In the quest for resident non-domiciled clients, UK private banks will need to put technology and a customer-centric approach at the heart of their proposition
The UK has faced its fair share of unprecedented challenges in recent years, from the implementation of Brexit to the consequences of the global Covid-19 pandemic, but the change and uncertainty has done little to dampen foreign interest in the UK as a destination of choice in which to live and invest.
The UK’s position as a financial hub for trade and wealth is far from a new phenomenon; indeed, Britain’s non-domiciled regime – whereby residents can live in the UK while continuing to have their primary home or domicile outside of the country – can trace its roots back to the 18th century. While the rules have changed considerably since they were first introduced to shelter those with foreign property from wartime taxes, the appeal of the UK for high net worth and ultra-high net worth individuals remains undiminished.
Armando Rosselli, head of wealth advisory and UK resident non-domiciled (RND) clients at Standard Chartered Private Bank says: “The language, culture, high quality educational system, access to capital markets, a stable rule of law and a strong regulatory framework are seen as key attractions for foreign domiciliaries. Additionally, London is home to a wealth of financial specialists. It is, in short, a global boutique for private wealth.”
Despite concern that the government crackdown on the RND population with the abolition of limitless non-domiciled status in 2017 would lead to a mass exodus, wealthy individuals continue to target the UK.
Data from HM Revenue & Customs revealed there were 75,700 individuals with resident non-domiciled status in 2020, contributing almost £7.9bn in income tax, capital gains and national insurance receipts. However, this figure does not reflect the full contribution that these individuals and their businesses make to the UK economy as a whole. In addition to their investment in the UK property market, arts and culture, their role in job creation, human capital development and diversity cannot be underestimated.
“In the wake of Brexit, the UK has sought to position itself as a global, free trade economy and foreign investment will be vital to achieving this. While some RND wealth is inherited, a great proportion today is generated through business and entrepreneurship, and this has untold benefits for UK economic growth,” Rosselli says. “It’s important that the UK continues to create a welcoming environment for individuals and families to access the type of support and services that put the UK ahead of other jurisdictions.”
Understanding UK tax requirements
With this influx of new arrivals to the UK coming from Africa, Asia and the Middle East, RND individuals and families are increasingly looking for a private bank with an extensive knowledge that can support them both at home and abroad.
Moving to a new country, particularly from emerging markets, can be a daunting and complex undertaking. The UK tax system can be difficult to navigate, especially for clients from jurisdictions around the world where little or no tax is due on income and gains, so it is vital that they have access to suitable advisers to ensure they understand the implications of UK tax.
Under current rules, a UK RND electing to pay on the remittance basis only pays UK tax on money earned in the UK but is not subject to tax on money made overseas, unless they choose to bring or benefit from these monies into the UK. If a RND chooses not to pay tax in the UK on overseas income and gains, they must pay an annual charge of £30,000 if they have been resident for at least seven of the previous nine tax years, and £60,000 if they have been resident for at least 12 of the previous 14 tax years.
Standard Chartered’s footprint across, Asia, Africa and the Middle East puts it in a unique position to provide private banking services to both new arrivals and existing RND clients out of its London Advice Centre, allowing clients to retain the same team and touchpoints they had in their country of domicile.
Rosselli says: “Our London Advice Centre offers a wealth of investment opportunities, ranging from equities, fixed income, structured products, mutual funds, exchange-traded funds and also wider discretionary and advisory solutions and often clients from emerging markets will also retain an appetite for investments in their region or country of domicile, for example African debt or sustainable investing focused there, which we can provide access to.”
He adds that RND clients may be familiar with the investment arrangements in their country of domicile and may want to continue investing in that same manner. “As a private bank, it is critical that clients have access to local knowledge and markets and work alongside a team that has an understanding of their culture and investment preferences and behaviours” he says.
Understanding the tax, investment and banking intricacies of moving to the UK can make a huge difference to how RND clients navigate their move and establish themselves in the UK.
The impact of technology and globalisation
To ensure the British financial services industry remains a persuasive player in international finance, there has been a sense of urgency among private banks to move to a more technology-driven, client-centric business model. While financial services have often stood accused of being slow to adopt digital transformation, the speed at which digitisation is shaping every aspect of business means banks cannot afford to be passive.
For Standard Chartered, technology plays an invaluable role in enabling clients to overcome the challenges of establishing a new banking relationship in a foreign country. “In a lot of cases, RND individuals will need their offshore bank accounts to be structured in advance so to identify different types of returns from a UK tax perspective,” Rosselli says. “Whilst we do not give tax advice, our technology enabled platform is based on safeguards which automatically segregate cashflows. This level of automation reduces the likelihood of manual errors and decreases the administrative burden for clients and managers, meaning there is greater focus upon building and nurturing client relationships face to face for mutual benefit.”
But while private banks are tailoring their proposition to meet the growing needs of RNDs, Rosselli believes the government can also do its part to help the UK retain and enhance its position as an attractive and stable location for entrepreneurs to establish and grow business.
He says: “With the world becoming increasingly globalised, there is tougher competition between jurisdictions to attract and retain private wealth and entrepreneurs. At present, there is a great deal of wealth that sits outside of the UK and whilst we have seen some reasonable success with the Business Investment Relief, more should be done to facilitate inward investing and reduce hindrance to entrepreneurship, a challenge the government should look to take on.”
Rosselli also believes the UK would benefit from a clear, fair and respected system of immigration, which would widen opportunities for direct investment into the UK, including attracting private wealth, following the government’s decision to scrap the Tier 1 investor visa.
“As with many other global economies, the UK has endured difficult times of late and we don’t want to lose our position as a global financial epicentre. Creating a supportive and welcoming environment for foreign domiciliaries will ensure that it continues to attract wealth and investment,” he concludes.
Despite the challenges of the past few years, and changes to the UK’s visa system supporting foreign investors, the UK remains a promising location for RND investors, particularly because of the strength of its banking infrastructure and financial services sector.
For more, please visit http://www.sc.com/uk-rnd
Promoted by Standard Chartered