Wealthy divorcees race to leave Britain before the Budget
High net worth divorcees are rushing to relocate amid rumours of wealth taxes and a raid on international assets, but it’s more complicated than they think, says Sophie Chapman
Conflict resolution is a growth area and England (London in particular) undoubtedly remains a magnet for wealthy international couples seeking to resolve their disputes. Recent decisions in cases such as Standish have reassured wealthy individuals that courts will protect pre-marital assets. Conversely, the decision in the Potanin case indicates to international, financially weaker spouses that England is a safe haven for resolving their financial claims.
There is an emerging tug-of-war between England being the appropriate jurisdiction for wealth protection on divorce and protecting that wealth during a marriage’s lifetime as a result of changes to England’s tax regime.
After last year’s Budget and the changes to the non-domicile tax regime, Stewarts saw a flurry of international relocation enquiries. With several ominous ‘wealth tax’ rumours again circulating ahead of the Budget, this could be the final straw for international families contemplating leaving England. Stewarts has already seen an uptick in enquiries from affluent clients looking to move to more tax-favourable jurisdictions, including Italy, Dubai and Israel.
Upping sticks
The impact of VAT on school fees and the anticipated tax changes is also likely to extend beyond wealthy international families and inspire British professionals seeking to move overseas for a more affordable higher-quality of life. However, many don’t realise that for separated parents, moving children between countries (even for short periods or holidays) needs to be agreed between both parents. A parent who wants to return ‘home’ to their country of origin, or a parent who wants to relocate for work, cannot simply ‘up sticks’ with their children without the consent of the other parent or a court order. If a family has been living in England habitually for a consistent period, removing a child without consent is likely to constitute child abduction. This will further strain those trying to navigate what is best for their family and what might be best for the family’s overall financial well-being.
There is no ‘one-size-fits-all’ approach. Those who want to relocate but cannot get the agreement of the other parent will be required to apply to the English courts to determine the outcome. The child’s welfare will be the court’s paramount consideration in determining whether a parent should be allowed to leave with their children. Relocating solely for tax purposes is unlikely to be persuasive if the arrangements in the new jurisdiction do not also prioritise what is in the children’s best interests.
If a parent is required to apply to the court for permission to relocate, they will be left at the mercy of an already overburdened court system. Even if they issued an application tomorrow, they would be unlikely, certainly in central London, to get a final hearing and resolution before the start of the next tax year. They also risk placing the entire outcome in the hands of a process that they cannot control.
Where there is disagreement, creative solutions will be required. Research undertaken earlier this year by Stewarts found that 35 per cent of divorcees would seek alternatives to going to court if they were to go through the process again.
If a decision is needed before the start of the next tax year, the only other option for parents in this scenario would be to agree to a private arbitration process. This can reach a decision far more quickly and behind closed doors, and often leads to better solutions for both sides.
Sophie Chapman is a partner at divorce and family team at law firm Stewarts