A significant feature of Bedell Group's specialist area of activities where private client and corporate business overlaps is the increasing importance of tax transparent vehicles, i.e. those for which the tax liabilities arising from their activities fall not on the vehicle but on their partners, members or unit holders. Such vehicles include;

• Partnerships
• Limited Partnerships ("LPs")
• Limited Liability Partnerships ("LLPs")
• Unit Trusts

Reasons for the increasing interest in tax transparent vehicles are as follows:-

• The potential double tax burden of companies and corporate structures, i.e. tax at the level of the company and then on the shareholders either on dividends or on disposal or deemed disposal of their shares.

• New vehicles – notably the Limited Liability Partnership ("LLP") which is incorporated and has separate legal personality but whichwas intended to betreated under UK tax rules, as the LLC is treated under US tax rules, as tax transparent. Jersey led the way with the Limited Liability Partnership (Jersey) Law 1997 designed in particular to assist UK professional partnerships, faced with partners' unlimited personal liabilities. The Jersey LLP in practice has been little used as there was a requirement for a £5m bank guarantee and because the UK Revenue originally did not grant the Jersey LLP tax transparency.

• However, the principle of the Jersey LLP has been a great success as, concerned that UK partnerships would incorporate offshore, the UK introduced its own Limited Liability Partnerships Act 2000 which has been widely adopted. UK LLPs can be incorporated for any business and are not restricted as was originally suggested to the professions. Nor are there any guarantee requirements for LLPs, which to date have proved one of the significant disadvantages of the Jersey LLP, although there is statutory provision for a claw back of distributions to members within two years of an LLP's insolvency.

• New uses for existing structures, notably exploitation of the relief from UK Stamp Duty Land Tax ("SDLT") for UK properties contributed to Jersey Property Unit Trusts ("JPUTs"). The specific exemption which was widely exploited in commercial property transactions, has been removed. However, even without the relief from SDLT for properties contributed to JPUTs – JPUTs continue to enjoy advantages as property holding vehicles given that they can enjoy tax transparency whilst there is no SDLT charge on a unit trust holding UK property on a change in unit holders as there is on a change of partnership shares in a partnership, LP or LLP owning UK property. Furthermore, the use of the JPUT in UK property transactions has increased familiarity with and renewed interest generally in the unit trust as a previously underutilised vehicle.

• Increasingly effective anti-avoidance tax provisions affecting traditional structures involving companies and trusts. Most recently the UK's Finance Act 2006 has extended the scope of the disadvantageous inheritance tax regime for discretionary trusts created by UK domicilaries to new or expanded interest in possession and existing accumulation and maintenance trusts, which previously enjoyed a relatively more favourable UK tax treatment.

• What was particularly unwelcome about these changes was that they affect adversely structures set up for good non tax reasons including maintaining unified ownership of a family business and restricting absolute ownership of wealth at too early an age. The range of tax transparent vehicles potentially provides alternative means of achieving these aims without suffering the penal tax provisions now affecting many trusts.

• Hybrid tax status by which we mean the vehicles may be viewed in one way in one jurisdiction and in a different way in another jurisdiction, potentially to a partner's or member's advantage. Again the UK LLP provides a good example. Increasing numbers of jurisdictions have blacklisted and treat penally entities established in offshore jurisdictions. As the UK LLP is UK incorporated it will almost certainly not appear on any jurisdiction's blacklist, however, as it is incorporated and has separate legal personality, tax rules in the jurisdiction of residence of non-UK members may not treat it as tax transparent, resulting in the happy outcome of neither the UK nor the jurisdiction of the member's residence taxing profits or gains arising to the LLP, allowing at the very least tax deferral within the LLP.

Conclusion

To date structuring for both wealthy families and corporate groups has largely relied on a mix of companies and trusts established both onshore and offshore.

Increasingly it also involves tax transparent vehicles including Partnerships, LPs, LLPs and Unit Trusts. That this change hasn't gone further reflects in part inertia and commitment to traditional structures but in addition the tax costs of moving from existing structures to tax transparent vehicles.

Further statutory innovation is to be expected in the area of tax transparent vehicles.Of great interestwill be the innovative use to which such vehicles are put in combination with traditional trust and company structures.