The UK’s crown dependencies and overseas territories are unlikely to suffer following the Brexit vote, and may even be a model for a post-EU UK says Richard Wilson QC
Even before the UK’s decision to leave the EU, offshore jurisdictions faced a number of significant challenges: increased pressure to provide ‘transparency’ (whatever that really means in practice), hostility towards low tax regimes and an apparent mistrust of international financial centres by government and media alike.
One might be forgiven for thinking that Brexit is yet another problem for the offshore jurisdictions. But from the perspective of the offshore jurisdictions and those who use them to assist High Net Worth Individuals to structure their affairs, Brexit may be a limited threat, and indeed may well create opportunities for future prosperity.
From the perspective of a lawyer working in the private client field, it is a relief that Brexit is unlikely to require significant change to the substantive laws governing trusts, estate planning or taxation of HNWIs. These are, mercifully, areas of law where EU law has had little impact and the extrication of the UK from the EU will therefore not create any significant difficulties.
Related
Even where the EU has previously intervened (with the EU Succession Directive) the UK chose not to participate. Therefore the ability to create structures (whether they be trusts, foundations, companies or partnerships) will remain, and the offshore courts are likely to be kept busy with the disputes that often arise in relation to them. As far as England and Wales is concerned, the position concerning the enforcement of judgments in the EU is likely to be an area where change may come, but the offshore jurisdictions are likely to be largely unaffected.
The impact of Brexit for offshore jurisdictions is likely to be less direct but may be significant nonetheless. Because of the position of its crown dependencies and overseas territories, the UK has always seemed to have a greater understanding of the role of the offshore world and therefore been more sympathetic than other EU countries (any trustee that has had to deal with an investigation by French tax authorities will probably agree with this view).
As such, the UK has been in a position to ensure that the EU approach to issues where there is a need of global co-operation (such as transparency, tax competition and financial regulation) is perhaps less hostile to the offshore world than might otherwise have been the case.
It remains to be seen whether a post-Brexit EU will push even harder for measures that will undermine the attractiveness of offshore jurisdictions as places to hold wealth. However, if it does, I would fully expect the offshore jurisdictions to do what they have always done: innovate in order to meet the challenges that face them and create structures that will attract HNWIs.
Content from our partners
We have seen it with British Virgin Isles international business companies, STAR and VISTA trusts, foundations and the introduction of firewall legislation, all intended to make the holding of wealth in particular jurisdictions more attractive and there is no reason to believe that Brexit will change that approach. Nor is there any obvious reason why HNWIs from around the world will be deterred by Brexit from holding their wealth in offshore jurisdictions.
One possibility (albeit perhaps a small one) is that outside the EU, the UK may seek to reinvent itself as an offshore jurisdiction. Some have suggested in the past that the introduction of international trust and international business set-ups similar to those in the offshore world, together with a new tax regime that encourages non-doms to remit funds to the UK, rather than keep them abroad, would make the UK an extremely attractive place to hold wealth. At present there is no political will to take such a bold step, but if the more pessimistic predictions of Britain’s post-EU economic outlook prove to be true, might the UK look to a bold new strategy to boost its financial sector?
Richard Wilson QC is a barrister at Serle Court
