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<strong>Bespoke</strong><br />
FOR PRIVATE CLIENTS<br />
ISSUE 1 SUMMER 2009<br />
200 tractors<br />
and counting<br />
The pleasures of<br />
unlikely hobbies<br />
Celebration wine<br />
Sir Alex Ferguson<br />
recalls aprevious<br />
league title and<br />
the ’61 Petrus<br />
that got away<br />
The great<br />
crash of 1720<br />
How the South<br />
Sea Bubble<br />
made fools of<br />
princes and<br />
paupers alike<br />
Inheritance<br />
tax<br />
Nasty, brutish<br />
and easy to<br />
mitigate<br />
National Treasure<br />
Philip Mould on selecting art<br />
that will keep its value and bring you joy<br />
><br />
>
OF INTEREST<br />
2<br />
BUDGET 2009<br />
High net worth individuals<br />
were heavily targeted in this<br />
year’s Budget with higher<br />
taxes, reduced personal<br />
allowances and restricted<br />
pension relief. Francesca<br />
Lagerberg and Lindsey Wicks<br />
of <strong>Grant</strong> <strong>Thornton</strong> investigate<br />
the details:<br />
■ CHANCELLOR ALISTAIR<br />
Darling exceeded expectations by<br />
introducing a‘super-tax’ rate of 50%<br />
for earnings over £150,000, to come into<br />
effect from 6April 2010. This was both<br />
higher and sooner than predicted, and,<br />
incorporating national insurance<br />
contribution increases scheduled from<br />
April 2011, the tax rate will be 51.5% for<br />
employees on income over £150,000.<br />
■ APRILNEXTYEAR will also<br />
see atapering away of personal allowances<br />
for anyone with asix-figure income.<br />
At an income of £112,950 you will have<br />
no personal allowance (currently £6,475).<br />
There are likely to be PAYE operational<br />
problems for many and to add to the<br />
confusion, those with incomes falling<br />
between £100,000 and £112,950 will pay<br />
an effective tax rate of 60%. Those with<br />
income of £110,000 could theoretically<br />
see their total tax bill rising by 5% in three<br />
years. In the case of earners of £180,000,<br />
the increase could be nearly 9%!<br />
■ IN TWOYEARS’ time the<br />
amount of tax relief available for pension<br />
savings will be down from 50% to 20%<br />
for those earning between £150,000 and<br />
£180,000. Incomes above this will only<br />
qualify for relief at the basic rate. There<br />
is an anti-forestalling provision in place<br />
to prevent pension alterations before<br />
then, atax charge of 20% of ‘additional’<br />
contributions in excess of the special<br />
annual allowance of £20,000. Regular<br />
51.5%<br />
The tax rate on income over<br />
£150,000 for employees as of<br />
April 2011<br />
ongoing pension savings in place before<br />
22 April 2009 are unaffected.<br />
■ ALSO FROM 6APRIL 2010<br />
there will be three rates of tax on dividend<br />
income. Where income falls within the<br />
basic rate band, the 10% tax credit will<br />
extinguish any liability, as before. The<br />
equivalent rate for 40% taxpayers remains<br />
at 32.5% but anew rate of 42.5% will be<br />
introduced where income will be taxed at<br />
the new super-tax rate of 50%. Trusts of<br />
course are not left alone. From the same<br />
date the additional rate of tax for trusts<br />
will also rise to 50%, with anew higher<br />
trust rate of tax on dividends of 42.5%.<br />
■ THEONLYREALGOOD news<br />
for savers is that the ISA limit is raised<br />
from £7,200 to £10,200; however,those<br />
under 50 will have to wait until 2010 for<br />
this benefit.<br />
CREDIT<br />
CRUNCH<br />
HITS DIVORCE<br />
‘The financial carve-up that<br />
follows adivorce settlement<br />
will be at the forefront of a<br />
couple’s mind.’<br />
AGRANTTHORNTON survey<br />
among 70 leading matrimonial lawyers<br />
reveals that nearly half expect the credit<br />
crunch to result in fewer divorces reaching<br />
the courts. While money trouble is a<br />
well-documented cause of tension between<br />
spouses, it could be that some couples stay<br />
together because of their financial situation.<br />
Robert Kerr,partner at <strong>Grant</strong> <strong>Thornton</strong>’s<br />
Forensic and Investigation Services<br />
practice, says: ‘The financial carve-up<br />
that follows adivorce settlement will be<br />
at the forefront of acouple’smind.’<br />
He cites the prominent case of the<br />
hedge fund manager Brian Myerson, who<br />
agreed to give his wife a£9.5 million<br />
divorce settlement only to see his personal<br />
wealth suddenly fall dramatically.Many<br />
other individuals of high net worth could<br />
find themselves similarly vulnerable.<br />
Clean break settlements (also known as<br />
‘lump sum financial agreements’) are likely<br />
to decline, with acorresponding increase<br />
in maintenance-based divorces, according<br />
to 65% of lawyers. This is not surprising,<br />
says Kerr,given that ‘individuals’ assets<br />
will be falling in value in the current<br />
economic climate, thus reducing the pot<br />
of wealth for the parties to share’.<br />
52% of responding lawyers<br />
predict that there will be an<br />
increase in pre- and post-nuptial<br />
agreements due to the<br />
economic slowdown.<br />
‘Pre-nups have become increasingly<br />
more popular as people are looking to<br />
secure the wealth that they have<br />
accumulated prior to their marriage,’ says<br />
Kerr.‘Therefore, it is no surprise in an<br />
economic climate where individuals’<br />
income levels will be fluctuating that they<br />
would like more guarantees over their<br />
finances. The recent case of German<br />
heiress Katrin Radmacher taking her<br />
husband Nicolas Granatino to court to<br />
uphold apre-nuptial agreement so that<br />
she could protect her wealth is afurther<br />
example of the uncertainty around<br />
pre-nups and the call by many to<br />
make them legally binding.’<br />
MORE NEW THINKING<br />
For more research and insights<br />
from our experts go to<br />
www.grant-thornton.co.uk/thinking<br />
www.grant-thornton.co.uk
welcome<br />
This is the first issue of <strong>Bespoke</strong>,the magazine produced by<br />
<strong>Grant</strong> <strong>Thornton</strong> for our private clients. It follows on from our previous<br />
publications to highlight issues we hope will be of interest to you, to<br />
introduce afew of our clients and showcase some of our thinking.<br />
In this issue we offer our insights on tax havens, personal finance<br />
and the Budget, divorce, family-run businesses, and some pertinent<br />
historical episodes that cast illuminating light on current events in<br />
financial markets.<br />
Inheritance has been aripe topic for literature for hundreds of<br />
years, and it is fascinating to discover that Charles Dickens based<br />
his novel Bleak House on areal contemporary case; the story is<br />
coupled with some up-to-date advice on how to best look after<br />
your family’s future.<br />
Our main interview this issue is with the inimitable Philip Mould,<br />
who runs aleading London gallery and is ahighly regarded<br />
specialist in British portraiture. Is it possible that more traditional<br />
artworks are currently holding their value better than experimental<br />
pieces? We hope you enjoy the conversation and find it of use.<br />
COVER TERRY JONES BY STUART PEARSON WRIGHT ©PHILIP MOULD LTD<br />
contents<br />
2 Of interest<br />
4 First person<br />
8 Family Limited Partnerships<br />
9 Devil’s advocate<br />
10 National treasure<br />
4<br />
14 South Sea Bubble<br />
18 Bleak house<br />
22 Need to know<br />
24 Viewpoint<br />
26 Sir Alex Ferguson<br />
14<br />
26
FIRST PERSON<br />
PASSIONS<br />
4<br />
RESTORER OF<br />
THE FLYING ‘B’<br />
In these days of mass-produced,<br />
computer-guided cars there are few that<br />
can stir the blood the way avintage<br />
open-top Bentley can. As Richard Ford<br />
has found, once driven, forever smitten<br />
INTERVIEW GLYN BROWN PHOTOGRAPHY JAMES PFAFF
‘Each is different.<br />
Some are more<br />
powerful, some<br />
are smoother –<br />
but Inever pick<br />
favourites’<br />
RICHARD FORD is going to have to<br />
live with the fact that he’s named after<br />
the wrong breed of car; quartered in the<br />
garage of his Warwickshire home are six<br />
gleaming vintage Bentleys, five deep<br />
green and one blue, which he cherishes<br />
like the thoroughbred racers they are.<br />
‘I’ve been interested in Bentleys since<br />
Iwas achild but could never find the<br />
time or money for one. Then 13 years<br />
ago [he’s 63] Ifinally bought my first.’<br />
Richard says he’s not an emotional<br />
man. Still, he repairs Bentleys as ahobby<br />
–and spending 7,000 hours (‘with abit<br />
of help from friends’) on one vehicle<br />
sounds like alabour of love to me.<br />
True Bentleys are those made between<br />
1919 and 1931, when Rolls-Royce took<br />
over the firm. The cars have apoignant,<br />
Brideshead Revisited feel, long-bodied,<br />
with muscular rising fenders. Do they<br />
have personalities? ‘Each is different.<br />
Some are more powerful, some are<br />
smoother –but Inever pick favourites.’<br />
These cars were made to chew up the<br />
open road. Richard unleashes his on<br />
international tours which the Bentley<br />
Drivers Club organises. So far, he’s taken<br />
them to the States, Australia, New<br />
Zealand and South Africa. Do they like<br />
the terrain? ‘Well, you have to be careful<br />
driving through hills and mountains, keep<br />
watching the temperature gauge. They<br />
often run better in the rain. But since they<br />
don’t have hoods, you tend to get wet.’<br />
Said so jovially, this is clearly no deterrent.<br />
And how easy is the driving?<br />
‘Technically, it’s exceptionally tricky.<br />
Without synchromesh gears, you have to<br />
get the timing right. But though it’sabig,<br />
heavy car, once called the fastest racing<br />
lorry in the world, it isn’tphysically hard.’<br />
Richard’s wife Jenny might disagree. On<br />
last year’s tour of New Zealand, with her<br />
husband in the passenger seat following<br />
an operation, she drove the 3,000-mile<br />
round trip. ‘They’re very physical cars,’<br />
she laughs. ‘By the end of the day, you<br />
definitely feel it in your shoulders.’<br />
The motor’s often overlooked racing<br />
history is most impressive. Walter Owen<br />
(WO) Bentley was 31 when, in 1919, he<br />
fired up the first of what would be a<br />
legendary marque, in amews off Baker<br />
Street. Prototypes went straight into<br />
competition, winning at Brooklands,<br />
Indianapolis and Le Mans. Richard has<br />
taken his turn at racing the cars, and<br />
putting them through their paces is<br />
encouraged. (Says aDrivers Club<br />
commentator, keeping one unused is<br />
like keeping agreyhound in abox.)<br />
An exquisite piece of engineering, the<br />
parts were made to be in motion.<br />
‘That’s itexactly,’ says Richard.<br />
‘I mean, you drive acar like this with<br />
care and concern, you always have a<br />
certain amount of worry that everything<br />
stays in tune. You’re listening to the<br />
engine.’ His brow uncreases. ‘But<br />
that long-stroke Bentley engine –<br />
what asweet, fantastic sound.’
FIRST PERSON<br />
PASSIONS<br />
THE COLLECTOR<br />
For sheer diversity, Bill Kemball’s collection of<br />
agricultural machinery is hard to beat. When you add<br />
up the number of different machines –200 tractors<br />
alone –it’s clear the word ‘hobby’ falls pitifully short<br />
INTERVIEW GLYN BROWN PHOTOGRAPHY JAMES PFAFF<br />
6<br />
BILL KEMBALL, 70, comes across as<br />
something of aRenaissance man. His<br />
primary income comes from warehousing<br />
and haulage firm Debach Enterprises.<br />
His other major concern is the 1,650<br />
acres of Wantisdean Hall Farm, deep in<br />
the Suffolk countryside. ‘That’s what<br />
Ireally am: afarmer, and afarmer’s son.’<br />
And aspects of both come together in<br />
Bill’s overwhelming love of vintage<br />
agricultural vehicles.<br />
‘Mechanical engineering has been my<br />
interest since Iwas aboy. Istarted<br />
collecting old tractors after Ileft school.<br />
Now Ihave quite afew.’ For years, Bill<br />
was single-handedly able to put on a<br />
Power of the Past display at Wantisdean,<br />
featuring vintage tractors, steam engines,<br />
gyrotillers, alarge, steam-driven<br />
reciprocating saw and –cue strains of<br />
Tubular Bells –heavy horses, the<br />
magnificent Suffolk drays.<br />
Having been to events like this, Ican<br />
vouch for the sheer hair-raising thrill of<br />
these machines, so big they seem alive.<br />
‘Yes, as alive as the horses. They’re<br />
massive things. Some of the steam<br />
engines go back to the 1800s; many<br />
of the tractors are from the First World<br />
War.’And offhand, you’d have, say?<br />
‘The collection of tractors alone, in<br />
excess of 200. And really quite anumber<br />
of steam engines. Then there’s the<br />
vintage commercial vehicles, delivery<br />
vans and things, the oldest built in 1911.<br />
Solid rubber tyres, some of them. Plus a<br />
collection of old army vehicles, as well<br />
as Model TFords. Are you familiar with<br />
those? I’ve got seven.’ Good lord.<br />
Where are so many vehicles stabled?<br />
For the most part, in aircraft hangars;<br />
another string to Bill’sbow is former US<br />
Air Force base Bentwaters, now known as<br />
Bentwaters Parks. To this day, the site has<br />
airfields, control towers, decontamination<br />
showers, dog kennels and nuclear<br />
weapons stores. It gets used for film and<br />
TV –‘TopGear, Dog Borstal,stuff like<br />
that’ –but, being pretty secure, it can also<br />
handle storage of valuable vintage<br />
machinery.‘We also have recording<br />
sessions in what’sknown as the Hush<br />
House, where they tested aircraft engines.<br />
And there’savegetable production group<br />
I’m involved with, and another company<br />
putting in banks of computers. Then<br />
we’ve got fireworks in old bomb stores,<br />
vintage wine, classic cars…’<br />
Despite the diversification, Bill<br />
still seems to care above all about just<br />
two things. In September, Wantisdean<br />
will hold aWartime Weekend. ‘It’ll be<br />
astep back in time, aweekend in the<br />
middle of 1943, with Land Army, Home<br />
Guard, making and mending, all that.’<br />
The biggest parts of that weekend,<br />
however, asfar as Bill is concerned, will<br />
be preparation of farm-grown food, and<br />
the astonishing, rattling equipment that<br />
once helped produce it. ‘My heart is and<br />
always will be in agriculture –the family<br />
farm.’ Ashrug. ‘And all my life, my<br />
hobby has been restoring and caring for<br />
beautiful old machinery.’<br />
www.grant-thornton.co.uk
PEOPLE AND PLACES<br />
‘Mechanical<br />
engineering has<br />
been my interest<br />
since Iwas aboy.<br />
Istarted collecting<br />
old tractors after<br />
Ileft school’<br />
www.grant-thornton.co.uk
INSIDE STORY<br />
Silver bullet<br />
or rusty nail?<br />
8<br />
HOW<br />
THEY ARE<br />
WORK<br />
Donors contribute assets to a<br />
Family Limited Partnership (FLP)<br />
in return for apartnership interest,<br />
which they then give away to family<br />
members. There must be at least one<br />
‘general partner’ (GP), who has<br />
unlimited liability and manages the<br />
FLP. The GP may have asmall<br />
capital interest and income<br />
entitlement. Typically, the GP will<br />
be aprivate company owned by the<br />
contributor of the funds, with<br />
directors who would otherwise take<br />
on the role of trustees in anormal<br />
trust arrangement. There can be any<br />
number of limited partners, who<br />
take the majority interest in income<br />
and capital. When passing assets to<br />
family members the type of entity<br />
used has an impact on the tax and<br />
reporting requirements of the gift.<br />
Family Limited Partnerships have been much talked<br />
about since 2006 when the trust rules were significantly<br />
altered. But are they all they’re cracked up to be?<br />
THEY<br />
ANY<br />
GOOD?<br />
The main advantage of using an FLP<br />
is that there is no Inheritance Tax<br />
(IHT) charge on the transfer of the<br />
assets into the partnership. In<br />
addition, there are none of the IHT<br />
exit and ten-yearly charges that are<br />
now levied on most trusts.<br />
The gifting of partnership<br />
interests is treated as adisposal<br />
of the underlying assets for<br />
capital gains tax (CGT) purposes.<br />
While an FLP structure has more<br />
restricted deferral reliefs available<br />
to it than atrust, it is nevertheless<br />
possible to defer aCGT liability<br />
in respect of business assets held<br />
by the partnership.<br />
OUR<br />
VIEW<br />
‘Although FLPs have their place,<br />
they can be limited in application,<br />
and may only be suitable for<br />
particular cases. However, at<br />
<strong>Grant</strong> <strong>Thornton</strong>, we have devised a<br />
number of ways of adapting the<br />
basic premise. We can allow for<br />
wider applications and greater tax<br />
advantages by combining key<br />
principles of some of our other<br />
capital gains tax and inheritance tax<br />
planning ideas. This way, the FLP<br />
may be auseful tax planning tool<br />
and aviable alternative to trusts.’<br />
Andrew Westhead, TaxPartner,<br />
<strong>Grant</strong> <strong>Thornton</strong><br />
www.grant-thornton.co.uk
DEVIL’S ADVOCATE<br />
NO PLACE TO HIDE<br />
There is much talk of anew global era of transparency in<br />
banking, but does it really amount to anything? And what,<br />
if any, are the consequences for individuals in the UK?<br />
ILLUSTRATION PETER JAMES FIELD<br />
he April 2009 meeting of the<br />
developed nations (the G20<br />
summit) looked in advance as<br />
though it was going to produce<br />
little but hot air. Inthe end the various parties<br />
involved managed to find anumber of subjects<br />
on which they could all agree, including amove<br />
against so-called ‘tax havens’. The G20 final<br />
statement noted that it would ‘take action against<br />
non-cooperative jurisdictions, including tax<br />
havens. We stand ready to deploy sanctions to<br />
protect our public finances and financial systems.<br />
The era of banking secrecy is over’.<br />
So what does this mean for high net worth<br />
individuals in the UK with offshore accounts? For<br />
many the answer is ‘not much’; they will already<br />
be disclosing all that they are required to under UK<br />
law. However, for those who have enjoyed banking<br />
privacy, the rules of engagement are changing.<br />
The first step is working out what qualifies<br />
as a‘tax haven’. There is no formal definition.<br />
The Organisation for Economic Co-operation and<br />
Development (OECD) believes atax haven will<br />
have no or low taxation, protection of financial<br />
information (secrecy) and alack of transparency or<br />
exchange of information with other jurisdictions.<br />
Pressure from the OECD has led to a‘white list’ of<br />
40 countries which have substantially implemented<br />
its tax standard of information exchange and<br />
transparency. There are two ‘grey lists’ of countries<br />
which have committed to the standard but have not<br />
yet substantially implemented it. There are, then,<br />
four countries on the blacklist: Costa Rica,<br />
Malaysia, Philippines and Uruguay, although all<br />
four are now stating that they want to take steps<br />
to take themselves on to the ‘grey list’.<br />
The G20 summit has tasked the OECD with<br />
pushing hard on the issue of tax havens and to<br />
report back in November 2009 at ameeting of the<br />
G20 finance ministers. Whether this will result in<br />
any concrete proposals remains to be seen. But<br />
what does appear to be happening is that effective<br />
PAUL ROBERTS<br />
Partner,Head of Tax<br />
Investigations,<br />
<strong>Grant</strong> <strong>Thornton</strong><br />
behind-the-scenes negotiation is bringing country<br />
after country in line with the OECD standard.<br />
Closer to home, the last few months have seen a<br />
number of jurisdictions entering into negotiations<br />
to increase the transfer of tax information.<br />
Liechtenstein has begun discussions with the UK<br />
with aview to anew agreement that will include<br />
the ability to access information about UK residents<br />
that have invested money in Liechtenstein without<br />
declaring the resultant income to the UK authorities.<br />
Switzerland has announced it will no longer use<br />
banking secrecy as areason not to disclose<br />
information to foreign jurisdictions about persons<br />
who deposit money in Switzerland.<br />
Arange of countries such as Jersey have entered<br />
into TaxInformation Exchange Agreements (TIEA)<br />
with the UK. The global financial crisis has meant<br />
that no one wants to be left as the ‘bad boy’ of<br />
the tax world.<br />
For those in the UK there will be aNew<br />
Disclosure Opportunity in the autumn. This will<br />
be another chance for those who have offshore<br />
accounts whichshouldhavebeendisclosed on UK<br />
tax returns to come forward and face acapped<br />
penalty, the details of which are still to be<br />
announced. Anyone concerned about these issues<br />
should contact their <strong>Grant</strong> <strong>Thornton</strong> representative.<br />
The global financial crisis has meant<br />
that no onewants to be left as<br />
the ‘bad boy’ of the tax world<br />
www.grant-thornton.co.uk
10<br />
National<br />
treasure
FINE ART<br />
Art has much to offer the investor, but it can be tricky to navigate.<br />
Renowned art expert Philip Mould provides guidance on the riches of<br />
English portraiture, and overleaf shows examples of what to look for<br />
WORDS LISA FREEDMAN PHOTOGRAPHY BRIJESH PATEL<br />
IN ANOTHER AGE Philip Mould might have<br />
been aprivate detective. He has the same cool<br />
English reticence, the same sharp eye, the same<br />
instinctive appreciation for when something is<br />
‘not quite right’. Fortunately for those of us less<br />
interested in dastardly deeds and more concerned<br />
with finding attractive bodies to furnish our<br />
library, Mould decided to confine his sleuthing<br />
to the world of English portraiture.<br />
Mould, who appears regularly as an expert<br />
on the BBC’s Antiques Roadshow, runs an<br />
internationally renowned gallery in London’s<br />
Mayfair, where you’ll find museum-quality<br />
likenesses of five centuries of the rich and famous.<br />
And, if you’re trying to build up acollection or<br />
track down aportrait by an artist such as Sir Joshua<br />
Reynolds or Sir Peter Lely, you couldn’t find a<br />
better place to start.<br />
Mould himself began honing his art detection<br />
skills early in life. (‘When Iwas 13 Icollected<br />
shoe buckles; they were cheap and Icould conquer<br />
the field.’) But it was only after studying art<br />
history at university and joining his older<br />
brother in the antiques business that the field<br />
he hunted in became portraiture.<br />
His first major discovery was atiny painting<br />
by an unknown artist of the young Prince Arthur,<br />
elder brother of King Henry VIII. The portrait<br />
had in fact been correctly catalogued by Sotheby’s,<br />
but what the experts at the international auction<br />
house had failed to realise was that this was the<br />
only likeness in existence of the short-lived heir<br />
to the English throne.<br />
Hardly surprising, then, that Mould’s motto<br />
is: ‘Fortune favours awell-prepared mind.’<br />
His boy-scout thoroughness, combined with<br />
an encyclopaedic knowledge of many artists<br />
(‘identifying signature stroke’), has helped him<br />
unmask ahost of extraordinary works –often<br />
in the unlikeliest places.<br />
‘Five years ago Ibought an Ipswich-period<br />
Gainsborough for $200 on eBay,’ he says<br />
casually. ‘The whole body had been painted<br />
brown but the face, even in adigital image,<br />
was clearly Gainsborough.’<br />
Many of his clients would be delighted<br />
if he could perform similar miracles for them.<br />
But although cheap-as-chips Gainsboroughs<br />
will always be in short supply, if you’re looking<br />
for aspecific period or artist, Mould is happy<br />
to work to order and can usually track down a<br />
significant work by awell-known painter within<br />
amatter of months.<br />
‘Some of the greatest old masters were<br />
remarkably prolific,’ says Mould. ‘Gainsborough,<br />
for example, painted 200 to 300 paintings ayear.<br />
And VanDyck, who worked with astudio,<br />
completed amajor work aweek. Alarge number<br />
of these paintings left the UK in the late 19th and<br />
early 20th century, but they can still be found.’<br />
Mould’s business has grown alongside the recent<br />
fashion for the ownership of large country homes.<br />
His advice to new collectors is concise: ‘The key<br />
things to bear in mind are: authorship, beauty,<br />
historical importance and condition.’<br />
The growth areas he is seeing at the moment<br />
are 17th-century miniatures, early 20th-century<br />
portraits and works from the Tudor period.<br />
‘Tudor portraiture has agraphic quality, which<br />
works unusually well in acontemporary setting,’<br />
says Mould.<br />
Whichever period you’re interested in, however,<br />
you can feel confident that the best portraiture<br />
will hold its value remarkably well. ‘It’sthe tortoise<br />
to the contemporary-art hare,’ says Mould.<br />
‘Good-quality historic portraits have seen asteady<br />
annual rise of about five per cent. They never<br />
experienced the enormous rises of modern art,<br />
but they haven’t seen the drops, either.’<br />
Philip Mould Gallery is at 29 Dover Street,<br />
W1S 4NA. www.philipmould.com<br />
Sleuth: The Amazing Quest for Lost Art<br />
Treasures by Philip Mould is published<br />
by HarperCollins
AN EXPERT’S GUIDE TO ENGLISH PORTRAITS…<br />
Henry VIII, school of Holbein<br />
Ann Davis, by JM Wright<br />
12<br />
TUDOR<br />
Henry VIII, school of Holbein<br />
This handsome portrait of Henry VIII was<br />
painted either shortly before or after his<br />
death by afollower of Holbein. ‘Henry’s<br />
image is one of the first truly defining<br />
images of kingship,’ says Mould. ‘With his<br />
richly embellished clothing and stately<br />
display of jewels, Henry isthe quintessential<br />
monarch.’ Portraits such as these became<br />
widespread during the late 16th century,<br />
when the owners of Elizabethan country<br />
houses, needing to furnish their newly<br />
built ‘long galleries’, began to hang<br />
portraits of kings and queens and other<br />
contemporary celebrities.<br />
Names to watch for: Hans Holbein,<br />
Guillim Scrotts and Hans Eworth.<br />
Prices from £5,000 to £30 million.<br />
LATE 17TH CENTURY<br />
Ann Davis, by JM Wright<br />
This charming portrait by John Michael<br />
Wright demonstrates the sharp shift in<br />
portrait style which took place during<br />
the reign of Charles II. Rather than the<br />
stiff, formal poses of the preceding century,<br />
here we see amuch more relaxed and<br />
naturalistic representation of female beauty.<br />
While the sitter’s arms and drapery<br />
are reminiscent of classical antiquity, her<br />
tumbling hair and revealing décolletage<br />
are typical of the rather louche style of<br />
the Restoration court. The face itself is<br />
painted with vivid clarity.<br />
Another growing area of investor interest<br />
from this period is portrait miniatures.<br />
Remarkable for their intense, jewel-like<br />
quality and detailed realism, miniatures<br />
were invented in the 16th century and<br />
remained popular in marriage negotiations<br />
and as keepsakes.<br />
Names to watch for: In portraits,<br />
Sir Peter Lely, Gerard Soest and Mary<br />
Beale; in miniatures, Nicholas Hilliard,<br />
Richard Cosway and Samuel Cooper.<br />
Prices from £15,000 to £1 million<br />
for aportrait; £2,500 to £500,000 for<br />
aminiature.<br />
18TH CENTURY<br />
The Hon John Tufton, by<br />
Sir Joshua Reynolds<br />
Joshua Reynolds is undoubtedly one of<br />
the greatest names in English portraiture,<br />
atowering figure who, with his rival<br />
Gainsborough, dominated the 18th century.<br />
Reynolds spent several years in Italy<br />
studying the style and technique of the old<br />
masters to create a‘grand style’, which<br />
married classical allusion with the demands<br />
of face painting. The first president of the<br />
Royal Academy, Reynolds exhibited large<br />
portraits treated in ahistorical manner.
FINE ART<br />
The Hon John Tufton,<br />
by Sir Joshua Reynolds<br />
Terry Jones, by Stuart Pearson Wright<br />
Lady Diana Cooper, byAmbrose McEvoy<br />
BRIJESH PATEL/© PHILIP MOULD LTD<br />
During his long life he painted as many as<br />
3,000 portraits, including almost every man<br />
and woman of note. Gainsborough, who<br />
was perhaps greater at catching alikeness<br />
and who allowed his sitters to wear their<br />
own fashionable clothes, was equally prolific.<br />
Names to look for: Sir Joshua Reynolds,<br />
Sir Thomas Gainsborough, Sir Thomas<br />
Lawrence. Prices from £20,000 to £3 million.<br />
EARLY 20TH CENTURY<br />
Lady Diana Cooper, by<br />
Ambrose McEvoy<br />
At the turn of the 20th century, British<br />
portrait painting began to react against the<br />
restrictive standards and conventions of the<br />
Royal Academy and looked to France and<br />
the French Impressionists for astyle that<br />
concentrated on the effects of light and<br />
colour on living objects. Early 20th-century<br />
English portraiture is very much agrowth<br />
area and prices remain relatively accessible;<br />
as Mould points out, you can still pick up<br />
an époque-defining image for as little as<br />
£10,000. This attractive, impressionistic<br />
work by Ambrose McEvoy, acontemporary<br />
at the Slade of Augustus John and Walter<br />
Sickert, is thought to be of the famed society<br />
beauty Lady Diana Cooper.<br />
Names to look for: William Orpen,<br />
Augustus John, Duncan <strong>Grant</strong>. Prices<br />
from £10-50,000.<br />
CONTEMPORARY<br />
PORTRAITURE<br />
Terry Jones, by Stuart Pearson Wright<br />
For investors, rather than pleasure<br />
purchasers, buying contemporary portraiture<br />
is the most problematic area. ‘If you’re<br />
dealing with art inthe past, there is an<br />
empirical understanding of historical value,’<br />
says Mould. ‘But contemporary art is much<br />
more speculative.’ Occasionally, however,<br />
he feels he can predict with confidence<br />
when an artist will endure. ‘Stuart Pearson<br />
Wright is original, incisive in his<br />
characterisation, and his painting is intense<br />
and arresting,’ he adds. ‘I know technical<br />
brilliance, and Ifeel strongly this will last.’<br />
Pearson Wright has painted some of today’s<br />
leading figures, including JK Rowling, the<br />
Duke of Edinburgh and John Hurt. His work<br />
hangs in The National Portrait Gallery.<br />
Names to look for: Susannah Fiennes,<br />
Brendan Kelly, Lucian Freud. Prices from<br />
under £1,500 to more than £1 million.
14<br />
Bubble<br />
trouble<br />
It was the mother of all get-rich-quick schemes: the South Sea Bubble. During the spring<br />
and summer of 1720 it seemed the whole country was swept up in afever: to become<br />
wealthy –very wealthy indeed –for wondrously little effort. Astory with afamiliar ring,<br />
and perhaps some lessons for investors three hundred years later<br />
WORDS GAYTHORNE SILVESTER<br />
www.grant-thornton.co.uk
INVESTMENT<br />
King George Ibecame the governor of the fledgling<br />
South Sea Company in 1718, providing credibility and<br />
aboost to the shares. His mistresses, the countess of<br />
Darlington and Duchess of Kendall, were heavily involved<br />
and suffered harsh criticism when the bubble burst<br />
THE BUBBLE ITSELF<br />
In 1711 agroup of merchants had<br />
formed the South Sea Company and<br />
were granted exclusive trading rights<br />
in Spanish South America. At that<br />
time, when the whole of America was<br />
being explored and settled, the ‘South<br />
Seas’ was what we called South<br />
America and its surrounding waters.<br />
In return for its trading monopoly,<br />
the company guaranteed to<br />
underwrite £9 million of UK<br />
government debt incurred by war,<br />
assured by the government of a6%<br />
interest rate –£540,000 guaranteed<br />
annually. Despite very little real trade<br />
being conducted with the Spanish in<br />
the following years, fanciful talk of<br />
golden opportunities, encouraged by<br />
the merchants in the company, led to<br />
acontinual increase in the value of the<br />
stock. In 1718 King George became<br />
governor of the company, and its<br />
success was assured. Buying into the<br />
South Seas became the fashionable<br />
way to riches.<br />
THE ART OFSPIN<br />
In early 1720 the stock started to<br />
soar. Parliament had accepted the<br />
company’s proposal to take over<br />
the national debt and the company<br />
expected to recoup itself from<br />
expanding trade as well as the increase<br />
in value of shares. On the latter point,<br />
at least their hopes were well founded:<br />
fuelled by continuing extravagant<br />
tales of treasure in Spanish America,<br />
the shares went into overdrive, rising<br />
from £128 in January to more than<br />
£1,000 in August.<br />
KEEPING THE PLATES<br />
IN THE AIR<br />
Fortunes were made overnight and<br />
no investor, itseemed, could afford<br />
to miss out. The company cannily<br />
passed on stock to politicians and<br />
aristocrats to ensure that they would<br />
keep talking up their shares: stock<br />
in the company was ‘sold’ to them at<br />
the going market price. However,<br />
rather than paying for the shares, they<br />
simply held on to what shares they<br />
had been offered, sold them back to<br />
the company when and as they chose,<br />
and received as profit the increase in<br />
market price. Their interest was<br />
bound to the fortunes of the<br />
company: in order to secure their<br />
own profits, they had to help drive<br />
up the stock.<br />
The Prince of<br />
Wales became<br />
the governor<br />
of one company<br />
and is said to<br />
have cleared<br />
£40,000 –the<br />
equivalent of<br />
£61m nowadays<br />
LITTLE BUBBLES<br />
OF ACRAZY NATURE<br />
Agreat froth of speculative projects,<br />
soon dubbed ‘Bubbles’, sprang up in<br />
the wake of the South Sea Company’s<br />
success, some genuine and some<br />
frankly preposterous. These included<br />
heat-resisting paint; trading wool<br />
with Barbary and ‘preserving our<br />
countrymen from being carried into<br />
slavery’; dealing in hair; trading in<br />
woad; importing broomsticks from<br />
Germany; extracting silver from lead;<br />
and that favourite of the truly<br />
hopeful, the perpetual motion<br />
machine –‘capital, one million’. More<br />
than 100 were advertised in June 1720<br />
alone. The Bubble Bill had to be<br />
devised by Parliament, most of whose<br />
members were in the scam up to<br />
their necks, to suppress them before<br />
they diverted too much cash from<br />
the South Sea Company itself. The<br />
Bubble Bill required all new joint<br />
stock companies to have aRoyal<br />
Charter as ameans of preventing<br />
the fraudulent ‘Bubbles’ that were<br />
springing up.<br />
‘TOTAL REVOLUTION<br />
IN THE ART OFWAR’<br />
Among the characters of the<br />
moment was James Puckle, aveteran<br />
‘Projector’ (the name given to<br />
those who spent their time devising<br />
money-making schemes) who<br />
promoted afiendish machine gun<br />
that could fire both round and square<br />
bullets. The latter were to be<br />
employed against the Turks as they<br />
hurt more. He then added apatent<br />
for asword he had invented, writing<br />
to Charles Stanhope, Secretary to<br />
the Treasury, that it was ‘worth<br />
avictory to the army that first has it’.<br />
THE MADDEST ONE OF ALL<br />
The most outrageous scam of all was<br />
an advertisement for abusiness<br />
proposition ‘for carrying out an<br />
undertaking of great advantage, but<br />
nobody to know what it is’.<br />
Enthusiastic crowds are said to have<br />
surrounded the company’s office in<br />
Cornhill, snapping up £100 shares for<br />
deposits of £2 each. By three o’clock<br />
the unknown author of the ploy had<br />
sold 1,000 shares, and he shut up<br />
shop. That same evening he was on<br />
the boat to the Continent, never to<br />
be seen again.<br />
GETTING SATIRICAL<br />
Pamphleteers and the newspapers<br />
mocked the absurdities and came up<br />
with their own, confusing the<br />
situation further. Among those listed<br />
in apamphlet called ‘The Battle of the<br />
www.grant-thornton.co.uk
16<br />
The most outrageous scam of all<br />
was an advertisement for abusiness<br />
proposition ‘for carrying out an<br />
undertaking of great advantage, but<br />
nobody to know what it is’<br />
Bubbles’ were ‘Automatons –i.e.<br />
Carriages for conveying single<br />
Persons… without the help of Four<br />
footed beasts, the Motion is to be<br />
performed by the Person carried, who<br />
is to wind up his Wheels every<br />
two Thousandth yard’. There was<br />
also the exciting news that<br />
‘A Flying-Engine is under the<br />
Consideration of the Author<br />
of the Automaton, and is speedily<br />
expected to be seen in the Air’.<br />
WHAT SORT OFMONEY ARE WE<br />
TALKING ABOUT HERE?<br />
The Prince of Wales became governor<br />
of one company, and is said to have<br />
cleared £40,000 by his speculations.<br />
Afigure not to be sniffed at now but,<br />
using the British Retail Prices Index,<br />
the relative value nowadays would be<br />
£61.4 million*. Fortunes were not<br />
Oneofaset of playing cards<br />
which mocked the many ‘bubbles’<br />
that sprang up in 1720<br />
restricted to the upper classes, either.<br />
The housekeeper to Sir Theodore<br />
Jansenn, sub-Governor of the South<br />
Sea Company, who was married to<br />
acustoms officer, made £8,000, the<br />
equivalent of just over £12.2 million.<br />
ASILVER LINING<br />
The Bubble had its beneficial side.<br />
Sir Thomas Guy, asouth London<br />
bookseller, put his considerable<br />
windfall, judiciously turned to cash<br />
in June, to good use. He died in 1724<br />
at the age of 81, and left £240,000 to<br />
found the great London hospital that<br />
still bears his name.<br />
THE BUBBLE BURSTS<br />
Of course it couldn’t last. By the<br />
beginning of August it was obvious that<br />
the shares, at £1,000, were hopelessly<br />
overvalued. The directors of the<br />
company started to unload their stock,<br />
as surreptitiously as they could, and<br />
those who had borrowed money from<br />
the company to buy their shares at the<br />
height of the market suddenly found<br />
they couldn’t make their repayments.<br />
Wholesale selling resulted in panic and<br />
acollapse of the price –down by more<br />
than £800 to £124 in December.<br />
Thousands were made bankrupt,<br />
suicides were commonplace, and the<br />
inevitable search for scapegoats began.<br />
THE GIFT OF HINDSIGHT<br />
The scientist Isaac Newton lost<br />
£20,000, commenting: ‘I can calculate<br />
the motions of heavenly bodies, but<br />
not the madness of people.’ The king,<br />
his mistresses, 462 members of<br />
Parliament and 112 peers, an<br />
embarrassing line-up of the great<br />
and the good, had not listened to<br />
the few lone voices who had spoken<br />
out against the scheme, Robert<br />
Walpole among them. But now<br />
they cried out for vengeance.<br />
THE CALL FOR BODY BAGS<br />
(AND SNAKES)<br />
Some cries for retribution were shrill<br />
and intemperate. Lord Molesworth,<br />
in aspeech in the House of Lords<br />
which was thankfully not heeded,<br />
proposed that anew punishment<br />
could be legalised which would<br />
copy the Roman practice of tying<br />
up the guilty in sacks filled with<br />
snakes and throwing them in the<br />
Tiber. The Thames, flowing<br />
conveniently outside the House,<br />
would be employed. In the event,<br />
Parliament confiscated property<br />
and profits from the blatantly<br />
corrupt, anumber of government<br />
ministers were imprisoned, and<br />
others fled the country.<br />
AND NOW, 289 YEARS LATER…<br />
When Gordon Brown calls his<br />
ministers to order in the Cabinet<br />
Room at Number 10, there is a<br />
portrait behind him that his colleagues<br />
may occasionally glance at in hope<br />
of inspiration. It depicts Sir Robert<br />
Walpole, who was called on by the<br />
anxious Parliament to steady the ship<br />
after the debacle of the Bubble. He<br />
had actually dabbled himself in the<br />
notorious shares, but he had spoken<br />
out against the scheme and was not<br />
tainted like so many others. In 1721<br />
he became First Minister, ineffect<br />
Britain’s first Prime Minister, and now<br />
he looks down on another set of<br />
ministers as they wrestle to restore<br />
economic confidence.<br />
In his day, the Bubble had shown the<br />
people in their worst light: greedy,<br />
dishonest and gullible. Plus ça change…<br />
*Basedon2007 figures.<br />
CORBIS, GETTY IMAGES, PRIVATECOLLECTION/BRIDGEMAN ART LIBRARY<br />
www.grant-thornton.co.uk
INVESTMENT<br />
INVESTING IN<br />
TURBULENT MARKETS<br />
Faced with the current market uncertainty,<br />
<strong>Grant</strong> <strong>Thornton</strong> has established strategies<br />
for protecting private wealth.<br />
ASSET ALLOCATION<br />
Our bespoke investment proposition involves<br />
distributing wealth across different investment<br />
avenues so that poor performance in one area<br />
does not jeopardise the entire investment plan<br />
over aperiod of time. The short-term<br />
downsides of market volatility are lessened by<br />
holding adiverse portfolio and using a<br />
long-term approach.<br />
DIVERSIFICATION<br />
Asophisticated extension of the common<br />
sense approach: ‘Don’t put all your eggs in<br />
one basket.’ By spreading funds across a<br />
number of different investments, specifically<br />
chosen based on your attitude to risk, this<br />
strategy is designed to optimise the trade-off<br />
between risk and reward by avoiding anarrow<br />
focus in one particular area.<br />
LONG-TERM APPROACH<br />
The investment industry typically thinks in<br />
five-year periods, seeking to achieve returns<br />
from acombination of income and capital<br />
growth in this relatively short time span. Our<br />
approach to portfolio construction focuses on<br />
the long term, providing acombination of<br />
investments which take into account your<br />
specific long-term goals and the individual and<br />
providing greater leeway to counter market<br />
uncertainties. This can be much better suited<br />
to individuals who are investing for their whole<br />
life or to provide for the next generation.<br />
MORE INFORMATION<br />
To find out about asset allocation speak to your<br />
usual <strong>Grant</strong> <strong>Thornton</strong> contact or email<br />
bespoke@gtuk.com<br />
Acontemporarywoodcut<br />
showing the frenzied<br />
buying of shares in Change<br />
Alley in London during<br />
the South Sea Bubble<br />
Investors should remember that past performance is not an<br />
indicator of future performance. The information presented<br />
here is not asubstitute for full professional advice and<br />
specialist assistance should be sought in relation to any<br />
individual circumstances.
Bleak<br />
house<br />
Take awealthy family with abeautiful<br />
country seat. Add the death of the father<br />
and mix with abizarre will. The resulting<br />
saga set 19th-century newspapers alight<br />
and became the basis for afamous novel<br />
WORDS MARK HARMON<br />
18
PROTECT YOUR WEALTH<br />
SPARE ATHOUGHT for Peter Isaac<br />
Thellusson. He was 36, newly married<br />
and exceptionally upwardly mobile, when<br />
his father died in 1797. Suddenly, the<br />
young Thellusson –who at the time was<br />
MP for Malmesbury, Wiltshire, and later<br />
became the first Baron Rendlesham –was<br />
financially secure for the rest of his life.<br />
Or so he thought.<br />
His father,who was also called<br />
Peter Thellusson, had been afabulously<br />
wealthy man. Indeed, at the time of his<br />
demise he was thought to have been worth<br />
around £700,000 –that’sapproximately<br />
£34 million in today’smoney.Even if he<br />
had decided not to favour his eldest son<br />
and had shared his fortune equally with<br />
all six of his children, none of them<br />
would have had reason to complain.<br />
In financial terms, they were about to<br />
live happily ever after.<br />
So imagine the scene when the family<br />
solicitor read out the terms of Peter<br />
Thellusson’swill. What drama. Presumably,<br />
his widow Anne (née Woodford, who<br />
hailed from aLincolnshire landowning<br />
family) gathered together her brood in<br />
the drawing room of Brodsworth Hall,<br />
the flamboyant stately home in Yorkshire<br />
that her husband had acquired seven<br />
years earlier.<br />
Expectation hung tantalisingly in<br />
the air. The ornate, symmetrical room<br />
provided aperfect backdrop to what<br />
would become acause célèbre in high<br />
society and alandmark in legal history.<br />
‘There was no indication of what was<br />
to come,’ says Caroline Carr-Whitworth,<br />
acurator at Brodsworth Hall, which<br />
English Heritage acquired in 1990. ‘Peter<br />
Thellusson was not thought to have been<br />
an eccentric man, or mean or strange. In<br />
fact, he was atypical merchant financier<br />
who put money into several ventures and<br />
reaped the rewards. He had been successful
20<br />
in business and, like many men of that<br />
period, he wanted to buy alarge estate<br />
in the country.’<br />
His will caused asensation. None of<br />
his children, grandchildren or greatgrandchildren<br />
was to benefit from his<br />
fortune, apart from asmall, shared<br />
bequest. Instead, his estate was to be<br />
left in trust to accumulate for three<br />
generations, whereupon it would be<br />
divided between ‘the eldest male lineal<br />
descendants of my three sons then living’.<br />
If there were no such descendants,<br />
it was to be used to help pay off the<br />
national debt –anotion that must have<br />
raised morale within the Treasury. Indeed,<br />
how the current Chancellor of the<br />
Exchequer must lie in bed wishing for<br />
such exceptional circumstances to come<br />
his way in 2009.<br />
The Thellusson family were<br />
dumbfounded and angry, dismissing the<br />
will as ‘an object impolite and pernicious’.<br />
Immediately, they sought to have the will<br />
reversed in court, amove that guaranteed<br />
abarrage of publicity that would not have<br />
been welcomed by his three sons, all<br />
of whom had gone into politics.<br />
‘Peter Thellusson has been portrayed<br />
as amiser but Idon’t think that was the<br />
case,’ says Carr-Whitworth. ‘Certainly,<br />
he was aprudent man and it would seem<br />
that he wanted his sons to continue in<br />
business rather than join the ranks of the<br />
The family was<br />
dumbfounded<br />
and angry,<br />
dismissing the<br />
will as ‘an object<br />
impolite and<br />
pernicious’ and<br />
immediately sought<br />
to have it reversed<br />
idle rich. He had astrong Protestant<br />
work ethic and he wanted that to be<br />
passed down the generations.’<br />
To his children’s chagrin, the courts<br />
upheld the will. But the case eventually<br />
led to Parliament passing the<br />
Accumulations Act 1800. This, in short,<br />
made it illegal to leave money to people<br />
not yet born. Ironically, by the time<br />
the Thellusson family could claim its<br />
inheritance, in 1856, the amount of<br />
money to be shared between Frederick,<br />
the fourth Lord Rendlesham, and<br />
Charles Sabine Augustus Thellusson was<br />
not much greater than that originally<br />
bequeathed, largely because of the money<br />
spent on litigation.<br />
Parallels have been drawn between the<br />
Thellusson/Woodford situation and<br />
the Jarndyce versus Jarndyce case in<br />
Charles Dickens’ Bleak House. Dickens<br />
never referred directly to the Thellusson<br />
controversy, but in the preface to<br />
Bleak House he singles out one particular<br />
case in the Court of Chancery that caught<br />
his attention.<br />
‘At the present moment,’ he wrote,<br />
‘there is asuit before the Court which<br />
was commenced nearly 20 years ago;<br />
in which from 30 to 40 counsel have<br />
been known to appear at one time; in<br />
which costs have been incurred to the<br />
amount of £70,000… which is (I am<br />
assured) no nearer to termination now<br />
than when it was begun.’<br />
Brodsworth was in limbo for nearly 60<br />
years, after which Charles Sabine Augustus<br />
Thellusson set about rebuilding the<br />
house, employing alittle-known architect<br />
called Philip Wilkinson to supervise the<br />
work. The result is adelightful blend of<br />
Italianate High Victorian and urban<br />
efficiency, reminiscent of grand London<br />
homes and clubs. Naked marble maidens<br />
pose in niches of dark yew; evergreen<br />
shrubberies surround acroquet lawn;<br />
and aparterre is screwed to the earth by<br />
monster monkey-puzzle trees.<br />
Perhaps fittingly, Brodsworth went<br />
through another period of uncertainty<br />
in the late 20th century, when successive<br />
generations struggled to maintain the<br />
house, at which point it was placed on<br />
the English Heritage Buildings at Risk<br />
Register. In1988 Pamela <strong>Grant</strong> Dalton,<br />
the granddaughter of Constance<br />
Thellusson, gave the house, its contents<br />
and its gardens to English Heritage,<br />
and anew chapter began.<br />
Today, Brodsworth is open to the<br />
public and makes for an exceptional<br />
day out. But as you wander through<br />
the immaculately preserved rooms and<br />
lovingly restored gardens, it’s hard not to<br />
think of the children of Peter Thellusson.<br />
They must have loved the place more<br />
than anyone but spent their entire adult<br />
lives fighting for the right to enjoy it.<br />
PHOTOS ©JOHN CRITCHLEY, ENGLISH HERITAGE PHOTO LIBRARY. ILLUSTRATION PETER JAMES FIELD<br />
www.grant-thornton.co.uk
PROTECT YOUR WEALTH<br />
The case for awill<br />
Inheritance tax reliefs are greatly under-used and yet they offer<br />
excellent succession planning for families and businesses<br />
ILLUSTRATION PETER JAMES FIELD<br />
nacomplicated world it is often<br />
surprising how one simple thing can<br />
make alarge difference. In the UK,<br />
statistics consistently show that well<br />
over half the adult population have not<br />
made awill. The relatively straightforward act<br />
of making and then regularly updating awill not<br />
only helps ensureyour wealthcascades to where<br />
you would like it to go but also that you can<br />
effectivelysuccession plan for your familyand,<br />
if relevant, your business.<br />
The implications of having no will can be<br />
significant. Imagine ayoung honeymoon couple.<br />
The groom is very wealthy. His new bride is less<br />
so. Tragically they are killed in amotorbike<br />
accident and there is no way of determining who<br />
died first. They had not made their will. Under the<br />
laws of intestacy, in this case the wealth of<br />
the husband would pass to the wife and then<br />
immediately to her parents. Do you think he<br />
intended to give his whole estate to his in-laws?<br />
Or take the common occurrence of second<br />
families. Maybe awidow remarries but of course<br />
still wants to ensure her children from her first<br />
marriage benefit on her death. Her new husband<br />
may have anumber of children from his previous<br />
marriage. Without awell-constructed will she may<br />
find that the children from her first marriage are<br />
left with little or nothing.<br />
There is also what has been termed the ‘vulture<br />
syndrome’ with family squabbles post-death.<br />
Arecent survey of 3,000 adults by aLondon<br />
law firm highlighted that aquarter had fought<br />
over adeceased’s estate, sometimes for as little<br />
as £250, often driven on by the inadequacies<br />
of the will drafted.<br />
Much painful heartache, time and money<br />
can be saved by getting awill right. The new<br />
transferable nil rate tax band provisions help<br />
married couples or civil partners transfer any<br />
remaining proportion of their inheritance tax nil<br />
rate band (currently £325,000) to their surviving<br />
spouse, for them to claim on their own death.<br />
However, many people will have estates<br />
worth far in excess of two full nil rate bands and<br />
will want to consider using trusts within<br />
awill to maximise flexible giving and minimise<br />
tax. For example, they may already have access<br />
to value inheritance tax reliefs, like business<br />
property relief (BPR), which can give 100%<br />
relief on certain business assets, and careful<br />
will planning can ensure none of this relief<br />
is wasted. Arecent case on BPR (Trustees<br />
of Nelson Dance) also suggests this relief may<br />
be available in far wider circumstances than<br />
previously thought.<br />
It therefore pays both to have awill and<br />
to keep it under regular review to make<br />
sure that your wealth is distributed according<br />
to your wishes.<br />
FRANCESCA<br />
LAGERBERG<br />
Head of Tax,<br />
<strong>Grant</strong> <strong>Thornton</strong>
Standby<br />
for super<br />
22<br />
If you have asix-figure income, you<br />
will be aware that the April budget singled<br />
you out as one of its key target areas. A<br />
new ‘super-tax’ rate of 50%, loss of<br />
personal allowances and significant<br />
pension changes could all affect your tax<br />
bill. Eric Williams, <strong>Grant</strong> <strong>Thornton</strong>’s<br />
Head of Private Client, has this advice<br />
ILLUSTRATION PETER JAMES FIELD<br />
tax<br />
rom 6April 2010,<br />
it is proposed that<br />
entitlement to basic<br />
personal allowances<br />
for income tax will be reduced for those<br />
with higher incomes. These allowances<br />
give everyone a‘tax-free’ amount but<br />
where gross income (before personal<br />
allowances are deducted) exceeds<br />
£100,000, the allowance will be reduced<br />
by £1 for every £2 of income, until the<br />
basic allowance is extinguished. This means<br />
those with income of around £113,000<br />
will have no personal allowance at all.<br />
But that is not all. From 6April 2010 a<br />
new 50% rate of income tax will apply to<br />
taxable income above £150,000. The rate<br />
applicable to trusts will increase from<br />
40% to 50%. The rate of income tax on<br />
dividends for individuals subject to the<br />
50% rate and on trusts will be increased<br />
by 10% to 42.5%. This will increase the<br />
effective tax rate on dividends received<br />
from 25% to over 36%.<br />
These changes give rise to some very<br />
high effective tax rates. For example,<br />
individuals whose income (excluding<br />
dividends) falls into anarrow band of<br />
income above the £100,000 threshold<br />
will have an effective income tax rate<br />
of astaggering 60%.<br />
The rate increases do not apply to<br />
capital gains, which will continue to be<br />
taxed at 18% (or just 10% if you can claim<br />
www.grant-thornton.co.uk
NEED TO KNOW<br />
the very helpful Entrepreneurs’ Relief).<br />
This will drive apreference towards having<br />
capital gains rather than much higher taxed<br />
income, although this is not always<br />
straightforward. There are afew ways to<br />
achieve this, although, as with all planning,<br />
this should only be done in the context<br />
of what is appropriate and practical for<br />
you. Share incentive schemes are another<br />
method that could help reduce income<br />
taxable at higher rates.<br />
When it comes to pensions, the<br />
withdrawal of higher-rate relief for<br />
pension contributions will make many<br />
revisit their pension plans. Those with<br />
income over £150,000 will see higher-rate<br />
relief withdrawn from 2011, although<br />
complex forestalling rules are already in<br />
effect, restricting what you can do now.<br />
Under these provisions, an additional tax<br />
charge of 20% could be levied with effect<br />
from Budget day, 22 April 2009, for<br />
contributions above what is perceived<br />
to be an individual’sregular (at least<br />
quarterly) contribution pattern before<br />
Budget day.<br />
All is not lost though, as there are many<br />
things to consider that might help you<br />
keep your tax bill down. For employeeowned<br />
companies, it may be possible to<br />
pay dividends and suffer alower effective<br />
rate of income tax, although this must be<br />
considered alongside the corporation<br />
tax implications for the company.<br />
HM Revenue and Customs approved<br />
share schemes are atax-efficient means of<br />
providing benefits. They work by way<br />
of granting options over shares in a<br />
company, which are eventually<br />
‘exercised’, then the shares are sold by the<br />
individual. If all the relevant conditions<br />
are met, then there is no income-tax<br />
charge on the grant or the exercise of<br />
the options. On asubsequent sale of<br />
the shares there is acapital gain on the<br />
difference between the exercise price and<br />
the sale price. This enables what would<br />
have potentially been an income-tax<br />
charge to be converted to acapital gain.<br />
If making acapital disposal, you should<br />
review the position in respect of<br />
Entrepreneurs’ Relief, as there may be<br />
simple steps you can take to benefit from<br />
a10% effective rate of tax.<br />
Incorporation may be an option for<br />
high-earning sole traders and partners<br />
who would otherwise suffer income tax<br />
at 50% on their profits. Provided profits<br />
do not exceed £300,000, any retained<br />
profits will be subject to a22%<br />
corporation tax rate from April 2010.<br />
However,there will be further tax<br />
charges, as mentioned above, when<br />
withdrawing income from the company.<br />
As aresult, consideration should be given<br />
to whether profits may be retained within<br />
the company or if cash will need<br />
to be extracted.<br />
Non-UK domiciled individuals who<br />
may have substantial overseas income<br />
may benefit from claiming the remittance<br />
basis in order to avoid suffering these<br />
higher tax rates. However,the remittance<br />
rules are extremely complex and it is<br />
imperative that specialist professional<br />
advice should be sought in advance of<br />
making any claims or returns.<br />
YOUR NEXT STEPS<br />
It is important to consider what your<br />
income position will be after 6April<br />
2010 and 2011. If you are likely to have<br />
income in excess of £100,000, is there<br />
anything that you can do to restructure<br />
the income you receive? <strong>Grant</strong> <strong>Thornton</strong><br />
is happy to talk you through the best<br />
options for you.<br />
Whatever you decide to do, the sooner<br />
you can start planning, the better position<br />
you are likely to be in.<br />
The rate increases do not apply to<br />
Capital Gains Tax, driving a<br />
preference over higher taxed income<br />
ERIC WILLIAMS,<br />
<strong>Grant</strong> <strong>Thornton</strong>’s<br />
Head of Private Client<br />
www.grant-thornton.co.uk
ADAY IN THE LIFE<br />
ARTWATCH<br />
Interesting art auctions<br />
from around the world<br />
FINE ASIAN ART San Francisco<br />
Monday 29 June 2009<br />
www.bonhams.com<br />
Tony<br />
Deep MBE<br />
24<br />
Arriving in the UK aged 18 with just £3.50 in his pocket,<br />
Tony Deep set up East End Foods. Now worth £100 million,<br />
it sponsors afoundation that promotes organic farming<br />
always wake up at four in the morning. Today I’m staying at a<br />
small house just outside Delhi. It is the local office for the Heart<br />
and Soil Organic foundation. The first thing Idoistake medication<br />
for my diabetes and then Imeditate for an hour. That’s when one<br />
can talk to oneself.<br />
‘I lost three members of my family to diabetes, which led me to<br />
good organic food. The foundation is concerned with sourcing organic<br />
spices and foods for the family business. Idrink green tea while Icontact people<br />
on the internet. Itried to set up organic sourcing in England but was told, “It’s<br />
not going to happen. You’re dreaming.” But here in India we now have 200,000<br />
farmers growing organic food. This is the time of year when the spice crops are<br />
coming in and it is important that they are delivered directly to us so that we can<br />
keep up the Soil Association’s standards while we process them for export.<br />
‘At eight o’clock Ihave some breakfast –anomelette of two egg whites,<br />
some cornmeal bread –and, of course, my insulin injection. Then it’s back<br />
to work. Icall myself retired. I’m 67, but Iwork about 12 hours aday. Itry to<br />
avoid political meetings, but they have to be done. We’re talking with the Indian<br />
government about exporting cereals, lentils and beans. They are currently<br />
banned for export as the government doesn’t think there are enough for the<br />
home market.<br />
‘Delhi is very crowded so car journeys to meetings can take more than an hour.<br />
Iwould normally do two or three during the day. Sometimes it’s over lunch, and<br />
often, like tonight, there will be an evening meeting. There are around 700 people<br />
involved with the foundation and in simple terms our aim is to make food as good<br />
and pure as the food our ancestors ate.<br />
‘I’ll be back about 10.30pm and go to bed at about 11pm. Idon’t really do<br />
anything to relax as my work is quite leisurely –I’m not pushed like Iused to be.<br />
Ihave no trouble sleeping. Iwatch the news; that always sends me to sleep!’<br />
Afine 18th-century Sino-Tibetan gilt<br />
bronze figure of Vaishravana –The<br />
Guardian of the North dressed in<br />
military costume. Overall 30cm high.<br />
Estimate: $10,000–$15,000<br />
RENAISSANCE &BAROQUE<br />
The Barbara Piasecka Johnson<br />
Collection London<br />
Wednesday 8July 2009, 6pm<br />
www.sothebys.com<br />
Christ carrying the cross, Andrea<br />
Solario, Milan, circa 1465-1524.<br />
Overall 51.6cm high, 52.1cm wide<br />
Estimate: £250,000–£350,000<br />
MASTER PAINTINGS WEEK<br />
London, 4–10 July 2009<br />
www.masterpaintingsweek.co.uk<br />
The most distinguished names in<br />
Old Master galleries, along with two<br />
auction houses, will showcase<br />
their expertise and great paintings<br />
with special displays or events.<br />
BONHAMS, SOTHEBY’S AMSTERDAM, MIKI ALCALDE
LATEST THINKING<br />
What to do with cash?<br />
Three experts provide their take on the best strategy<br />
ILLUSTRATION PETER JAMES FIELD<br />
■ The £75 billion committed to<br />
quantitative easing has had afairly<br />
dramatic effect on medium-term<br />
UK Government bond yields.<br />
Longer-term rates are likely to fall<br />
further as aresult.<br />
■ We feel that UK rates are likely<br />
to remain low over the next 12<br />
months as inflation falls and we enter<br />
adeflationary period. Beyond that,<br />
we see inflation returning as the<br />
new money entering the economy<br />
takes effect.<br />
■ Asensible strategy for managing<br />
significant sums in this market is one<br />
that places cash on the balance sheets<br />
of highly rated banks or building societies<br />
that have either explicitly or implicitly<br />
received Government support. Also,fixa<br />
proportion of the cash for up to 12 months<br />
to protect against persistently low rates.<br />
■ Fixing cash rates for longer than 12<br />
months might be worthwhile for a<br />
small proportion of the available<br />
balance, given the likelihood that<br />
inflation and therefore rates will be on<br />
the increase in 2010.<br />
■ We can supplement this approach by<br />
looking to pick up yield through some<br />
short-term investment strategies that<br />
exploit factors such as the high volatility<br />
in equity and currency markets and<br />
deliver returns in atax-efficient manner.<br />
Rory Gilbert, Managing Director of UK<br />
Private Bank, Barclays Wealth<br />
■ The outlook for all the major<br />
currencies in the next year or so, at<br />
least to some extent, is abattle of the<br />
‘least bad’. All of the policymakers face<br />
major challenges, and each of them<br />
is undertaking monetary and fiscal<br />
risks that threaten their currencies’<br />
long-term purchasing power.<br />
■ Quantitative easing, together with<br />
fiscal expansion, is usually arecipe<br />
for currency disaster. The only<br />
dilemma is that all of the US, UK,<br />
Japan, Switzerland and, in an indirect<br />
way, the eurozone, are doing this.<br />
This is why many people currently<br />
like gold.<br />
■ So where is the pound going?<br />
By default, we like it at Goldman<br />
Sachs. It has fallen alot already,<br />
and because of this, two things<br />
make it attractive. It is cheap<br />
on our measures of fair value,<br />
especially relative to the euro,<br />
Swiss franc and yen, and to amore<br />
moderate degree against the dollar.<br />
In addition, there are signs in leading<br />
indicators that the UK might be the<br />
first major economy to show some<br />
‘green shoots’. We expect that the<br />
pound will be closer to 1.80 than<br />
1.40 against the dollar by this time<br />
next year, and agood 10% stronger<br />
against the euro.<br />
Jim O’Neill, Head of Global Economic<br />
Research, Goldman Sachs<br />
■ As the consequences of the<br />
credit crunch started to emerge,<br />
many investors initially fled to<br />
capital safe options. However,<br />
many are now looking for abetter<br />
interest rate in addition to capital<br />
security for their short-term<br />
cash deposits.<br />
■ With base rates so low and<br />
predicted to stay low in the<br />
near term, ‘better than base rate’<br />
interest rates are available if you<br />
shop around.<br />
■ For significant sums, ensuring you<br />
keep to the £50,000 (per individual)<br />
Government compensation scheme<br />
limit would complement the strategy,<br />
while watching out for those deposit<br />
takers that are part ofthe same group<br />
of companies.<br />
■ For medium to longer-term<br />
investors willing to accept adegree<br />
of risk, having set aside acash<br />
reserve, then diversifying your<br />
investments into aportfolio which<br />
includes avariety of asset classes<br />
may be asuitable option.<br />
■ The volatile investment periods<br />
that we are currently experiencing<br />
often create opportunities for the<br />
longer-term investor. These investors<br />
could benefit from any turnaround in<br />
economies around the world.<br />
Richard Wheatley, Partner, Private Client<br />
Services, <strong>Grant</strong> <strong>Thornton</strong><br />
www.grant-thornton.co.uk
PRICELESS<br />
Cheeky<br />
bouquet<br />
Sir Alex Ferguson on the joys of<br />
sharing along-anticipated wine<br />
INTERVIEW PETER BUHLMANN<br />
26<br />
collect wine and that’s mainly kept in<br />
London in bond, but I’ve got some<br />
great stuff at home. I’ve about 500<br />
bottles, Iimagine. I’ve got some<br />
Penfolds Grange in the house, that’s<br />
abeautiful wine. Iwas trying alot of different<br />
wine houses for quite awhile there and Isaid<br />
to myself, “Look, the best way is to stick to<br />
what we know…” and that’s sticking to the best<br />
brands because they don’t disappoint, to be<br />
honest with you.<br />
‘About two years ago Ihad a1961 Chateau<br />
Petrus which was absolutely fantastic. I’d had it<br />
for two years and Ilaid it out the day before a<br />
big game between Arsenal and Chelsea. They<br />
had adraw, sowewon the league and Iinvited<br />
all my staff and their wives up for acelebration<br />
drink that night. Itold them to come by at<br />
seven o’clock and at six o’clock I’d opened the<br />
Petrus and was ready to enjoy it.<br />
‘Of course the doorbell rang –and there was<br />
my assistant and the fitness coach standing at the<br />
door! So Icouldn’t doanything else but invite<br />
them in and give them ashare of my ’61 Petrus!<br />
Ishould have told them to drive around the<br />
block about three times.<br />
‘It was agreat year, anyway –Idon’t think you<br />
get abad year with Petrus, to be fair, but that was a<br />
1961<br />
CHATEAU PETRUS<br />
Value: £9,000 upwards<br />
fantastic wine. It was so smooth and velvety<br />
and the taste lasted so long in the mouth. Ithink<br />
that’s one of the secrets of agood wine; the<br />
taste lingers there and you can maybe only<br />
take one glass and not touch it for another 10<br />
minutes because you’re still relishing the odours<br />
and the ingredients of it.<br />
‘My favourite years are 1961, ’82 and, well, ’47<br />
if you can get it. Ithink some of the years that have<br />
excelled have surprised people –1986 is very good<br />
and then 2003 is turning out very well, too. Ihad<br />
some 2003 and it was beautiful –aPavie Decesse,<br />
an excellent wine.<br />
‘I’m always looking for value. Awhile back<br />
Iwas in Glasgow, inmyfriend’s restaurant, and<br />
Isee that there’s aPesquera Ribera del Duero,<br />
which is an excellent Spanish wine, and they had it<br />
down at £12! Imean, it really should be 30-odd<br />
quid. So Isaid to myself, “£12! Let’s get in here.”<br />
The owner was sitting at the table –hewanted<br />
some dinner –soItold him, “I’ve picked us a<br />
nice Pesquera.” He asked if it was any good and<br />
Isaid, “It’s fantastic, James, and I’ll tell you<br />
something, you’re selling it for nothing!”<br />
He jumped out of that chair and got hold of the<br />
wine waiter and said, “What’s going on here?”<br />
Iwound him up about it terribly. Isaid, “I think<br />
I’ll take some home with me…”<br />
‘There were about 10 of us as I’d just won the<br />
2000 Guineas at Newmarket with Rock Of<br />
Gibraltar, and we’d flown up the same day to<br />
celebrate. Aye, it was agood day.’<br />
CHRIS TERRY /CONTOUR BY GETTY IMAGES, SOTHEBYS
‘All Iask is a<br />
chance to prove<br />
that money can’t<br />
make me happy’<br />
Spike Milligan<br />
©2009 <strong>Grant</strong> <strong>Thornton</strong> UK LLP. All rights reserved. ‘<strong>Grant</strong> <strong>Thornton</strong>’ means <strong>Grant</strong> <strong>Thornton</strong> UK LLP, alimited liability<br />
partnership. <strong>Grant</strong> <strong>Thornton</strong> UK LLP is amember firm within <strong>Grant</strong> <strong>Thornton</strong> International Ltd (‘<strong>Grant</strong> <strong>Thornton</strong> International’).<br />
<strong>Grant</strong> <strong>Thornton</strong> International and the member firms are not aworldwide partnership. Services are delivered by the member<br />
firms independently. This publication has been prepared only as aguide. No responsibility can be accepted by us for loss<br />
occasioned to any person acting or refraining from acting as aresult of any material in this publication.<br />
Email: bespoke@gtuk.com<br />
FOR GRANT THORNTON PAUL ENGLISH, KATECREMIN, MELANIE SHAKESPEARE, JOANNA HORSLEY, CHANTAL GOODMAN, BRADLEY NEILL.<br />
EDITOR PETER BUHLMANN MANAGING EDITOR JON WATKINS GROUP ART DIRECTOR SIMON CAMPBELL ART DIRECTOR SUNDEEP BHUI<br />
PICTURE EDITOR MARTHA GITTENS CHIEF SUB-EDITOR STEVE MCCUBBIN EDITORIAL DIRECTOR PETER DEAN FINANCIAL DIRECTOR<br />
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All information correct at time of going to press. Articles may not be reproduced without permission from <strong>Grant</strong> <strong>Thornton</strong>.
28<br />
‘For those who<br />
have enjoyed<br />
banking privacy<br />
the global rules of<br />
engagement are<br />
changing.’<br />
Paul Roberts,<br />
Head of TaxInvestigations, <strong>Grant</strong> <strong>Thornton</strong><br />
www.grant-thornton.co.uk