Business

ViewPoint: Why London is the true global home of family business

Photo by QQ7/iStock / Getty Images
Photo by QQ7/iStock / Getty Images

With instability in the Middle East and Russia ongoing, businesses and families in those regions are increasingly looking to move away from their home countries. Where do they want to go? London.

Just like Switzerland it offers political and physical safety for their families, and the rule of law, but it is far more cosmopolitan. These days London is the number one location for wealthy families who wish to relocate.

Several groups in particular are coming to London. We have seen a lot of Middle Eastern families relocate to the capital since the Arab Spring, especially from minorities such as Coptic Christians. Some of them have always had issues in the Middle East but the rise of Islamic State and other fundamentalist groups, which have little or no tolerance of minorities, means they want to come somewhere that is safe, welcoming, liberal and open.

Others are relocating from the Gulf area, where elements of Shariah Law make inter-generational planning difficult especially for those owners of large businesses who wish to implement modern styles of governance whilst still keeping relevant members of the family involved. If Gulf States families have educated their children in the West they often have, for example, daughters returning from Harvard Business School who are extremely capable and probably would be better at running the family business than a playboy son.

In some states it is impossible to run a business if you are a woman. Families in that position are increasingly relocating their business headquarters to London.

Then there are people from the CIS – the former Soviet Union – who are looking to move their money somewhere more stable and predictable. They like the quality of life, and especially value the educational opportunities offered by British private schools. For them it is also about risk-mitigation. Russia has a much more attractive tax rate than the UK and some Russians have made pretty spectacular returns on their investments over the years but being located there is clearly risky for currency, political and geo-political reasons.

For all these groups another reason the UK appeals is the potentially beneficial tax treatment that may apply to individuals who are UK resident but non-domiciled. For these individuals electing to be taxed on the remittance basis may limit the amount of tax they pay on assets which are not brought to the UK. Non-dom status is often perceived as controversial and critics say that non-doms are tax-avoiders – a statement which is factually incorrect.

In our considerable experience of dealing with “non-doms” they are the last people who would wish to secure any sort of aggressive tax advantage. In reality their reasons for being in the United Kingdom are never driven by tax and therefore to jeopardise their position by evading or avoiding tax is counter-intuitive.

In fact, non-doms tend to be some of the most assiduous tax payers. Experience tells us that there are several other categories of taxpayer who are far more likely to try to evade or avoid tax. Some members of older generations whose parents or grandparents were taxed at 98% have an ingrained attitude that all taxation is bad.

Many high income earners are also ruthlessly exploited by those selling tax schemes or tax “efficient” investments; it often seems that there is a direct and lamentable correlation between high earners and the use of aggressive tax avoidance. We find that people relocating to London don’t think like that about tax at all. The image of billionaires coming to the UK to game the UK tax system is just not a reality and says more about how ill-informed debate on this issue is.

The UK’s finance industry has, in modern times, focussed on institutional and corporate wealth but in many other countries big business is as much, if not more, owned and controlled by individuals. As more wealthy families from all over the world take advantage of the benefits London has to offer, the capital is becoming a hub for family businesses with roots all over the world. Arguably it, more than anywhere else, is the true home of global family business.

Nick Rucker is a founding partner of Berkeley Law, a London-based, boutique legal and wealth advisory business

 

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