Practical impact on private individuals of Brexit

Posted by Helen Bunker on
Now that the dust is settling on the UK's decision to leave the EU, we have been in touch with many of our private clients who are asking what this means for them. Below is a round up of some practical aspects which may impact you and your family.

Succession and inheritance

The UK's tax regime has always been different from our EU neighbours and Brexit is unlikely to impact many estates directly. However since 17 August 2015 we have been coming to terms with new EU legislation for succession (known as Brussels IV). Paradoxically this system is intended to unify the succession laws which apply to an estate, and now we have left just at the point the member states choose to change things for good! That said, the UK opted out of full implementation of the legislation, along with Ireland and Denmark, so the impact strangely has been simplified as there was some uncertainty as to how the legislation applied to the UK. The intention is that EU citizens are able to make an election of the law of the jurisdiction of their nationality to govern the whole of their estate (including foreign property located in another EU state). Post-Brexit the UK is clearly a 'third state' under the Regulation like the USA which means less flexibility in the choice of succession rules and potentially more tax, although double taxation treaties should continue to apply. Our EU neighbours mainly favour a succession system which includes forced heirship and we could find ourselves in a position where there is less choice on the ultimate distribution of foreign immoveable assets.

Buying residential property

If we are looking for silver linings, a fall in property prices brings an opportunity for first time buyers to access previously unaffordable properties. Whilst we can't predict what we will happen to mortgage interest rates, if the Bank of Mum & Dad is prepared to get in on the act, this could be an opportunity to consider. Interest rates on savings may remain low so helping the next generation on the property ladder may be desirable. We would always recommend you take advice as to how this is structured and ensure that the documentation is in place to protect both parties.

Pensions and investments

If it wasn't complicated enough already with pension freedom introduced in 2015, we have since had the market shock of Brexit coming after a week of instability. Further instability remains likely. People will still invest for the long term but it is prudent to review your position holistically with a financial adviser. Look at your whole estate rather than at specific investments. A balanced portfolio would include assets held as cash and property and may also include potential inheritances.

You may wish to consider cash flow forecasting with your adviser. Whist it is an investment of time and effort, you are rewarded by being able to model different scenarios including gifting to children or grandchildren, retiring earlier or later than planned or taking that round the world trip of a lifetime.

Protection for savings

For those worried about the safety of their savings, following an EU directive, the level of protection afforded by the Financial Services Compensation Scheme (FSCS) was reduced to £75,000 from 1 January 2016 for UK based financial institutions. Whilst this protection is unlikely to change again in the short term, it's important to remember that some banks appear as different brands on the High Street but share the same licence. HSBC and First Direct are an example of where deposits would be covered for a total of £75,000 rather than £75,000 each. It is worth checking as it's not always obvious which brands come under the same umbrella.

Should your savings be held in another EU jurisdiction, the level of protection afforded for deposits is €100,000.

Gifts to charities

Presently Gift Aid is available to provide income tax relief for gifts of money to charities, including organisations in EU Member states that meet the UK tax definition of a charity. Interestingly charities in Norway and Iceland are also included. Legacies to charities in EU member states also attract Inheritance Tax exemption and it remains to be seen if this will continue.

Dual nationality

There must be a strong temptation presently to seize the opportunities afforded by acquiring dual nationality and maintaining the rights associated with EU membership. Anecdotally there has been a rush of British people applying for Irish citizenship so that they can use their Irish passport to maintain freedom of movement within with EU. 

Each country has its own nationality rules and many require you to live there for a period so it’s not automatic. You may have an EU nationality but your children are UK nationals. They may be able to acquire your nationality by descent. Equally, you may be an EU national living and working in the UK and worried about the future. Naturalising as a British citizen may be available to you. Either way, we would strongly recommend that you take advice.

Travelling overseas

The EU is the main holiday destination for UK tourists and there will be implications for free movement of goods, services, people and investments. Whether holidays or the cost of travel increase, or there is less travel to or from Europe, remains to be seen. How this is going to affect the EU-US Open Skies or other international agreements is also unclear, but we anticipate that similar bilateral agreements will be negotiated.

A significant problem has come about due to holidays being booked dynamically. The current European (and therefore English) law does not give someone who has bought their flights and accommodation separately the same protection as if a package holiday had been bought with flights and accommodation at an inclusive price. Europe has however identified this issue and has come up with a solution. The Package Travel Directive 2015 aims to give customers protection where they picked their own combination of flights and accommodation.  That was to be implemented by 1 January 2018 and we will have to wait and see if Parliament still implements this Directive.

Airline customers could see their rights significantly altered. Following a flight delay, airlines are often frustrated at having to pay out significant sums of money thanks to the Denied Boarding Regulations. They may no longer be part of UK law.

Divorce in another jurisdiction

It is reassuring that nothing will change immediately and, in the case of Family law, any amended laws are unlikely to be dealt with until much later along the line – we are, after all, still dealing with domestic matrimonial cases under the Matrimonial Causes Act dating back to 1973! Therefore, the current jurisdiction rules that govern where an individual can get divorced (normally following the habitual residence and domicile requirements in the particular state) will continue to stand. However, in the long run, we would expect there to be a greater emphasis on 'jurisdiction shopping' as divorcing parties are likely to start taking a closer look at which of jurisdictions are likely to give them the best outcome in the division of their matrimonial assets. We may also see more 'jurisdiction races', whereby parties will try and be the first to issue divorce proceedings in the jurisdiction of their choice. Most notably it will now be open to challenge the jurisdiction of a particular Court where an opposing party believes a different jurisdiction has better links to the parties using the "forum conveniens" argument.

Moving family abroad

It is inevitable that some families who have relocated from overseas to the UK, including single-parent families, will think about their options for returning to their country of origin. Alternatively, families might be considering the prospect of relocating to make a new start within the EU.

A parent cannot remove a child from England or Wales without the express permission of the other parent, and anyone else who may hold parental responsibility. Any parent doing so commits child abduction, a criminal offence which carries with it a possible custodial sentence. Where international child abduction has taken place and a child has been removed to an EU country, the Hague Convention on the Civil Aspects of International Child Abduction will remain in place, which provides some protection in these circumstances by returning the child to the country where they are habitually resident. However, the greater protections afforded by the Brussels II Regulation which, amongst other things, provided powers to the Court of the child's country of habitual residence to make a mandatory order for return, will no longer apply post-Brexit.

Maintenance orders

Current EU legislation works with member nations' domestic legislation to provide a relatively simple framework for enforcement of orders concerning, for example, maintenance, contact and domestic violence in other EU member states. As part of Britain's exit from the EU, it will now be open to the Government to negotiate a replacement agreement with the EU which replicates the current system of mutual co-operation between Courts or, if this is not possible, to negotiate bilateral agreements with particular states to render these orders enforceable. There is otherwise the risk that, in order to enforce any such orders, the person in whose favour the order was made will need to issue further proceedings in the relevant foreign jurisdiction in order to enforce the order. This could prove costly and time-consuming.

Employing EU citizens

There is a fear that the UK will be hard hit by the impact of 'Brexit' on immigration  in respect of European Economic Area citizens currently working in the UK (who currently have freedom of movement) and future recruitment. Skilled workers may continue to be recruited with relative ease. The sticking point comes with low-skilled workers. It is reported that three quarters of EEA citizens currently working in the UK would not meet the current non-EEA requirements (under the non-EEA Points Based System). It is possible that the Government would introduce new requirements to enable the recruitment of low-skilled workers, but this is by no means certain bearing in mind the promises of the 'Leave' campaign.

Over the long term it may become more expensive and administratively difficult to recruit from within the EEA, but by no means impossible.

How we can help

Blake Morgan's succession and tax, family and immigration lawyers are here to support you and your family through the changes posed by Brexit. For further information and advice please contact your usual Blake Morgan adviser.

Click here to download our free Brexit guide.

About the Author

Helen is the Divisional Director for Private Law based in the firm's London office and is responsible for the delivery of private law services across Blake Morgan’s six offices.

Helen Bunker
Email Helen
020 7014 5246

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