Wealth and personal matters during COVID-19 Wealth and personal matters during COVID-19 Wealth and personal matters during COVID-19

While Northern Ireland’s family owned businesses continue to deal with the impact of the coronavirus, it is important to reflect on some matters that require the attention of those seeking to balance the health and wellbeing of their employees and family members with the impact on the family business itself, and the potential implications of the pandemic on family wealth.

Kevin Bell, Private Clients partner at KPMG in Northern Ireland, reviews matters related to family wealth and the impact that the pandemic can have on choices for family members. It is increasingly clear that the impact which COVID-19 has on the way we think, and act will be both far-reaching and enduring. 

Just as market uncertainty presents challenges for a family business, it also poses important questions around how it will affect the value of family wealth and assets. The safety and wellbeing of family members and employees will be paramount, but as the crisis develops and passes, it remains important to monitor and manage not just family business interests but also family wealth more generally, including non-business assets.

Below are some considerations that should be borne in mind when faced with volatile markets and uncertain asset values.

• Managing family wealth in these unpredictable times may require a shift in priorities from growing wealth to wealth preservation and asset protection. This may require restructuring with an emphasis on flexibility.
• Market volatility presents challenges and opportunities. Private capital is the fastest-moving and nimble investors are well-placed and poised in this regard.
• There is a myriad of considerations, ranging from supply-chain to inventory and contractual issues and crucially cash flow, where trading businesses are an important component of the underlying wealth of the family.
• Clear governance and communication strategies both within the family and between the family and advisors remain crucial and need special attention in times of social distancing.
• In a time of volatility related to asset values, it is important not to lose sight of any plans to transfer assets to the next generation.
• This is also a time when many families consider philanthropic pursuits, such as making charitable donations to help finance expenses arising from pandemic emergencies. Many families are making these decisions collectively and through that helping younger members to understand the impact of the current crisis. It is also important to structure the donation to provide maximum impact, whether through corporate or personal giving.

Just as key management risks in a business include the need for new decision-making processes and controls when pivotal employees are unable to work, contingency plans and quick responses are just as critical when managing family wealth.

• Maintaining normal operations, administration and oversight over family wealth can be challenged where the pandemic means that key employees or advisors are unexpectedly unable to work. Drawing on resources that have the capacity to work remotely can mean that you and your family are better positioned to respond.
• However, achieving this requires an IT infrastructure that is sufficiently robust and secure to support communications between people working from a home basis with a need for virtual business meetings due to travel restrictions and social-distancing requirements.

Now is the time to test governance mechanisms you have put in place for decision-making and communication, to assess the durability of the digital and human infrastructures and test the strength of your contingency plans to be best placed to preserve and protect family wealth and assets.

Making choices for the safety and wellbeing of your family during this time, or just the practical impact of travel restrictions, may take some people away from their usual location. 

Each country has its own laws for determining when an individual is a resident for tax purposes. For those who are tax resident in more than one country, the country that has the taxation rights over specific types of income is governed primarily through double-taxation agreements and related protocols.

As the COVID-19 travel restrictions to and from the UK continue to have impact, many individuals are concerned about the impact the additional unplanned days spent in either the UK or overseas will have on their tax residence status.

HM Revenue & Customs [“HMRC”] has published guidance on how certain aspects of the Statutory Residence Test will apply when individuals are displaced due to COVID-19.

Individuals and families living across a number of destinations will be familiar with the need to maintain clear and ordered evidence of their taxable presence in a country. This could include the total amount of time spent in that country; how much of that time was at their home; the number of days they spent working; and several additional factors all depending on each country’s specific residency requirements.

Now may be the time to review such plans or consult with your family business advisor to consider the below possibilities:

• Is the country where you have based yourself where you plan to be considered a resident for tax purposes, or is it where you can spend a significant amount of time without being classed as a resident?
• Have temporary relief restrictions been introduced in certain countries that will not lead to you being taxed as a resident or could reduce some burdensome tax compliance and filing requirements? Some countries, for example, allow you to ignore reasons beyond your control as days that count towards your taxable presence.
• Do you need to consider the specific tax laws of the country in which you are spending time? Your family business advisor should be able to assist you with this.
• Lastly, what evidence will you need to collect to support your position if you are unable to leave a country and exemptions apply? Have you gathered sufficient evidence to support your position?

Individuals should consider their plans in light of specific legislation in each relevant jurisdiction and gather appropriate evidence to ensure they are clear on their tax residence position and globally compliant.

Health, wellbeing, and safety will continue to supersede all other concerns as we navigate these days of unprecedented change and unpredictability. However, this too will pass and to help prepare for a stable future it may be worth considering some actions that you can take now to reduce the longer-term economic impact. 

Our KPMG in Northern Ireland Private Client Team understands the potential consequences of the current global health situation for family offices, businesses and entrepreneurs including how COVID-19 may affect both strategic and shorter-term operational issues. We can help you navigate your business and family through these unprecedented times.

For further information on family wealth matters, please contact:

• Kevin Bell, resident partner
• Johnny Hanna, partner-in-charge and head of Tax
• Paddy Doherty, resident partner
• Susan Smyth, director