Wealthy widows race to leave Britain before the Budget

High net worth widows are rushing to move amid rumors of wealth taxes and international asset raids, but things are more complicated than they think, says Sophie Chapman

Conflict resolution is a growing field and the UK (especially London) undoubtedly remains a magnet for wealthy international couples looking to resolve their differences. Recent decisions in cases such as Stand has assured wealthy people that the courts will protect pre-marital assets. Instead, the decision in potanin This case shows financially weaker international couples that the UK is a safe place to settle their financial claims.

There is a tug-of-war between the UK as the appropriate jurisdiction for the protection of assets after divorce and the protection of those assets during the marriage as a result of changes to the UK tax regime.

Following last year’s Budget and changes to the non-domicile tax regime, Stewarts saw a lot of inquiries about international relocation. With some ‘wealth tax’ rumors circulating again ahead of the National Revenue and Expenditure Budget, this could be the final straw for international families looking to leave the UK. Stewarts has seen increasing demand from wealthy clients looking to move to more tax-favorable jurisdictions, including Italy, Dubai and Israel.

Raised the stick

The impact of VAT on school fees and anticipated tax changes is also likely to extend beyond wealthy international families and inspire British professionals looking to move abroad for a more affordable and high-quality life. However, many do not realize that for parents who are separated, moving children between countries (even for a short time or on holidays) needs to be agreed upon by both parents. Parents who want to return ‘home’ to their home country, or parents who want to change jobs, cannot simply ‘accompany’ their children without the consent of the other parent or a court order. If a family is used to living in the UK for a consistent period of time, removing a child without consent is likely to constitute child abduction. This will increasingly burden those trying to determine what is best for their family and what is best for the family’s overall financial well-being.

There is no ‘one size fits all’ approach. Those who want to move but cannot get consent from the other parent must apply to a UK court to determine the outcome. The child’s welfare will be the court’s primary consideration in determining whether parents can leave with their child. Relocation solely for tax purposes will not be convincing if the arrangements in the new jurisdiction do not also prioritize the best interests of the children.

If parents were required to apply to the courts for permission to move, they would be at the mercy of an already overburdened court system. Even if they applied tomorrow, it is unlikely they would get a hearing and a final resolution before the start of the next tax year, especially in central London. They also risk putting the entire outcome in the hands of processes they cannot control.

When differences of opinion occur, creative solutions are needed. Research carried out earlier this year by Stewarts found that 35 per cent of divorced people would seek alternatives to going to court if they wanted to go through the divorce process again.

If a decision is required before the start of the next tax year, the only other option for parents in this scenario is to agree to a private arbitration process. This can reach a decision much more quickly and behind closed doors, and often results in a better solution for both parties.

Sophie Chapman is a partner in the divorce and family team at law firm Stewarts