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  1. 1. The Family Office KPMG bringing accounting, tax and technology together for the benefit of the Family Office Tax & People Services
  2. 2. KPMG LLP St James Square Manchester M2 6DS United Kingdom KPMG LLP, a UK limited liability partnership, is a member of KPMG International, a Swiss cooperative Registered in England No OC301540 Registered office: 8 Salisbury Square, London EC4Y 8BB Tel +44 (0)161 246 4000 Fax +44 (0)161 246 4040 <ul><li>Dear Sirs </li></ul><ul><li>The Family Office </li></ul><ul><li>KPMG can bring together our accountancy, tax and technology experience to help your Family Office manage your global family wealth. </li></ul><ul><li>This document contains: </li></ul><ul><ul><li>an overview of the issues facing the Family Office and how KPMG would work with you and your Family Office to address these issues and find possible solutions; </li></ul></ul><ul><ul><li>a note of KPMG’s credentials in this area; </li></ul></ul><ul><ul><li>your KPMG team. </li></ul></ul><ul><li>We hope that you find this document informative and look forward to discussing it with you in more detail. </li></ul><ul><li>Yours faithfully </li></ul><ul><li>Mike Walker </li></ul><ul><li>Partner </li></ul>
  3. 3. Contents The contacts at KPMG in connection with this report are: David Kilshaw Partner Tel: +44 (0)20 7311 2841 Fax: +44 (0)20 7694 5362 [email_address] Mike Walker Partner Tel: +44 (0)161 246 4117 Fax: +44 (0)161 246 4037 [email_address] Jonathan Fisher Director Tel: +44 ((0)161 246 4350 Fax: +44 ((0)161 246 4037 [email_address] <ul><ul><li>4 </li></ul></ul>Understanding the Family Office; possible solutions to your issues <ul><ul><li>8 </li></ul></ul><ul><ul><li>Your KPMG contacts </li></ul></ul><ul><ul><li>7 </li></ul></ul>Why KPMG? - our credentials <ul><ul><li>3 </li></ul></ul><ul><li>Executive summary - today’s challenges and environment for the Family Office </li></ul>
  4. 4. Executive summary <ul><li>KPMG can bring our accounting, tax and technology experience together to help you deal with some of the issues facing Family Offices and their trusted advisors:- </li></ul><ul><ul><li>Financial structures are becoming increasingly global and complex. Therefore risk management and assurance is becoming more onerous to ensure the family’s wealth is secure; </li></ul></ul><ul><ul><li>Maintaining adequate records to deal with the increasing international regulation and scrutiny both for taxation and anti-money laundering purposes; </li></ul></ul><ul><ul><li>Unravelling, categorising and tracking appropriate categories of income and capital to ensure global tax exposures are minimised and trustee obligations are met; </li></ul></ul><ul><ul><li>Ensuring adequate risk management procedures are in place to provide confidence in source data provided to meet third party reporting and audit obligations; </li></ul></ul><ul><ul><li>Enabling Family Offices to manage global wealth/inheritance tax liabilities as families and their business interests become increasingly global; </li></ul></ul><ul><ul><li>Verifying and accurately recording information to ensure that family trustees are able to meet their fiduciary duties; </li></ul></ul><ul><ul><li>Keeping up to date with complex investment products and helping members of the Family Office understand the products and their various taxation implications; </li></ul></ul><ul><ul><li>Enabling data to be provided in a timely and efficient manner to younger generations with different information need expectations. </li></ul></ul><ul><li>In this document we provide an overview of some of the key issues facing the Family Office and how KPMG would work with the Family Office and their trusted advisors to address these issues and find possible solutions. </li></ul>Today’s challenges and environment for the Family Office
  5. 5. Understanding the Family Office; possible solutions to your issues <ul><li>KPMG can work with you to review your accounting and IT systems to ensure that they: </li></ul><ul><ul><li>capture tax critical data efficiently and manage data retention; </li></ul></ul><ul><ul><li>identify the source of wealth distributions, i.e. income or capital; </li></ul></ul><ul><ul><li>provide source data on underlying tax pools of accumulated undistributed wealth so future distributions can be made in the most tax efficient manner; </li></ul></ul><ul><ul><li>satisfy potential tax reporting and compliance burdens on the Family Office </li></ul></ul><ul><li>Our suggested solution may involve a review of your accounting system, following which we may advise you on possible modifications to your existing system or the implementation of a new system. </li></ul><ul><li>This will enable you to make the correct decisions when making distributions and to meet your reporting requirements. </li></ul>International mobility of the family: International mobility is a key issue for the Family Office. It is now the norm rather than the exception for family members to have a tax presence in a number of jurisdictions. The effect of tax residence in multiple locations must now be considered. Fiscal systems around the world are becoming more advanced. The physical presence of key members of the family in multiple locations will probably result in future tax reporting obligations and scrutiny of the family’s wealth through distributions from family trusts or other asset holding vehicles by fiscal authorities. The global Family Office must be able to identify these sources as either income or capital. This is critical because the tax implications and potential tax liabilities of either capital or income distributions can be very different from one tax jurisdiction to another. <ul><li>KPMG can work with you to help you: </li></ul><ul><ul><li>establish governance and risk management procedures to enable you to run the Family Office with confidence and provide assurance to the family that their wealth is secure; </li></ul></ul><ul><ul><li>conduct audits and report in the appropriate accounting formats in accordance with International Accounting Standards on Auditing and relevant national standards; </li></ul></ul><ul><ul><li>meet your third party financial reporting obligations by delivering quality, independent, rigorous audits. </li></ul></ul><ul><li>KPMG’s audit methodology will enable you to identify, assess and manage risk in your financial statements for your Family Office’s reporting needs. </li></ul>Audit and risk management of global family wealth: Family wealth is frequently held through complex structures involving trusts, companies and underlying investment holding structures such as unit trusts. The Family Office must be able to rely on the financial information provided in the accounts for these entities. The family also needs assurance that their wealth is secure. It is therefore essential that the Family Office systems contain effective control procedures to manage the risk to ensure that funds are not lost, misallocated or misappropriated or to obtain these verification from their trusted advisors. In addition, there may be regulatory bodies in these jurisdictions that require audited accounts or statements for some of these entities. Our suggested solutions Issues for the Family Office
  6. 6. Understanding the Family Office; possible solutions to your issues <ul><li>KPMG can work with you to ensure that your systems: </li></ul><ul><ul><li>can demonstrate your compliance with the necessary regulations; </li></ul></ul><ul><ul><li>control compliance costs and the possible drain on your resources. </li></ul></ul><ul><li>KPMG can work with you to: </li></ul><ul><ul><li>assist you in keeping pace with developments in the International tax and accounting arena that impact on your family; </li></ul></ul><ul><ul><li>advise you on ensuring your accounting system will stand up to tax authority scrutiny in terms of transparency and control; </li></ul></ul><ul><ul><li>manage confidentiality within a small dedicated KPMG team; </li></ul></ul><ul><ul><li>ensure you are aware of global information flows between different tax jurisdictions. </li></ul></ul><ul><li>Our solutions will allow you to identify and manage these risks. </li></ul>Increasing international regulation and scrutiny: Anti-money laundering, Sarbanes-Oxley 404, The EU Tax Savings Directive, The UK, US, Canadian and Australian Task Force on tax avoidance, and the impact of the OECD blacklist on low taxing jurisdictions and International Accounting Standards, are just a few examples of regulations which must be complied with where you have operations in those relevant jurisdictions. <ul><li>KPMG can work with you to provide: </li></ul><ul><ul><li>tax awareness training and update sessions for Family Office staff; </li></ul></ul><ul><ul><li>produce tax risk assessment processes to help in the early stages of decision making by the Family Office. </li></ul></ul><ul><li>Our solutions will enable the preparation of a strategy for dealing with current tax exposures and succession/inheritance tax issues. </li></ul>Increasing complexity of global taxation: Tax is integral to the family and every aspect of the Family Office. Tax will frequently impact on decisions of the Family Office from investment decisions, structuring of wealth holding entities to wealth distribution and succession issues. Where tax is not considered at an early stage in the decision making process, it can increase the potential tax exposure to the family and result in decreased rates of returns from investments and produce inflexibility in wealth holding structures. Our suggested solutions Issues for the Family office
  7. 7. Understanding the Family Office; possible solutions to your issues <ul><li>KPMG can work with you to help you to: </li></ul><ul><ul><li>identify your users (both internal and external) of information; </li></ul></ul><ul><ul><li>consider if a family constitution is appropriate to facilitate communication; </li></ul></ul><ul><ul><li>collect accurate data quickly and cost efficiently and to communicate it to internal and external users effectively in the most appropriate agreed/prescribed formats; </li></ul></ul><ul><ul><li>co-ordinate the information flows so that the correct decisions can be made in a timely manner; </li></ul></ul><ul><ul><li>provide the correct tax data to be inputted into the appropriate compliance forms to satisfy filing requirements of family members wherever they settle. </li></ul></ul><ul><li>Our solutions will help you communicate and co-ordinate this information in a targeted manner based on user needs. Decisions made on correct information by the correct user will minimise costs to the family. </li></ul><ul><li>Communication and co-ordination across the world: </li></ul><ul><li>The ever extending global reach of the family presents communication and co-ordination issues for the Family Office for both: </li></ul><ul><ul><ul><ul><ul><li>internal users – the family, their trustees and the Family Office as a whole; </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>external users – your investment advisers, your professional advisers, tax/regulatory authorities. </li></ul></ul></ul></ul></ul><ul><li>You need access to this information to respond to queries or requests in a timely manner. You need to ensure that the right people receive the right information to make the correct decisions for the family. Incorrect decisions will increase the tax cost to the family. </li></ul><ul><li>Your Family Office will need to be able deal with the often divergent interests of different family members and ensure that any disputes are resolved equitably. To achieve this, your Family Office must understand the family dynamics and facilitate effective communication between family members and the Family Office. </li></ul><ul><li>KPMG can work with you to: </li></ul><ul><ul><li>develop the awareness of the Family Office staff and investment brokers of the tax implications of investment selection; </li></ul></ul><ul><ul><li>develop systems of accounting for investments; </li></ul></ul><ul><ul><li>free up your Family Office staff to concentrate on family wealth generation and management; </li></ul></ul><ul><ul><li>develop methods of data interface with broker information to avoid duplication of data input. </li></ul></ul><ul><li>Our solutions will release your staff resources to concentrate on family wealth generation and management. Also, our advice will ensure that your staff are up to date on key tax issues that can impact on investment decisions. </li></ul>Wealth management for the family: The preservation and growth of your wealth is clearly critical to the long term interests of your family. As the younger generations of the family reach ages where income/capital distributions may become more likely, managing the family’s wealth to meet these expectations and demands will become more important. The Family Office has a critical role to play here. The family’s wealth can either be managed by investment experts within the Family Office or by external investment advisers, whose performance is monitored by the Family Office. In either case, the Family Office can help with the design of asset selection and the structural issues. The Family Office therefore needs to co-ordinate the professional advice from different specialists – i.e. corporate finance, investment managers, accountants and tax advisers to achieve the family’s objectives. As the number of investments/financial products available continuously expands, it will become increasingly important for the accounting and capital and/or income tax implications of those investments to be established at the outset so that tax is minimised on the distribution of that wealth in the future. Our suggested solutions Issues for the Family Office
  8. 8. Why KPMG? – our credentials <ul><li>Why KPMG? Our Family Office credentials </li></ul><ul><li>KPMG is an international advisory firm, with specialists in audit, tax and technology. As such, we are uniquely placed to assist you in your Family Office role. </li></ul><ul><li>In the following paragraphs, we explain our experience in the key areas and provide an illustration of our credentials. Subject to client confidentiality issues, we are always pleased to provide references for our work. </li></ul><ul><li>Areas of assistance </li></ul><ul><li>KPMG can assist in the following ways: </li></ul><ul><li>Tax & Process Technology; IT Systems </li></ul><ul><li>The KPMG technology team has a unique offering in the market place in terms of their experience of providing bespoke tax accounting systems. This unique offering comprises of not only the information technology knowledge but also, most crucially, the tax technical skills to fully understand the issues facing a global Family Office. Our tax technology team has the leadership skills and experience to project manage changes to an existing Family Office accounting system or the implementation of a brand new accounting system for a Family Office. </li></ul><ul><li>Audit and risk management </li></ul><ul><li>KPMG’s audit practice has a wealth of experience of audit methodologies and risk management procedures. The audit of your family’s affairs to the standards of international accounting is a critical factor in risk management. </li></ul><ul><li>Regulatory </li></ul><ul><li>We can assist in ensuring you satisfy the regulatory issues placed upon your family. </li></ul><ul><li>Taxation </li></ul><ul><li>KPMG offers the advantage of a coordinated international reach on all aspects of taxation. </li></ul><ul><li>Family Governance </li></ul><ul><li>We can assist in the formation and design of the charter to regulate family governance, sharing with you our extensive experience of how other family’s have addressed this very important issue. </li></ul><ul><li>Our credentials </li></ul><ul><li>KPMG provide a wide range of service to wealthy families and their Family Offices. These services range from us providing support on a variety of issues, to carrying out the entire Family Office function. </li></ul><ul><li>By way of example we work with one of the wealthiest UK based families in the world (wealth over £5 billion) and their Family Office to provide tax support for the Family Office staff including spending time working on site running training sessions on tax/trust issues. This service has cut office staff costs on tax compliance for the family and speeded up tax compliance procedures allowing the Family Office to concentrate on wealth management and generation. </li></ul><ul><li>KPMG also provides tax and structuring services to another ultra-wealthy family (wealth over £3 billion) and their Family Office. These services include providing highly specialised tax and structuring advice as the global reach and mobility of the family increases across multiple jurisdictions. The delivery of these services results in KPMG staff spending considerable amounts of time working with the Family Office in the UK. </li></ul><ul><li>Our team has also spent up to three months each year working on site in Family Offices in offshore tax jurisdictions. This role involved assisting the Family Office in implementing a new accounting system, review of nominal ledgers and accounts to give the family comfort in the information provided and developing control procedures to capture tax critical data on accumulated tax pools. This service provided the family and its office staff with assurance on new accounting systems and practices and also formed the basis for a Family Office appraisal. </li></ul>KPMG has extensive experience in advising on all aspects of a Family Office
  9. 9. Your KPMG contacts Contact Details Background UK + 44 (0) 161 246 4117 Mobile + 44 (0) 771 147 3221 E-mail [email_address] Mike is the partner who leads KPMG’s UK trust practice. Mike has worked at KPMG for 20 years and exclusively advises high net worth individuals, Family Offices and family trusts. Mike is a leading member of KPMG’s global private client network and has been involved with a number of high net worth Family Office structures where KPMG’s tax and trust accounting services are delivered to the Family Office to service the family’s tax and trust needs. Mike sits on the Technical Committee of the Society for Trust and Estate Practitioners (STEP) in the UK. In his role with STEP Mike is active in reviewing proposed legislation on UK and offfshore trusts and influencing its future direction and impact. Mike Walker, Private Client Partner Contact Details Background UK + 44 (0) 0207 311 2841 Mobile + 44 (0) 7710 578303 E-mail [email_address] <ul><ul><li>David is Head of KPMG’s Private Client Group and has nearly 25 years experience of advising clients on personal tax matters. </li></ul></ul><ul><ul><li>David advises on all aspects of personal taxation including capital gains tax, inheritance tax and trust planning, but with particular emphasis on structuring to ensure tax efficiency. </li></ul></ul><ul><ul><li>David also comments on tax issues in the press and lectures regularly to clients and professional audiences. In 2006 and 2007, he was nominated as a member of the Citywealth top 100 wealth advisers. </li></ul></ul><ul><ul><li>David’s clients include high net worth individuals, entrepreneurs and both onshore and offshore trustees. David also provides personal taxation advice to a large number of Private Equity firms. David has extensive experience of acting in expert witness cases, including appearing in the High Court. </li></ul></ul>David Kilshaw, Partner and Head of Personal Taxation Practice
  10. 10. Your KPMG contacts Contact Details Background UK + 44 (0) 161 246 4350 Mobile + 44 (0) 7919 057762 E-mail [email_address] Jonathan is a senior manager specialising in tax planning, trust accounting and compliance. Jonathan has spent the last 13 years specialising in advising high net worth individuals, their Family Offices and their trustees. Jonathan is a member of KPMG’s UK trust practice. Jonathan has extensive experience of working for Family Offices and frequently spends time working directly with members of the Family Offices at their premises. Jonathan has also been involved in projects where Family Offices have been putting in new accounting systems and working closely with their IT specialists and accountants. Jonathan Fisher, Private Client Director