Tell us a bit about Sovereign and your role within the company
I am the Managing Director of Sovereign’s UK operations, subsidiaries of our global Group. We now have 26 offices worldwide, have just celebrated our 30th anniversary, and we are represented by a remarkable cross-section of 410 members of staff and management.
Sovereign is one of the world’s largest and most recognised independently owned organisations, whose core business is setting up and managing local and overseas companies, overseas trusts, international pensions and other structures to meet the specific personal or business needs of our clients. Typically, these needs would include private client tax planning, wealth protection, structuring arrangement for property investment, facilitating cross border business, offering Pension Trustee services to persons seeking to retire overseas and assisting SME’s to expand and establish themselves in new countries and regions of the world.
What are the key services you offer to your clients?
Traditionally, from our inception in 1987, we have been offering private client services to higher rate tax payers, and those who are international in focus.
One of our key services, is assisting clients who might find themselves living in one country but undertaking business and investments in another. Particularly for non-British persons, there are many ways Sovereign can help such clients achieve their required objectives. Non-UK doms can often take advantage by establishing an overseas trust especially for the accumulation of a range of assets. The acquisition of an overseas or UK investment made through an underlying overseas onshore, mid-shore, and/or offshore companies but owned by a trust, represents just one viable solution but such planning does depend on the specific circumstances of each client.
Sovereign is also a market leader when it comes to the provision of International Pension Trustee Services, both in the UK and for those who wish to retire overseas, with a broad proposition that includes: Self Invested Personal Pensions (SIPPs), Small Self-Administered Schemes (SSAS), Qualifying Recognised Overseas Pension Schemes (QROPS); Qualifying Non-UK Pension Schemes (QNUPS); International Pension Plans (IPPs); and Corporate Pension Plans.
Have you found an increase in clients wanting to relocate to various other countries due to the uncertain state of the UK economy at this time, especially matters involving Brexit?
Not necessarily but I think uncertainty may increase as we get much closer to 2019. However, there is still demand from overseas companies seeking to enter the UK, as they look to take advantage of the weaker Pound, the low UK Corporation Tax, the helpful taxation laws for non-UK doms, and the competitive interest rates for UK property investment. It is evident that inward UK investment is not slowing and it appears that non-British investors are seeking to become formally established in the UK prior to the official Brexit date.
Many businesses, local and international seek to establish their corporate headquarters in the UK, but there will be increased demand to establish subsidiaries in other parts of Europe, as a safeguard as we get closer towards Brexit. Take Hong Kong as a prime example: prior to Hong Kong reverting to the Chinese, many Hong Kong corporations elected to have a business presence in Singapore. It wasn’t that they wanted to migrate away from Hong Kong but as there was uncertainty about the changeover in administration, notwithstanding the perceived unknown consequences, having a registered base in Singapore provided them with options. Despite the uncertainty at the time of the handover, Hong Kong remains one of the world’s largest trading centres and I am very much confident that the UK will mirror its success come Brexit.
How have the recent Property Buy to Let (BTL) tax relief cuts impacted Sovereign?
The number of enquiries, and the willingness of local and international clients seeking to purchase property in the UK has not been hindered. I have noticed that there is an increased concern with overseas persons seeking to purchase property in the UK because they have not been so sure and conversant about the new legislation, which has been subject to many changes in recent years.
As we head toward 2020/2021, I foresee existing private landlords converting their property portfolio from their personal names to a UK or overseas company. This is due to mortgage interest deductions being mostly withdrawn from private landlords, however this does not yet apply to companies, so the transfer of existing real estate, which will always be a challenge to corporates, is an area of potential business growth. Tax laws and the prevailing tax rates, especially Stamp Duty Land Tax (SDLT) are somewhat harsher than they used to be, which may perhaps be deterring some overseas investors. However, for commercial property acquisitions, the tax landscape is clearer, fairer and less complex. Commercial property is a serious area of growth. Stamp Duty Land Tax (SDLT) rates are low – maximum 5%, and for non-UK doms, Capital Gains Tax (CGT) and Inheritance Tax (IHT) benefits can be substantial, especially if a fully managed Isle of Man VAT registered companies are deployed.
So, you can help clients who are investing in both commercial, residential property and other property?
Yes, absolutely! We help clients in various stages of their property purchase, regardless of the type of property that they are acquiring, and regardless of their citizenship, domicile and tax residency status.
For example, take a client seeking to acquire land for development of residential dwellings intended for sale. Regardless of the client’s country of residence, we would look to establish and administer a UK company. This is due to the Government’s revised legislation, which ensures that the trading of UK land, regardless of the type of entity used, would always be subject to UK Corporation Tax (CT), notwithstanding that the UK CT is the lowest in the G7 – and possibly will be reduced further from 19% to 17%.
This is why Sovereign work so well with Enness, our preferred mortgage brokerage. It is highly appropriate that Enness sources finance solutions for all types of purchase, starting with the purchase of land for development and sale in this instance. Finance levied against a UK company is fully deductible against net profit, and even the shareholders can use an EU company to lend in the deposit and at commercial rates, which again should be deductible against CT.
If you would like to understand more about Sovereign’s offering, you can visit their website here: https://www.sovereigngroup.com/.
You can also get in contact with Enness today – we are more than happy to answer any of your questions about upcoming tax reform, and discuss your financing situation no matter your citizenship or residency status.