Mrs Chippendale and her husband had arranged to meet with us whilst they were visiting the Island. One of their friends had recently relocated and had suggested that the Isle of Man could be an interesting option and base for their future plans.

We asked Mrs Chippendale if she could outline why they were considering a move to the Isle of Man. “Thirty years ago, I took over the family furniture manufacturing business from my father” she explained. “The business was founded in the 18th Century by one of my ancestors, who became renowned for the quality of his workmanship and innovative design. As demand for his furniture grew, he increased production, building factories to meet the demand.

Under my grandfather the company switched production from bespoke pieces to mass produced popular designs. The business grew well until the 60’s but the estate duties that arose after my grandfather’s death nearly caused it to close. My father refocused the business looking to source production overseas and producing innovative designs that we could sell through our connections in the retail industry and our long established arrangements with the department stores.

Since I took over the business, I have seen radical changes in tastes and demand. Our traditional routes to market have been affected with the collapse of the high street and the closure of department stores and consequentlyI have had to ensure that our business embraced the internet and new design technologies. Luckily, I studied computer aided design at university, and I helped develop specialist software and automated production facilities so we can quickly produce and sell popular designs in the mass market with some of production and materials being sourced from abroad. Some sales are direct to the public through the internet (our historic brand name still being associated with quality) and our sales team focuses on furniture outlets with a particularly important sector being the supply of furniture to hotel chains around the world.

With the recent changes in the UK, the increases in the minimum wage and NI our business is once again struggling. We employ over 150staff many of whom have worked for the company for generations, but we are genuinely concerned about the future. Sadly, I have also recently been diagnosed with a chronic condition which could affect my life significantly over the next 15 years. With the changes to IHT allowances my husband and I are really concerned that should the worst happen, our business will not be able to be passed on to my children, and the closure of the business would affect the future of our loyal employees and the community.

My friend suggested relocating to the Isle of Man as it is close and so like the UK in terms of culture and way of life. My husband and I are too old to consider being too far away from our family in the UK (my father is in a care home) especially given my own health prognosis. From what we have seen the island is a beautiful and safe place with easy access to the UK andIreland. The benign fiscal environment with no IHT, CGT and low rates of Income and corporate taxes seem attractive, as is the fact that it is so easily accessible.We can relocate to the island as easily as moving anywhere within the UK.

I thought if we were to just to relocate, we could then transfer our shares for the children to hold on our behalf and continue to control our business from the island, travelling over as necessary for day-to-day management decisions whilst benefitting from the Islands more attractive fiscal regime.” My colleague thanked Mrs Chippendale for her detailed outline of the family’s circumstances.

“Unfortunately, just relocating, transferring your shares, and running the UK business as usual would not work. The rules on residence are quite complicated and if not followed correctly you could inadvertently remain UK resident. Also, the UK has sophisticated anti-tax avoidance rules and there are also international tax principles that apply. For instance, if you appear to gift something but really retain the benefit and control then HMRC can challenge if a gift has really taken place and this can have serious tax consequences. Finally running a business in the UK is a taxable activity in the UK which could negate any benefit of relocating to the Isle of Man. I would always urge clients to take appropriate tax advice. Sandstone can assist in this regard either working with UK advisors or independently depending on the situation.

We are increasingly coming across clients facing similar succession issues who are considering relocation as part of their planning. Relocation is very much a lifestyle choice and should not just be driven only by tax.

Moving to the Island can be an effective step in planning for the succession and continuation of your business to the next generation. It is possible with your relocation to the Isle of Man that after a period of time some of your assets will be outside of the scope of IHT and could be passed on by gifts to your children as part of a strategy to ensure the continuation of your business across the generations.

However, this is just the beginning. With careful thought, once you have relocated it is possible to design a structure that more appropriately reflects the modern nature of your business. A forensic examination of your business would establish where value is created and by whom.Identifying which parts of your business take place “in” the UK and which are truly international or could take place at arms-length “with” the UK business owned and controlled by your children.

When your ancestor created the business the value he added in crafting bespoke luxury furniture from blocks of wood, came from his skills and knowledge. This is just as relevant now when looking at your role within the business Mrs Chippendale.

From your description your involvement with the business covers so much more than you may realise. For example, there is the computer aided design, the development of software involved in production processes, the procurement of materials and specialist equipment from overseas, there is your handling of sales through the internet internationally, then the overseas sales, delivery and supply (in some cases direct from your international furniture suppliers) to international hotel companies in areas such as the Middle East. If you look at it this way there is the domestic work conducted only in the UK by your local operations but then there are the international aspects some of which do not involve the UK.

With your relocation from the UK to the Isle of Man, you take your skills, knowledge, and contacts to the Island. It is possible to establish once you relocate an Isle of Man business as a vehicle to cover these“international business operations.” The new business could employ local staff who can help develop contemporary designs, procure international sales and co-ordinate import and export of materials and product for domestic and international markets. A real business, locally run with real substance.

The Isle of Man has a well-educated and talented employment sector to recruit from, and the Isle ofMan Government offers grants and incentives for firms looking to establish an operation here. We would be happy to assist with an introduction to our contacts in the Department of Enterprise should this be of interest.

Taking this approach, the UK family-owned business would become one of several clients that use the specialist skills and services provided independently through your Isle of Man company and team. The “value”of these international operations stays with you outside of the UK enabling you to better plan for future succession to your children.

As mentioned, the key thing is to ensure that your relocation is properly advised and planned with all of the entities and contract flows properly identified. We can help with that by analysing your current business to identify how the business model can effectively change with your relocation to optimise the benefits.

Mrs Chippendale paused reflectively, “this is exactly what we were looking for.” Indeed, looking further, we have other issues to consider. One of my sons is looking to relocate to Dubai and he will focus on promoting our products to some of the leading hotel chains in the region. It would seem this could fit well with your concept of an international business based on the Isle of Man.”

My colleague agreed that it would be possible for an Isle ofMan structure to take into account the son’s relocation to the UAE this could also help protect his interests should he decide the UAE was not for him. He explained that we at Sandstone have international advisory, legal and fiduciary contacts who could assist her son in the area.

Mrs Chippendale smiled, “So relocating to the beautiful Isle of Man is just the first step of our journey with the Island becoming the home of our international business and a safe place to build our family wealth – I can see now it’s not an end in itself but a new beginning. My family has always adapted to challenge you could say I am a chip off the old block!”

‍