In last week’s Note from Caroline we looked at some of the worrying trends which can be summarised as follows
Lockdown is costing the Treasury £2.4 billion a day, many businesses are suffering
Post Covid-19 the gap between the haves and have nots is going get bigger as will the tension
Boris Johnson wants to win a second term maybe he would like the scalps of rich tax cheats who tried to hide their money offshore
Governments across the globe now have the information they need to pursue tax cheats with money offshore
Mel Stride Financial Secretary to the Treasury said it will pursue people who ‘avoid or evade’ taxes if they keep it offshore,
Many people believe they are legitimately avoiding tax with monies offshore
What should clients do now - make sure their offshore accounts are watertight with a second opinion
If investigated clients must act quickly to check that HMRC is not abusing its power by seeking a Judicial Review
Last week’s Podcast Professional was Alison Parry Head of Private Wealth at Intertrust listen to hear what Intertrust is doing to prepare their clients
What happens if the Governments become too powerful?
Sergei Pugachev is a Russian entrepreneur, and the founder of what was once Russia’s leading private bank (Meshprom). He was an oligarch, and one of the few who wielded power at the Kremlin under President Yeltsin. He thought his power would continue under President Putin. But Putin said he would ‘rid Russia of the oligarchs as a class’ and he meant it.
In July 2000 he summoned the top 21 oligarchs including Pugachev to a meeting where he told them that their political power at the Kremlin was over.
The BBC i Player documentary ‘The Countess and the Russian Billionaire’ is the story of Sergei Pugachev and his wife Countess Alexandra Tolstoy filmed over 5 years as he was pursued by Russia for his billions. During the story we see how this pursuit led to self imprisonment in his French Chateau to escape and survive.
Sergei met the English beauty Alexandra Tolstoy in 2005 after her previous marriage (to a penniless Cossack horseman) fell apart.
The documentary films their fabulous wealth with homes across the globe including two adjoining homes in Chelsea; one for them and the other for their children and nannies.
During the financial crisis of 2008, Meshprom received emergency assistance from the Russian Central Bank which it then wanted back. Pugachev claimed that the Russian State’s pursuit of him was politically motivated, and resisted the claims.
Pugachev hid his money in a series of trusts, but ill advisedly reserved too many powers for himself as Protector. When the case came before the court in the UK, it upheld the claims of the bank that inter alia the trusts were illusory and shams, and they provided no protection from the Russian state and its claims against Pugachev personally.
During this harrowing time the family in Chelsea began to notice they were being watched. Someone threatens to cut off their son’s finger.
Sergei’s assets are frozen and he leaves the UK to live in their French Chateau where he becomes a self imposed prisoner. He asks Alexandra and the children to join him in exile. She refuses and allegedly he becomes abusive. She escapes triggering a split and divorce.
This case is extreme. But it gives some indication how unpleasant an investigation by a Government can be, especially if you do not know what information it has about you.
As I mentioned last week, Mel Stride, Financial Secretary to the Treasury has said that it will pursue people hard who avoid or evade tax in the UK by keeping their wealth offshore.
Is this not hypocritical since the Tax legislation clearly provides tax incentives for foreign UK residents to keep their wealth offshore?
Surely now is a good time for the Treasury to take a leaf out of the tax book of Switzerland? As a Fellow of the Chartered Institute of Taxation, I would not have thought it difficult to change the tax benefits for foreign UK residents to include trusts set up in the UK with UK situs assets. This would bring transparency, jobs for our Professionals and a feather in Boris’s cap who could claim that he has put an end to the benefits of hiding wealth offshore. It would also remove the threat for our clients for an investigation.
With wealthy people living in the UK, their money would boost the UK economy in general; restaurants, plumbers, architects, interior designers, estate agents and everyone else who works for clients including our Professionals
This week’s Podcast Professional is Managing Director of Oak Group, a newly formed offshore service company, Paul Shreibke. As a tax and trust specialist, I ask him what he thinks of the powers of HMRC and his experience of working with it in an investigation
If you would to find out more about our Podcast Professionals or would like to join our project to create the definitive podcast library of information for the UHNW community contact deborah@garnhamfos.com or call 020 3740 7423.
Keep safe, keep strong and keep well.