Figures that could offer an insight into the volume of UK-domiciled directors with assets abroad are hard to come by.
But where the reverse is true, with business people registered in foreign countries holding UK-based assets, we do have some clues - and it is not an insignificant number.
According to experimental analysis published by HM Revenue & Customs in 2020, 1.1 per cent of companies operating in the UK were foreign owned, yet they accounted for 13.4 per cent of total UK company assets.
Assuming there is anything like the same asset ownership internationally among UK-based business owners, this represents a huge amount of wealth.
At some point the assets must change hands.
Given that a study released earlier in 2023 by the National Will Register revealed 40 per cent of UK adults are yet to discuss financial instructions on their death with anyone, it is fair to say there is a sizeable gap in estate planning in the business community.
Fizzling into thin air
Estate planning is complex, even when handled efficiently. When foreign assets are involved, arrangements can be downright vexing.
That leaves the person who intends to pass on their wealth - and all of their beneficiaries - at risk of legal problems, emotional strife and, ultimately, finances fizzling into thin air.
Some of the problems that can befall business people and their beneficiaries when considering an estate that features foreign assets include:
- Longer and costlier probate processes
- UK will invalidity in foreign jurisdictions
- UK inheritance tax applied to overseas assets
- ‘Conflicting intentions’ cancelling UK wills
- Banking and EU regulation issues
- Oversight of forced heirship rules.
It must be remembered that some items listed above apply only in certain jurisdictions. This is especially pertinent as more and more emerging economies consider what regulations to put in place.
Planning early to get ahead of these potential problems, and to understand the extent of regulation around the world, is therefore crucial. That might sound like simple advice - but it really matters.
It is unsurprising that directors get so tied up in the cut and thrust of growing their business that they ignore estate planning, particularly as it’s so complicated.
If it is not tackled from the word go, however, wealth that has been amassed over decades can easily become tied up in red tape. It could be even harder to extract if death comes suddenly with no estate provision in place.
Don’t leave your assets in financial quicksand
To illustrate the tricky nature of international estate planning, let us consider a notional situation involving a UK-domiciled director who is a second-generation Asian immigrant (a further example can be read in the case study box later in this article).
She has both assets and intended beneficiaries in either India, Pakistan or Bangladesh.
In addition to her UK-based business interests, she also inherited part of her family’s longstanding agricultural assets. So far, the assets have not been declared in her name via foreign Land Registries. This puts the land at risk of dispute by distant family members.
Nor has the land been declared on the British probate forms required as she is domiciled in the UK, and this risks her exposure to UK authorities, which would no doubt seek to claim any inheritance tax due.
