Tuesday, November 14, 2017

"Ownerless" Wealth

Gerald Grosvenor, the Duke of Westminster, was one of the richest men in Britain, worth an estimated £9bn. He was so wealthy mainly due to the happy fact that one of his ancestors acquired most of Mayfair and Belgravia 300 years ago.
When Gerald died last year, the Duke’s 26-year-old son, Hugh, inherited the family title. So how much inheritance tax was payable on that £9bn fortune as it passed down to the next lucky Grosvenor generation? Given the current rules state that the inheritance tax rate on an estate worth more than £325,000 is 40 per cent, you might be thinking of a number well in to the billions. But think again. Go lower. Much lower.
In fact, go all the way down to zero. Why? It would appear that, in the eyes of the tax authorities, Hugh didn’t inherit a penny of that £9bn, so no inheritance tax was due from him. This is because the Grosvenor family assets are legally owned by a series of “trusts”. The only thing that changed when Gerald died was that Hugh became the primary beneficiary of those trusts, receiving regular cash pay-outs at times decided upon by the trustees.
Of course, this is a legal fiction. The effective owner of the assets is not the trust but the beneficiary. This is something the society magazines know well enough. Tatler claimed last year that Hugh was the owner of “half of London”. The young man was listed as the ninth wealthiest person in Britain by the 2017 Sunday Times Rich List. And that’s because Hugh really is, as Vanity Fair, puts it “absurdly rich”.
He is not alone.
A $450m (£340m) trust established by the major Tory donor Lord Ashcroft in which he is himself one of the beneficiaries.
Zac Goldsmith is the fortunate beneficiary of an offshore trust set up by his father Sir James Goldsmith. Zac received around £5m in income from the trust between 2010 and 2015, dwarfing his MP’s salary. To most people that would look like an inheritance from Sir James, who died in 1997. But not to the taxman.
Inheritance tax brought in £4.9bn in 2016-17. That’s up on the £3.6bn raised from the levy in 2006-07. But the Office for National Statistics estimates that between 2007 and 2014 the aggregate net worth of the household sector soared from £7.2 trillion to £9.4 trillion. Wealth is absurdly under-taxed in Britain.
 We need to sweep away the fiction of “ownerless” aristocratic family wealth.

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