By James Heathcote, Associate Director at Lancaster Knox

Introduction

In my role advising high net worth individuals, families and family offices at Lancaster Knox, I am very lucky to spend a lot of time working with advisors across multiple jurisdictions (with some of the best collaborations coming from the PCD Club network!). International advisory work is my passion, ranging from estate planning, trust creation and property structuring to shareholder agreements and family disputes. Working out how different countries' tax systems interact is fascinating, challenging, and thoroughly rewarding when you find the right answer.

However, everyone will be acutely aware that the international landscape is changing rapidly. A senior colleague at a previous firm once told me never to use the word "offshore" because of the often-negative connotations, and that has stuck with me. Part of our job as advisors - whether in the tax, legal or wealth planning world - is to promote responsible and sustainable structuring that respects both the letter and the spirit of the law. Long gone are the days of complex and convoluted 'solutions' being seen as acceptable, and we must now all be mindful of the risk of both challenge from tax authorities around the world and the potential reputational damage to us, our firms and our clients.

Disclosure and cross-border reporting

Once we venture into the world of cross-border advice, this becomes even more acute. Not only do we have to think about our home jurisdictions' tax regimes, but also tax regulation overseas. With the huge shift towards global transparency, there really is nowhere to hide and, with professional networks such as PCD at our disposal, no excuse not to take professional guidance from a local advisor.

Most people will be familiar by now with the Common Reporting Standard ('CRS') and the Foreign Account Tax Compliance Act ('FATCA'), whereby information is automatically exchanged between relevant jurisdictions. However, relatively fewer advisors are aware of the impending EU Mandatory Disclosure Regime ('MDR'), introduced by EU Directive on Administrative Cooperation 2011/16 ('DAC6'). This requires intermediaries, and sometimes end clients themselves, to disclose tax planning arrangements to the local tax authority where it meets certain hallmarks. Penalties for non-compliance with DAC6 can be severe, and the rules are complex, so anyone who has not yet begun planning for MDR should do so urgently.

DAC6 also means that multiple advisors in different jurisdictions may have an obligation to report the same information in respect of the same transaction for the same client. This means that the global landscape becomes even smaller, and the importance of understanding disclosure requirements becomes even more paramount.

We also, of course, have an ever-increasing number of 'beneficial ownership' registers for property, companies and other structures. This topic would take up several articles on its own!

Is it the end for non-UK jurisdictions?

So does this mean the end of international tax planning and structuring opportunities outside the UK? Absolutely not. There are, as every reader and member of PCD will know, any number of reasons why the 'offshore' jurisdictions still offer valuable, legitimate and entirely sensible planning. Strong regulation and experienced advisors, as well as close geographic and legal connections to the UK in the case of the Isle of Man and Channel Islands, means they are a real option for those looking to establish a tax-neutral structure.

Of course, care does need to be taken, and ignorance of international rules won't be any excuse in front of a tax inspector. Taking local advice in the relevant jurisdictions is crucial, which is where the importance of establishing a strong network with other global professionals really does come into its own.