Insurance firm AIG is to offer insurance products to non-doms hit by the recent inheritance tax (IHT) changes to help them meet their new liabilities, reports The Financial Times Adviser.
Prior to last Thursday (6 April), individuals who were neither UK-domiciled nor deemed domiciled for inheritance tax purposes were able to avoid the tax by owning property via an offshore trust – an entirely legal practice known as enveloping.
Legislation brought in during 2013 meant such individuals were subject to an annual tax on enveloped dwellings’ (ATED) - although this was significantly less than inheritance tax.
But now non-doms will be liable for inheritance tax on all UK residential property held through trusts – and ATED may still apply - meaning someone with a house worth £5m could face a tax bill of £2m.
AIG has been working on a solution and is now able to offer life cover to non-residents - both British citizens resident almost anywhere in the world and foreign nationals resident in more than 40 countries.
The life cover will pay out on death to pay any tax liabilities due.
The provider is calling on financial advisers, accountants and legal advisers of impacted individuals to make them aware of the changes, discuss their options and address their needs.
In September 2015, using data from the Land Registry, it was estimated that more than £170bn worth of UK property was acquired by offshore trusts or companies between 2005 and 2014.
Andy Roberts, technical sales manager at AIG life, told FTAdviser: “We think that a lot of business will come our way. A couple of other providers have looked into this and are attempting to do something, but it won’t be anywhere near as comprehensive as ours.
“There were a lot of hurdles in terms of legal approval, but we felt it was worth the effort. We have also gone above and beyond in putting a process in place to be able to arrange medicals overseas.
“We think it will be felt in the business for at least a couple of years. Next year there will still be a significant amount of business coming through. This will take two or three years before all of these liabilities are swept up.”
Alan Lakey, director at Highclere Financial Services in Hertfordshire, said: “This shows AIG have an appetite for growth and innovation.
"It is nice to see a situation where we have got an insurance company that is able to react very quickly to a situation that is deserving of attention.
“I know AIG has some very ambitious growth targets and something like this will assist them with that and keep them at the forefront of advisers’ minds.”