of the British hedge fund industry. he joined ed F Man in 1987 and rose

to the top of what is now the Man group in 2000. he gives 33% of his income to charity.

08[ lord sainsBury ]

Wealth: £960m source of wealth: supermarkets

the london-based supermarket group, in which the sainsbury clan has a stake of about 14%, is valued at more than £6.7bn. sainsbury, 70, is a keen philanthropist: his gatsby charitable Foundation has awarded £660m in grants since its formation in 1967. other family members have given £300m to charitable causes, with £165m generated for or given to charity in the past year.

09[ sir elton john ]

Wealth: £195m source of wealth: Music

new dad john’s concerts grossed about £20m in 2010. john’s earnings reached £30m last year, and he continues to be one of the country’s top philanthropists.

10 [ david potter ]

Wealth: £40m source of wealth: Computers potter, 67, founded

psion, the hand-held computer company whose early devices took the market by storm in the late 1990s. psion is now worth £140m. he has sold shares over the years including a £65m sale in 2000, and has made substantial charitable donations.


philanthropy

17

was welcomed by the industry for the measures, funds and initiatives put in place to stimulate innovation around philanthropic giving. It also provided a specific commitment of £700,000 to support Philanthropy UK: a resource connecting wealthy people with charities, and establishing a new honours committee to ensure people are recognised and celebrated for exceptional and sustained philanthropy.

At the Paper’s launch Nick Hurd, minister for civil society said: “We want to help Britain become an even more generous country. It needs a new approach which is all about making it easier to get involved and make a difference.”

The government’s initiatives have been welcomed and several positive trends are now emerging. Sarah Burton, Deputy Director at the Institute for Philanthropy, says: “We have had interesting conversations with a number of intermediaries who are being pushed for products with social as well as financial returns. We are also seeing the use of social impact bonds on projects related to outcome-based contracts in the public sector.”

In the UK, she says there is a growing trend for philanthropists (who, interestingly, are becoming increasingly younger) “to want to give while they are still alive, looking for more responsibility and taking a definite interest in any outcome and results. The role of our institute, and others like it, is to provide donor education and collaboration, fill in the gaps and build networks.”

At Charities Aid Foundation (CAF), they work hard to connect donors with relevant charities. Jane Arnott, Head of Advisory and Consulting, sees the major philanthropic trends in the UK as being around social impact investment and the US-inspired Giving Pledge. While social impact investment has learnt a great deal from emerging economies with big income disparities where philanthropists tend to support investment in things like education and health, the Giving Pledge is the Bill Gates-sponsored organisation through which a number of billionaires have already signed up to give a percentage of their wealth to charities and foundations of their choice.

Legacy 10“It hasn’t really translated here (in the UK) although the government has been keen to see something similar,” says Arnott. Only about 7% of the UK population get involved in legacy giving, or giving after death, but it nonetheless adds up to more than £2bn for the country’s top charities, and as such represents “a significant source of income”.

The latest UK tax rules, coming into effect from April 2012, say that if you leave at least 10% of your estate in your will to charity, the tax burden on your remaining taxable estate comes down from 40% to 36%.

“an individual’s eMotional connection to their PhilanthroPY is the critical factor that wealth Managers need to understand.”

seBastian dovey, Managing partner of scorpio partnership

And to encourage people to support charities in their wills, a new campaign called ‘Legacy 10’ was launched in November 2011 by Roland Rudd of public relations group Finsbury. The campaign, which will be transformed into a charity in due course, has already signed up a handful of business and arts leaders to promote the initiative. It intends to announce ‘ambassadors’ from across a range of sectors to encourage their peers to leave 10% of their wealth to charity in their will.

‘Legacy 10’ is an interesting development and seems to have found favour already with a number of high-profile businessmen. Those on board include Charles Dunstone, the founder of Carphone Warehouse, Richard Reed, co-founder of Innocent Drinks (named ‘ambassador’ for entrepreneurs), and Nick Serota, Director of the Tate Gallery. And Virgin entrepreneur Sir Richard Branson has thrown his not insignificant weight behind the campaign: “I think Legacy10 is a terrific initiative and I support the campaign whole-heartedly.”


what Price

lineage?

we all want to do the best by our children and grandchildren.

But it’s an increasingly costly business. Fiona nicolson

tries not to reel at the total and offers guidance on how

to alleviate the burden.

the next generation


the next generation

19

as any parent knows, children don’t come cheap. So, it’s never too soon to start planning how to fund the key stages in junior’s life.

The Bank of Mum and Dad, or perhaps just as pertinently these days the Bank of Granny and Grandad, is likely to be most heavily drawn upon when the next generation starts school, goes to university, buys a home and gets married.

But there can also be a substantial outlay well before these obvious milestones. The cost of hiring a nanny, nursery fees, prams and other baby equipment can all add up. So it makes sense to start saving almost as soon as you start thinking about having a family. Indeed according to a recent survey* the average cost of bringing up a child to the age of 21 is £210,00; a 50% increase since 2003.

There is no hard and fast rule about how much you should save, but it can help alleviate the pressure if you are able to put away a specific amount each month and build up the savings over the years.

The good news is that there is no limit on what you can invest for your children. And there is plenty of choice from a range of tax-free savings opportunities for parents, including child savings accounts, unit trusts and, of course, stocks and shares.

National Savings and Investment products, including bonus bonds and premium bonds are worth looking into as well.

But it might be wise to seek a second opinion before making any sudden decisions as there could be tax implications, depending on your own financial circumstances, and this could help dictate how best to save for your children and the years ahead.

school days Arguably the first major milestone in any child’s life is starting school. And it’s only natural to want to provide the best possible education for your child, whether by choosing a local or international school, or by sending them to school abroad. Each has its pros and cons.

Local schools can help children learn the language more quickly and are usually free, but many parents still choose international schools. These are generally considered quite pricey, but can provide consistency especially for those families who are likely to be moving again.

If you opt to educate your child at an international school, it’s not just the fees you need to consider: schoolbooks, uniforms, extra-curricular activities, transport and lunch need to be budgeted for too. Fees and payment arrangements may vary from school to school, depending on reputation and location. So, it makes sense early on to find out what the total is likely to be.

Another option is to choose a UK-based education for expatriate children. As this is most likely to involve boarding, it can prove costly. The Independent Schools Council quotes average boarding fees of around £8,000 per term, with the school often requiring a deposit of a term’s fees in advance.

Choices need to be made about qualifications too. Should your child study for the International Baccalaureate (IB), or aim for a clutch of A-levels?

As it covers six subjects, including maths, science and languages, the IB can be more suited to youngsters who do not yet know what they plan to study at university, or what their chosen career might be.

For those children who already know what they’d like to do, studying for specific A-level subjects could be more appropriate.

university – financial challenge Furthering any child’s education through university could potentially be the most expensive stage for their ‘sponsors’.

For instance, if your child has set their heart on studying at Cambridge University, currently rated the top university in the UK, then presuming that

saVings Plans For ChilDren

P child savings accounts P premium BondsP children’s Bonus

Bonds P unit trustsP stocks and shares

“the good news is that there is no liMit on what You can

invest for Your children. and there is PlentY of choice.”


the next generation

20

[ the Best schools ]

uK independent schools

ranked by a-level results (nB some uK independent schools decline to publish results).

01 westminster school, london

02 Magdelen college school, oxford

03 oxford high school

04 wycombe abbey school, high wycombe

05 north london collegiate school, edgware

Source: The Telegraph September 2011/data supplied by the Independent Schools Council (ISC)

international no official league tables on exams are published, only a guide based on reputation, exam results, extra curricular activities and a cosmopolitan student body.

01 tanglin trust school, singapore

02 garden international school, Kuala lumpur

03 dulwich college, Beijing

04 st. christopher’s, Bahrain

05 British school of paris

06 sir james henderson school, Milan

07 dulwich college, shanghai

08 international school of Brussels

09 Munich international school

10 Berlin British school

Source: www.expatsvillage.com July 2011

they meet the necessary admissions requirements, the best financial outcome would be that they qualify to only pay ‘home’ student tuition fees. If not, they’ll be classed as an overseas student and as such the fees are much higher.

To qualify for ‘home’ fees, your child must be an EU national and able to satisfy residency requirements. If they fulfil these criteria then annual tuition fees are currently £3,375 per annum for all courses for students starting their studies before 1 September 2012.

But if they don’t qualify and are classed as an overseas student, be prepared for an altogether bigger dent in your bank balance. Annual tuition fees for an overseas student at Cambridge University start at just under £12,000. And if medicine is your child’s vocation, be prepared to pay around £29,000 a year. And that’s not all: college fees of around £4-5,000 may be payable too.

The cost of living also has to be factored in. Cambridge University suggests students should budget for approximately £8,000 per year for living expenses.

However, depending on eligibility, some students can alleviate the costs with the help of a student loan for both tuition and living expenses. The maximum that students living away from home can borrow for living costs is just under £5,000. Loans can be paid back after graduating but only once the student is earning a minimum salary of £15,000.

the Bridge of sighs at saint john’s college, cambridge.

toP UniVersities in the UK

01 cambridge

02 oxford

03 st andrews

04 london school of economics

05 university college, london

06 warwick

07 lancaster

08 durham

09 loughborough

10 imperial college, london

Source: Guardian University Guide May 2011

oVerseas stUDent annUal tUition Fees at CamBriDge UniVersitY (2011-12)

01 arts, social sciences, law, mathematics £11,829

02 architecture, geography, music £15,480

03 engineering, management, science £18,000

04 Medicine, veterinary medicine £28,632

For more information visit our new international schools infographic and guidance section at lloydstsb-offshore.com/guidance


the next generation

21

All these costs soon mount up and can be pretty daunting for parents and grandparents alike so starting to save as early as possible should reap rewards in the long run.

The price of love The tradition of the father of the bride paying for the wedding seems to have been dying out in recent years. These days, more often than not, parents from both sides agree to cover the costs but this in itself can be no small undertaking. The cost of an ‘average’ wedding can be anything between £10,000-£20,000. Starting to put some money aside almost as soon as the engagement is announced will make the burden a little easier to bear.

Weddings have a habit of spiralling out of control so it’s worth discussing at the outset exactly what you will be paying for and how much you will be contributing. And even when you have set your budget, bear in mind that, inevitably, additional costs will arise. Creating a contingency cushion of around 10% should help keep things relatively stress-free.

That said, the biggest trend, according to luxury wedding planner Linda Cooper, of Linda Cooper Weddings, is to get married in France or Italy. But even this needn’t break the bank and employing the services of a good wedding planner should help you stay within budget.

However, be prepared for a regular flow of invoices. Wedding bills have to be paid on an ongoing basis so it makes sense to work from an instant access account, with the highest possible rate of interest and no restriction on the number of withdrawals.

Leg up the property ladder In the current climate, first time buyers, especially if they aren’t able to raise the initial deposit, are finding it more difficult than ever to get one leg up on the property ladder. At the same time, the cost of renting is soaring, creating a ‘catch-22’ situation in the housing market.

Once again it’s the Bank of Mum and Dad to the rescue. It’s hardly surprising that any parent should want to help their child up on to the first rung of the property ladder, but how best to go about it?

There are a number of different options. You can either lend or give your children the money towards a deposit. If you are lending it’s prudent to make sure that both sides understand the terms of the arrangement and all timings around repayment. If you are giving them the deposit then, depending on the amount, there could be tax implications for both parties so it makes sense to work out in advance exactly what these could be.

Some parents choose to act as guarantor on their offspring’s mortgage but this approach is not for the faint-hearted: you could become liable for the

cost of the entire mortgage if your son or daughter fails to keep up the repayments.

Another trend that has appeared in the property market in recent years is that of shared ownership, whether it be a group of friends, siblings or parents and their children. This too can be fraught with complications, hopefully less so when it’s a parent and child purchase, but nonetheless to avoid problems further down the line it makes sense to draw up a legal agreement from the outset. That way everyone knows exactly where they’ll be financially when the agreement comes to an end.

However you choose to help your offspring purchase their first home it’s likely that there will be tax implications so take advice and establish exactly what the position could be before making any decisions.

And do bear in mind that once you’ve paid for the school fees, the university education and contributed to the property and the wedding, the Bank of Mum and Dad should be able to close the vault doors for a while – at least until the next generation comes along…

*Insurer LV quoted in the Guardian 24 February 2011

lloyds tsB international can help you help the next generation. as they move on in life and start to find their own feet there will always be times when a little parental or grand-parental assistance will go a long way.

savings — whether you’re looking for instant access or competitive interest rates, we’ve got a range of savings accounts to suit you. available in euro, sterling, us dollar and all other major currencies.

investments — if your goal is to invest for your children’s future or even just for you, then our trained and experienced international Financial Managers can help devise a suitable investment programme to help you achieve your financial aspirations.

For more information visit lloydstsb-offshore.com/savings and lloydstsb-offshore.com/investments contact your relationship Manager or call +44 (0) 1624 638000 or if you live in europe +350 200 50999

The value of shares and the income from them can go down as well as up and cannot be guaranteed. Consequently, on selling, investors may not get back the amount they originally invested

M

Funding the neXt generation

[ Money Matters ]

“costs soon Mount uP and can be PrettY daunting for Parents and grandParents alike so starting to save earlY can have real advantages.”

t rusts can be a useful, if occasionally complicated, vehicle for ensuring that your spouse or children are looked after tax-efficiently in the future, and

also as a way of protecting family businesses and minimising tax liability.

However, different types of trust may have different structures and tax implications, so the devil really is in the detail if you wish to use them effectively. Trusts enable the donor to dictate exactly who benefits and under what circumstances, sometimes long after death. Compare this with making a direct gift (for example to a child) which is exempt from inheritance tax so long as the donor survives for seven years after making the donation, but which offers no control.

Most firms of lawyers, accountants or banks will be able to set up a trust but it is important to establish at the outset what services they include and what costs are involved. It is also worth discussing your plans with members of your family, particularly if the trust is being set up as part of a will, as excluding family members at this stage might lead them to claim against your estate once you’re gone.

What are the benefits of a trust?Alastair Collett, Partner with law firm Bircham Dyson Bell, says: “Traditionally, trusts were set up for people who couldn’t or shouldn’t hold money – for example children or individuals with mental health issues – and to preserve wealth for future generations.”

They can be set up so that the settlor does not hand money over outright and can ensure that it is directed for the benefit of the people named in the trust.

Alastair adds: “A modern example would be the second family, where an individual wishes to provide for a second spouse but also to pass the capital ultimately to the children of a first marriage. If a settlor disposes of funds into a trust then he or she dictates the terms.”

Anna Third, solicitor with law firm Boodle Hatfield, says trusts can be a useful succession planning tool and, if structured and used in the right way, can result in tax efficient estate planning.

“Generally, the assets given to a trust are outside of the taxable estate of the beneficiaries and so no Inheritance Tax (IHT) is payable on their death(s) as it may have been if they had received an outright gift. Since the Finance Act 2006, lifetime transfers into trust attract an IHT charge of 20% on the value of the assets transferred but only so far as they exceed the available nil rate band (£325,000 for 2011/12).”

Anna also explains that by using the available nil rate band or, in the case of a married couple, potentially using two nil rate bands, as well as other available exemptions, such as Agricultural Property Relief (APR) and Business Property Relief (BPR), it is possible to create trusts during lifetime without an immediate charge to IHT.

ensuring exactly how your wealth continues to look after your loved ones in the future can be a complex business. Marianne curphey explains the background behind trusts, and how the devil is very definitely in the detail.

a tried &

aPProachtrusted

What are the DoWnsiDes oF a trUst?

costs vary widely but it may well not really be worth setting up a trust for sums of less than £100,000 because the costs are likely to outweigh the benefits. the potential costs to consider include:S establishment and management costs including time and expenses incurred on tax returns and accounts.S trustee fees which are charged by your bank or professional trustees.S Fees which are often charged on an hourly basis.S significant costs for administering the trust investments, including investment management fees and costs.S accountancy and legal fees which may also be charged.


trusts

22

“traditionallY, trusts were set uP for PeoPle who couldn’t or shouldn’t hold MoneY and to Preserve wealth for future generations.”alastair collett, partner, Bircham dyson Bell

Gifts or transfer of assets – which is best?The transfer of assets into a trust is usually a method of disposal for Capital Gains Tax (CGT) purposes so CGT will still be payable if assets standing at a gain are transferred into trust.

“However, it may be possible to ‘hold over’ the gain so that it is deferred until the trustees dispose of the assets,” she explains. By contrast, it is not always possible to avoid CGT on an outright gift and so trusts can offer an advantage here.

“If the settlor lives for more than seven years from the date of the transfer into trust, there is no further IHT to pay in relation to the transfer. This means that it is possible to transfer assets out of your estate for IHT purposes, at a rate of IHT of 20% (or less if the nil rate band or exemptions are used).

“If those assets were instead to remain in the estate, there would be an inheritance tax charge of 40% on the value of those assets on that person’s death (so far as value exceeds the nil rate band available on death).

“Life insurance could be taken out to cover the tax risk that may arise on death, reducing the amount of tax payable. It is usually advisable, therefore, for any life assurance policy to be held in a separate trust.”

How can trusts help organise and protect family wealth and family businesses?There are a number of reasons why trusts are often used by wealthy or entrepreneurial families to ensure that the family retains control over a business. Written correctly, trusts can protect family wealth from tax charges, divorce and creditors, and have a number of other major benefits: • transferring business assets into trust can avoid the shares in

a business being divided up and instead retained by the trustees,• trusts can be a useful tool to enable business owners to transfer

the business for the benefit of the next generation without a charge to IHT or CGT, thereby preserving the family business and avoiding the scenario of having to sell the business to meet the tax charge,


“life insurance could be taken out to cover the tax risk that MaY arise on death, reducing the aMount of tax PaYable.”

Outright gifts can be a useful estate planning tool as they will reduce the value of the individual’s estate for IHT purposes (though they do, of course, increase the estate of the recipient).

Trusts are indeed complex vehicles and in the right circumstances, they very much have their place. But whether making a gift into trust, or even an outright gift, individuals should be aware that complex IHT rules have been specifically created to prevent you from continuing to enjoy the benefits of any assets you might have disposed of without being subject to Inheritance Tax.

For further information on tax residency please visit: www.lloydstsb-offshore.com/guidance

• discretionary trusts (where benefits from the trust are at the discretion of the trustees) can be used to “ring fence” family wealth and family business assets so that there may be, potentially at least, some protection of the assets from creditors and on divorce.

Alastair Collett believes that trusts can also “have a role to play regarding family divorce, although a judge in the UK does have absolute discretion to decide on the needs of the parties involved (and this might go against the wishes expressed and directed in an existing trust). In divorce cases it might be that a trust is used to provide benefits for the ex-spouse for life and while the children are dependent, and then the benefits pass to the children.”

Alternatives to trusts – the pros and consIf you give away any sum outright to an individual you will not pay tax immediately: this is known as a Potentially Exempt Transfer (PET). Compare this to gifts into most trusts where, once the £325,000 band is exceeded, you immediately pay 20%.

If you survive for seven years after you made the gift then there is no tax to pay. For example, if you were to give away £1,000,000, there would be no tax upfront and no tax to pay if you survived

for seven years.There are also allowances for

small gifts: £3,000 to an individual; £250 as a gift and £5,000 on the marriage of a child. Generally there are tax exemptions for gifts to spouses and to charities.

As Alastair Collett explains: “For gifts to most trusts there is an IHT entry charge on amounts over £325,000 and after that you have, in principle, a ten year,

periodic charge and a charge on capital distributions within the period. If the value of the trust (and

capital distributions) remains under the nil rate bands, then there is no IHT to pay. You need to look at the value of the trust as you approach the 10-year mark and see if you want to keep the money in the trust or take it out to avoid or limit the tax to be paid. The charge can be as much as 6% every 10 years.”

wherever you are in the world, a face-to-face financial review will help you assess your investment priorities.

our financial experts are on hand to provide a professional evaluation tailored to your needs – your risk tolerances, time horizons for when you need the money and any currency requirements. a regular review with a financial manager does just that: collating all the necessary information to make an expert recommendation.

our financial experts are available in the following regions over the next three months: Belgium, France, ireland, netherlands, italy, germany, greece, Malta, spain, cyprus, israel, united Kingdom, Bahrain, oman, qatar, south africa, Botswana, Mozambique, egypt, Zambia, Mauritius, Brazil, thailand and hong Kong.

The value of shares and the income from them can go down as well as up and cannot be guaranteed. Consequently, on selling, investors may not get back the amount they originally invested.

to find out more and book a review, speak to your relationship Manager or call +44 (0) 1624 638000.

M

a review near you[ Money Matters ]

Do trUsts aFFeCt Will Writing?

one of the ways of creating a trust is for the trust to be contained in a will, coming into effect on the testator’s death. trusts in wills are a way of providing for young beneficiaries so that the assets are held on trust until they are old enough to receive some or all of the assets.

another option is to create a ‘life interest’ trust as part of a will to provide the surviving spouse with income during his or her lifetime, whilst protecting the capital for the next generation. this would mean that the surviving husband or wife would be supported during their lifetime, but would ensure that the underlying assets are passed on to the children and protected should the spouse re-marry.


trusts

24

Remains of the Castle of san Juan, Almería, spain.

livingspanish Beat

to a

>>

painting in the picturesque spanish countryside is a long way from pounding the beat on Britain’s

streets. But gordon Maddock has made the seamless transition from successful policeman to award-winning artist, finds Fiona nicolson.


custoMer profile

25

1/

1/ spring flowers at pozo-san jose area, by gordon Maddock.2/ award-winning ‘nuns on Beach’, by gordon Maddock.3/ gordon Maddock at ‘work’.

h is working life began in the RAF in the early 1950s from where he joined the Metropolitan Police embarking on a career that would span 31 years. His job as a policeman took him all

over the UK, firstly as a young detective on Cornwall’s Lizard Peninsula, followed by an 18-year stint in Wiltshire where he moved up the ranks to the level of Superintendent. Promotion to Chief Superintendent took him to Surrey, before reaching the position of Assistant Chief Constable for the Devon and Cornwall Constabulary.

In all this time Gordon never lost sight of his real passion and talent for the arts. As a child, inspired by his art teacher, himself an exhibitor at the Royal College of Arts, Gordon won a prize for his work. So, despite the demands and pressures of senior policing roles, Gordon continued to pursue his passion for art in his spare time.

When he retired from the police force in 1987, Gordon didn’t exactly put his feet up and take it easy. He accepted an advisory role for an international computing company and made some useful contacts which in turn led to an interesting role as an international security consultant for the Olympic Games in Atlanta in 1996.

This was a role he very much enjoyed and with the London 2012 Games almost upon us Gordon’s advice would be to make the most of what will be a very memorable experience. “It’s a truly wonderful occasion and a real privilege to be there.”

Artistic endeavoursThese days, in his retirement, Gordon is finally able to pursue the career he always wanted and is now an award-winning artist and photographer, as well as a published writer, based in the Mediterranean province of Almeria in Spain: “I was always something of a frustrated artist,” he explains, “probably all through my time with the police.”

And now he has the luxury of time to fully explore and develop not only his own talents, but to also put his skills and expertise to good use, as well as the techniques learned from his art teacher all those years ago, who still influences him to this day.

“While I am not really an art teacher myself as I have no professional training, I really enjoy the experience of painting with others and passing on any tips I have learned over the years.”

Gordon has been exhibiting watercolours, oil paintings and murals in the UK, Germany, Spain and the US since the 1970s and has won a great many accolades and awards. He takes his inspiration from a wide variety of sources, including his favourite post-Impressionists, Gauguin and Van Gogh, as well as, less obviously, from Walt Disney cartoons. But whatever the

“if You’re retiring to sPain, You need to learn the

language and adaPt to the culture of the countrY.”

3/

2/


custoMer profile

26

inspiration Gordon’s approach to his art is refreshingly down to earth. “You need to be in the right mood, find the right subject matter and just enjoy the process.”

Bird song And these three elements were very much in place when Gordon created his most recent project: “I have an aviary,” he explains, “with one parrot, one cockatiel and three budgerigars. It’s a pretty large aviary and tends to attract wild birds as well, so it’s really nice to sit outside on a summer evening and just listen to them all chirruping.

“I was sitting outside one evening, enjoying listening to the birds singing when I had an idea,” he says. “I’m a great music lover and I thought about a book which would combine music and drawing cartoons of birds.”

The result, the recently-published children’s book, “Plink, Plonk and the Plankettes,” has been written and illustrated by Gordon. Aimed at 6-8 year olds, it is an introduction to the musical instruments that make up an orchestra, with colourful cartoons bringing it all to life.

The book is also accompanied by a song which the children can sing along to and is available in both English and Spanish, thanks to a suggestion by one of Gordon’s neighbours.

“One of my Spanish neighbours is a teacher,” he explains, “And when she heard about what I was doing she suggested that we publish it in Spanish as well as English.”

Although it’s early days, the book has been extremely well received: “I’ve already been approached about writing a sequel,” Gordon says, “and it’s even being used to teach English in Spanish schools.”

Gordon wrote the book for the love of the process, rather than for financial reward so all proceeds are going to a charity close to his heart: DREAM-A-WAY, a Devon-based charity providing holidays and outings for disabled people and their carers.

Creative pursuits This isn’t, in fact, the first time Gordon has been published. He has written three books about his police career when he was with the Wiltshire Constabulary, titled ‘Fuzzy Memories’, ‘Fuzzy Moonraker Memories’ and ‘I Was, Sir, Your Fuzzy Obedient Servant.’ They were, he says, inspired by his family: “I have seven grand-children who all wanted to know about my previous life as a policeman, so I wrote the books for them.”

It may come as no surprise to learn that Gordon is a keen amateur photographer who has received a number of notable accolades for his work. He recently won a prize in a Spanish photographic competition for a picture he really didn’t expect to take.

“I had been walking along the seafront and fully intended to capture some seagulls in flight,” he recounts, “but then I turned round and happened to see five nuns from the local convent walking along the beach.” He immediately realised this could be a striking image and so he took that picture instead. The judges agreed and Gordon was awarded second prize in the competition.

Living in spain - the pros and cons Retirement abroad has clearly suited Gordon, who loves the life in Almeria. While still in the police force, he had always dreamed of retiring to a warmer and sunnier climate and, a few years before he retired, he bought a holiday home in Spain for the family.

This gave them the chance to learn the language and familiarise themselves with the country’s culture. This familiarity with the area also helped them decide where to move to, when they made the decision to re-locate abroad on retirement.

“Almeria is perfect for us,” he says. “It’s not over-populated, there are very few high-rise buildings, we’re at the edge of a national park, in a rural area and it has a wonderful climate.

“I also love the people – I like that they are so family-orientated. And as an artist and photographer, I love the quality of the light.”

Although painting, photography and writing books in a warm and sunny country might sound idyllic, Gordon sounds a note of caution to would-be retirees to a country such as Spain, advising them to think very carefully about how exactly they plan to spend their time.

“My advice to anyone retiring abroad is to ensure you have sufficient interests to fill your days. The novelty of living your life abroad as one long continuous holiday soon wears pretty thin.”

And he can’t stress enough the importance of being able to communicate with the locals. “If you’re retiring to Spain, you need to learn the language and adapt to the culture of the country. You can very easily get into difficulties if you don’t.”

Gordon would also urge retirees to consider their financial position very carefully and weigh up any financial complications that moving abroad might

create. “At the very least make sure that your pension is transferable and that you are able to live off it.”

Gordon arranged his bank account in Spain by speaking to a Lloyds TSB adviser. “You can rely on Lloyds TSB,” he says. And when it comes to taking out a mortgage in Spain, his advice is equally succinct: “Go to a reputable bank and

ensure you will be able to make your mortgage payments because Spanish banks can be quick

to sequestrate if you cannot.” ●

Further information on living, working and retiring abroad can be found at: lloydstsb-offshore.com/guidance or to find out how we can help call +44 1624 657223

shepherd in almeria, by gordon Maddock.


THe sPORT OF

kingsshoreline magazine issue 84 28

there are numerous ways to invest your money, but how many offer the thrill of owning a racehorse?

For sheer excitement, watching your own horse win a race must be hard to beat.

And it’s a prestigious activity to be involved in. Horseracing has a glamorous aspect to it that the vast majority of traditional investments simply can’t match. Stocks and shares can’t really compete with the opportunity to participate in the ‘sport of kings’.

The links to royalty are long-established and the Queen remains a noted enthusiast, as was her late mother. One of the first public appearances by the Duke and Duchess of Cambridge after their marriage in April was at the Epsom Derby.

But according to the British Horseracing Authority, it’s not just a pastime for the aristocracy and racehorse ownership is no longer the reserve of the elite.

Investing in a racehorse may or may not make you rich, but like classic cars, fine wines, antique jewellery or contemporary art, if horses are your hobby, they can be a fascinating and enjoyable alternative investment.

Adrian McGlynn is company secretary at bloodstock advisers, Weatherbys, which is also a 200 year-old bank, specialising in the provision of banking and accountancy services to the horseracing and bloodstock industry.

“Not many people,” he confirms, “come to horseracing purely to make money. More often than not it’s because they love horses, the sport and the prestige of it all.”

Horses for courses For any horse-lover chomping at the bit to get involved, it is worth bearing in mind that investing in horses is not for the faint-hearted and requires the same due diligence and consideration as any other investment.

While it is possible to make money on horses, the chances are that you’ll get a better return on more traditional investment options so it’s essential to have realistic expectations.

Investors in bloodstock are likely to experience both winning and losing streaks and should prepare themselves for this from the outset.

So, before taking the plunge, it’s a good idea to do your research, have a plan, and also to obtain expert advice from someone with solid credentials and a good reputation.

“Get advice from a reputable bloodstock agent first before you do anything else,” suggests McGlynn. “They’ll be able to tell you whether a horse is worth investing in or not. And have a good look at the pedigree of any horses you’re interested in. This will always dictate the value.”

although associated with the rich and famous, horseracing is one of the less obvious alternative investments. Fiona nicolson takes a stroll around the paddock and discovers that it’s not for the faint-hearted.


a colourful investMent

It is vital, too, to assess your appetite for risk before getting into the horseracing game to establish exactly how much you are prepared to lose and, if you do decide to go ahead, then stick rigidly to this figure.

“Horseracing is among the riskiest of all investments,” admits McGlynn, “so proceed with caution. Anyone you speak to in the horseracing industry should make this abundantly clear. And never forget that at the end of the day your investment is entirely dependent on how fast a horse can run.”

This highlights one of the main differences between investing in bloodstock and in more traditional

investments: you are dealing with a live animal, which may very well not be fastest on the day or could easily fall at the first fence. It could even become sick or injured and may be unable to run at all – all of which can have a decidedly adverse effect on your investment.

At a canterIf all of the above hasn’t put you off and you’re still determined to invest in a horse, then there are two main options: racing or breeding. How deeply you decide to become involved in either really depends on how much you’re prepared to pay, but even then it’s always going to be a bit of a gamble.

“You can very easily spend a fortune on a horse,” says McGlynn, “with no guarantee that it will be any good. But equally you could spend just a few hundred or a few thousand pounds on a horse which turns into a serious ‘money spinner’ that can then be sold on for a huge return.”

William Sporborg, Managing Director of Breeding Capital, which manages bloodstock assets believes that: “You have to embrace a higher degree of risk when investing in bloodstock and you can make good money. Also it generates a greater level of investor interest than many other investments.”

People often invest in a racehorse because they love horses and horseracing. But you still need to treat

“You can, of course, buY Your own horses, but to Make a success of it, You need lots of cash, lots of knowledge and lots of luck.”adrian Mcglynn, company secretary at bloodstock advisers, weatherbys.

it as you would any other investment, maintains McGlynn. “The best way to ensure a return on your investment is to be hard-hearted about your horses and sell them at the peak of their value.

“Once a horse has proved itself and demonstrated repeatedly that it’s good, it may then be tipped for a prestigious race such as Ascot or even as a favourite for the Grand National. That’s actually the point where an investor should seriously consider selling it. And there have been a number of instances when horses have changed ownership in a matter of hours before a big race. They are effectively selling on their asset when it’s at its least risky.”



30

All too often racehorse owners fall into the trap of becoming too attached to the track record of the horse. “You can easily get carried along with the glory of a successful horse,” says McGlynn, “and end up keeping it longer than perhaps you ideally should, from an investment perspective.”

While many investors choose to stake their money on arguably the more glamorous racing side of the business, others choose the option of breeding.

“This involves buying a mare for the foals she will produce and hoping the sales will be greater than the cost of the purchase. Others buy foals and nurture them till they are yearlings, then sell them,” explains McGlynn, “this is known as pinhooking.”

McGlynn’s belief is that breeding is the less risky option generally providing a better return than racing; “Some breeders can be extremely successful and investors can see costs repaid ten times over.”

At full gallop However if you’re absolutely determined to own your own horse outright then William Sporborg, who is also an experienced point-to-point jockey and commentator on amateur racing, would advise extreme caution. “You can, of course, buy your own horses, but to make a success of it, you need lots of cash, lots of knowledge and lots of luck. It’s very rare to come across the perfect combination of all three.”

A relatively popular, and perhaps less risky option, is shared ownership. This can be accomplished in a number of different ways. You can buy a horse by forming a company which owns shares in the horse, by getting together with a group of friends to buy the horse, or by joining a syndicate, to name only a few.

Harry Herbert, Chairman of Highclere Thoroughbred Racing believes that joining a syndicate is arguably the most straightforward approach.

“We arrange for small groups of between 8–20 people to share in two horses – it’s much more cost effective,” he says. “And it’s a good way to dip your toe in the water, bearing in mind not only the costs but also the risks of investing in a racehorse.

“If you buy your own horse outright, it will cost around 50,000 guineas for a yearling, then you’ll have the additional costs of around £25,000 for training, vet fees and so on.

“But if you join a syndicate then obviously you all share the costs and, of course, any winnings.”

And, according to Herbert, there are occasions when those winnings can be really quite substantial.

“We’ve had seven champions over the last few years and a world champion in 2010. Last year,

one of our horses, Harbinger, won at both Royal Ascot and the King George VI and Queen Elizabeth Stakes at Kempton. Twelve people have a share in that horse. They each invested £36,000 and received £400,000 each in return, tax-free.

“Another of our horses, Dominant was bought for 80,000 guineas and was sold last year for £1.1m.

“If you get a good horse, when it’s sold, it will be worth large sums of money. But equally,” adds Herbert, “if you get a ‘Dobbin’, at least you’ll have shared the costs.”

Herbert would argue that the odds of Highclere picking a ‘Dobbin’ are significantly reduced by the fact that the person responsible for buying all of their horses is John Warren, the Queen’s bloodstock adviser.

In recent years syndicates have managed to generate an air of glamour, attracting a mix of celebrities and famous figures from the world of sport. Herbert reveals that his company’s syndicate members include actress Elizabeth Hurley, TV presenter and explorer Ben Fogle, Manchester United manager Sir Alex Ferguson, and former England rugby player, and husband of Zara Phillips, Mike Tindall. He is quick to point out, however, that it’s not just for the glitterati.

“We have a very wide clientele, from chairmen of blue chip companies, through to a retired train driver, whose ambition had always been to own a racehorse. And he has done quite well out of it.

“Horseracing,” claims Herbert, “is for everyone. No matter who you are, you will be welcomed, there is nothing snobbish about it at all.”

While this may well be the case, as an investment horseracing remains about as risky as they come and is certainly not for everyone. There’s no denying the attraction, the glamour and the thrill of being involved in the ‘sport of kings’. And while it might be terribly easy to get carried away by the excitement of it all, if you want to come out of the experience a winner it might be wise to rein in your enthusiasm and treat horseracing as you would any other investment decision.

hoW to inVest in BlooDstoCK

P seek the advice of an expert

P check out the expert’s credentials and track record

P do your own research and keep learning

P assess risk and identify how much you are prepared to lose

P have a plan



31


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P transfer money between your multiple currency accounts at lloyds tsB international where your foreign exchange transfers are free of charge and quick and easy to use,

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Moving MoneY and foreign exchange MADe eAsywe are delighted to announce the introduction of our enhanced international Moneymover and Foreign exchange (FX) services for our international customers. we’re very conscious that your circumstances are more likely than most to require these kind of services, for example, an overseas property purchase or simply sending money back to the uK to family and friends. so that’s why we’ve made things as simple and cost effective as possible to help you to manage your money.

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P www.lloydstsb-offshore.com/foreign-exchange

foreign exchange


worldwide offices

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SOLUTION S dOWN1 left2 Mangoes3 alice springs4 eggcup6 overt7 last post8 announcement12 ejection15 Kitbags16 snatch18 nasal19 etna

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lloYDs tsB WorlDWiDe oFFiCes

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For general account enquiries, please contact the offshore phoneBank team tel: 08457 449900 or +44 (0) 8705 449900 from outside the uK.to request your offshore phonebank registration pack please call 08705 329802 or +44 (0) 8705 329802

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the hidden word is lineage


two-in-one crosswordwhen you have filled in the answers, the letters in the grey squares spell out a word found within shoreline magazine

QUIcK cLUES P AcROSS

1 soft drinks (8)5 roasting cover (4)9 woodland growths (5)10 trained with firearms (7)11 Be the overall winner (4,3,2,3)13 Biblical character (6)14 vipers, for example (6)17 shipments (12)20 understanding (7)21 precise (5)22 north african river (4)23 stretch of water north of russia

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cRYPTIc cLUES P AcROSS

1 i am shortly to be in starring role with points for drinks (8)

5 undermine by sword (4)9 Mushrooms give pleasure to soldier (5)10 north london team of artillery men (7)11 succeed in exposing oneself at summit

(4,3,2,3)13 hopes jolly leader has arrangement

for multi-coloured coat (6)14 sneaks around reptiles (6)17 cargo fraudsters take notice of models (12)20 the idea is to be visible (7)21 remove former part of play (5)22 now i leave egypt, first, by river (4)

23 he saw tie floating in northern water (5,3)

cRYPTIc cLUES S dOWN

1 abandoned revolutionary tendencies (4)2 servant leaves fruits (7)3 adventure heroine leaps up and lands

in australia (5,7)4 Finally remove extremely large bra from

the breakfast table (6)6 ‘up the junction’ is candid (5)7 Memorial tune played for evening

collection (4,4)8 the year for international organisation

to seal declaration (12)12 ice on jet forced removal (8)15 King shoots it between the hand luggage

(7)16 grab poles at church (6)18 in the nose, find what’s grown as a lump (5)19 alien backs article on volcano (4)

QUIcK cLUES S dOWN

1 opposite of right (4)2 tropical fruits (7)3 place in australia (5,7)4 Breakfast crockery (6)6 conspicuous (5)7 Bugle melody (4,4)8 Bulletin (12)12 Banishment (8)15 Baggage for gear (7)16 steal (6)18 connected with the nose (5)19 sicilian volcano (4)

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ANSWERS ; PAGE 33>

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