There is a long history of families creating family offices in the United Kingdom, although this is on a less formal basis than in more recently favoured jurisdictions. As in other jurisdictions, over time, family offices have become more professionalised and have had to adapt to continue to remain competitive to attract individuals to work in them.
A wide variety of families choose the United Kingdom due to London's reputation as an international finance centre, with a strong professional and financial services sector. These include international families, as well as domestic families – although in recent years, some have moved abroad due to the increased competition and incentives offered by some other jurisdictions.
The full range of providers operate in the United Kingdom, including:
- single family offices;
- multi-family offices;
- concierge and other lifestyle services;
- banks;
- consultancy firms;
- law firms;
- accountants; and
- fiduciaries.
Predominantly in London, particularly where the family is not resident in the United Kingdom, although family offices can be found throughout the United Kingdom.
There are no specific programmes, incentives or initiatives in this regard.
There are none which are specific to family offices, although the usual professional standards will apply to lawyers, accountants and others who provide services.
The majority of family offices in the United Kingdom are single family or multi-family office, depending on the needs of the family. In addition, it is possible to use a virtual family office, although this is usually an initial phase, from which a family will graduate to one of the other models.
Some single family offices will be informal and may form part of the family business, with aspects such as legal and other professional services outsourced.
Single family offices offer privacy, control and customisation. Multi-family offices can offer a more cost-effective option and can afford the advantage of consolidating the family's wealth with other families, including access to services and investment opportunities.
This varies depending on the family's needs, which drive the choice of model. The majority will provide investment services, but some may focus exclusively on lifestyle, including:
- the employment of domestic workers; and
- the management of real estate and luxury assets.
Some single family offices will cover the full range of services, including in-house legal and tax compliance.
The key factors include:
- the services required;
- the costs, both of set-up and ongoing;
- the level of involvement and control that the family wishes to have; and
- privacy concerns.
Single family offices are usually either:
- owned directly by the family (or a single family member); or
- held as part of a trust structure – either:
-
- within a discretionary trust (if the family office is expected to be revenue generating); or
- via a purpose trust (if the family office will only cover costs).
A standalone family office, as opposed to one which is also involved in the family business, will usually be held in a bespoke structure, to segregate it from the family's business and personal assets, for both risk and privacy reasons.
There is no difference in structuring options available for non-residents.
One key factor to consider is whether the family office will generate profits, which the family will want to be able to extract or benefit from. This is more likely where the family office is providing services to other families in addition to the owning/original family.
While direct ownership of the family office entity is the most straightforward structure, it has issues around succession and the shares will also form part of the family member's estate (including potentially for inheritance tax purposes if a UK company is used). It is therefore generally not recommended and ownership via a trust is a more common structure.
There are no specific requirements to establish a family office, as there is no specific regulatory (or other) regime for family offices. Some family offices are very informal and not described as such, although they perform the role.
If a UK company is used, the usual corporate incorporation requirements must be met but the United Kingdom does not have economic substance requirements.
The costs vary depending on factors such as size, location and staff numbers – as a general rule, the more services which are provided, the greater the costs.
There is no specific regulatory framework for family offices, but a family office will need to be aware of, and compliant with, other regulatory requirements, including:
- the General Data Protection Regulation; and
- the UK anti-money laundering rules.
If the family office is providing investment services, it may need to be regulated by the Financial Conduct Authority – this is likely to be required where services are being provided to third parties.
As the United Kingdom is a high tax jurisdiction, it is important to consider the tax position of the family office itself, as well as the possible impact that locating it in the United Kingdom could have on the other family structures, particularly where those are located outside the United Kingdom. Careful management of roles and decision-making is required to ensure that the family office does not create a taxable presence in the United Kingdom of non-UK entities, whether companies or trusts. This is particularly the case where a key family member is involved in the family office.
The family office will also have to operate Pay as You Earn – the UK mechanism to collect tax on employment income – in respect of any employees of the family office.
It will be necessary to:
- consider how the family office will be funded; and
- ensure that the relevant transfer pricing considerations are taken into account when determining the relationship between the family office and related parties.
Historically, non-UK domiciliary family members resident in the United Kingdom would need to consider the source of funds used to pay the family office to avoid remittance issues, but (for future income and gains) this will fall away after 6 April 2025 with the changes to the 'non-dom' tax system.
As the United Kingdom is a high tax jurisdiction, it is important that:
- protocols are in place to govern decision-making; and
- the family office team have training so that they are aware of the risks.
As in all jurisdictions, privacy is a key concern for families operating in the United Kingdom and it is important that all family office personnel are aware of their confidentiality obligations.
Cybersecurity remains a key threat, with family offices being seen as an easier target than large organisations, so comprehensive cybersecurity policies are crucial.
Finally, as for all businesses, it is important to have clear operational policies and oversight/reporting.
Some families will have a family charter, value statement or other governance document which sets out their values and objectives. If such a document exists, it will be important for the family office to follow its guidance.
If there is no such document, the family office may engage with the family to put one in place, using external expert advisers where required.
The activities of the family office should be reviewed regularly to ensure that they continue to meet the needs of the family.
Clear communication channels are important to ensure that everyone within the family knows what they need to and that the family office operates effectively. The level of engagement with trusted advisers will vary depending on the level of activity of the family office and the services it can provide in-house; but most will have some degree of need for external advisers.
It is common for a chief executive officer to be appointed with general day-to-day oversight and responsibility for the family office (although this will depend on the size of the family office). However, in general, ultimate oversight will be exercised by the family.
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(a) Investment and wealth management
The family office:
- must comply with the anti-money laundering and date protection regimes; and
- may need to be regulated by the Financial Conduct Authority if it provides services to third parties
(b) Tax management
The family office will need to:
- ensure compliance with the various international reporting obligations for the family, such as the Common Reporting Standard and the Foreign Account Tax Compliance Act; and
- ensure that UK tax compliance requirements are met as appropriate.
The activities of the family office in relation to non-UK entities will need to be carefully managed to avoid creating a UK taxable presence.
(f) Management of luxury assets (eg, private jets; yachts; art collections)
In addition to the tax concerns discussed above, if there are any family members in the United Kingdom who use such assets, advice should be obtained to ensure that any taxable benefits are being correctly reported.
Value added tax can be an issue for private jets and yachts which come to the United Kingdom/into UK waters and again specialist advice should be sought.
(i) Hiring and management of staff (eg, domestic, PAs, security, other)
Ensuring compliance with immigration requirements when hiring staff to work in the United Kingdom is essential; as is ensuring that the minimum wage is paid to all staff (particularly relevant in the context of domestic workers).
We typically see the creation of a family foundation/charity. This is often a company limited by guarantee or may be a trust; in either case, it is common for the trustees to be a mix of professionals and family members. This gives a degree of control and flexibility over the family's philanthropic activities, but does require adherence to:
- the Charity Commission rules regarding UK charities; and
- in the case of a company:
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- the UK company law requirements; and
- filings with Companies House.
Alternatively, clients may choose to use donor-advised funds as a more cost-effective way of achieving their aims.
There is a lot of discussion around impact investing, but the demand from family offices for it is still in its infancy. We expect this to continue to grow, particularly as part of the wealth transition.
ESG is a growing focus of the activities of family offices, including in the way the family business is operated.
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While this varies depending on the services being provided, we usually see some form of senior management, which would include some or all of:
- a chief executive officer;
- a chief financial officer;
- a chief information officer; and
- a chief operating officer.
Depending on the assets being managed, the family office may also need:
- investment managers;
- reputation managers;
- concierge/lifestyle people;
- luxury asset managers; and
- admin and accounting teams.
We see an increased requirement for share incentives or some other mechanism allowing the family office team to share the return – particularly in the investment sphere – in order to be able to compete with the same roles in private practice.
This will depend on:
- the family;
- the family office; and
- the services being provided.
If a family member is involved, it is important to ensure that their role and responsibilities are documented.
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Disputes can be resolved via the usual court system, but we are also seeing increased use of mediation and arbitration to resolve disputes. Disputes can involve issues such as the following:
- disagreements between family members (often seen when the patriarch or matriarch dies);
- disputes between beneficiaries and trustees of family trusts; and
- claims in respect of wills/claims against an estate.
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International aspects bring issues such as the following to the fore:
- conflicts of laws;
- questions of forum; and
- jurisdiction shopping.
A seamless team of advisers across the jurisdictions is crucial to ensure that all angles are considered and addressed.
Relocation of family members might lead to a family office being moved outside the United Kingdom. A single family offices may also cease to operate if:
- it is no longer delivering what it was set up to achieve; or
- the family decides to move to a multi-family office set-up.
Any cessation will need to be carefully managed to ensure a smooth transition, particularly in relation to personnel employed by the family office.
While not directly relevant to family offices, the changes to the taxation of UK resident 'non-doms' which come into effect on 6 April 2025 may make the United Kingdom less attractive for family members and therefore may lead to less use of the jurisdiction for setting up family offices.
While other jurisdictions continue to offer incentives and favourable regimes to attract family offices, there has been no suggestion that the United Kingdom will do so, which may lead to a reduction in UK family offices.
The above factors may also play into a trend we have seen for splitting family offices, so that different roles/services are performed from different locations, with the United Kingdom hosting part of a family office.
As in any jurisdiction, the key is to:
- ensure alignment of the family office with the family's objectives; and
- keep this under review to ensure that the two continue to operate as intended together.
Overall, the main issues in operating in the United Kingdom are:
- navigation of the sometimes complicated tax system;
- the lack of incentives for family offices to set up in the United Kingdom; and
- somewhat restrictive immigration/visa options.
