How the UK’s financial sector continues to woo foreign investors

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