Case Study:
Robert


When Robert was introduced to us by a long-standing Index client, George, he was on the point of selling his business, which, although he had spent 15 years building it, he was able to do at a relatively young age of 42. Married for 12 years he and his wife Catherine had two young children, with twins on the way! Robert was going to receive a substantial sum, making him and his young family financially independent for the rest of their lives. Gifts in trust for the benefit of his children were in his mind and he wanted to achieve as much tax efficiency with his capital as possible.

Investment, Tax, Legacy


We advised Robert to consider transferring some of his shares, prior to sale, to a discretionary trust for the benefit of his children. This had the considerable benefit of deferring capital gains tax on this portion of the sale proceeds as well as leaving Robert and Catherine free to make gifts up to the nil rate band of £325,000 each post the sale. If he had waited until after the sale to make a gift he would have been restricted to a total of £650,000 if he wanted to avoid paying tax on the gift to the trust.

Enlisting the help of a leading private client lawyer to whom we introduced him he transferred sufficient shares to establish a trust with assets of £1 million after the sale of the business was made. By carefully complying with the rules regarding business property relief and gifts into trust, as well as the capital tax gains deferral, the lawyer was able to devise a course of action which resulted in tax being payable at 10%. This was highly preferable to the alternative of paying 20% for the gift into trust and capital gains tax potentially of 28%.

At such a young age, Robert wanted to continue in business and reserve some of his capital for this purpose; using our financial modelling software we helped him determine how much capital he needed to invest in order to provide him and his growing family with quality rising income now and in the future. Having identified his core capital this was invested in a globally diversified portfolio utilising a tax wrapper which means no tax is payable on any income drawn in the next 20 years and that no UK taxes are payable on gains and income within the portfolio, no matter how long this is held.

In addition, both Robert and Catherine made gifts of £325,000 each to the children’s discretionary trust; again, the proceeds were invested tax efficiently and the trust may never pay tax throughout its life.

The Result


  • Robert and Catherine have established a trust fund for their children and potentially their grandchildren with starting capital of £1,550,000 which is completely outside of their estate.
  • Investing £5 million utilising a tax efficient wrapper which will mean they will never, under current rules, pay tax on gains and income whilst they hold it and starting from when they first take income, they will be able to take £250,000 a year without paying UK taxes.
  • Retained substantial capital to fund Robert’s new business venture.
  • Retained sufficient capital to purchase their dream home, a substantial property set in several acres with stables and paddocks.
  • Using our sophisticated financial modelling software they have established that they can continue to fund the family’s lifestyle into the future and so have achieved peace of mind.

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  • Chartered Institute For Securities & Investment
  • Financial Planners Chartered