Search News & Insights
The view from Ireland
Step Journal, September 2014
Paraic Madigan TEP is a Partner with Matheson and a member of STEP’s Council
Paraic Madigan TEP has represented Ireland on STEP’s Council since 2012, an experience he has found hugely beneficial from a professional point of view. ‘It highlights that client families around the world all face similar issues,’ he says. ‘They are often working in different legal and tax environments, but there are common features in the challenges that they face.’
Paraic particularly likes hearing how STEP members in other countries resolve their clients’ challenges and the understanding he gets of ‘how core principles apply to private client practices across many jurisdictions’. He adds: ‘One of the benefits of STEP is that, when we have clients who face challenges, we can reach out to STEP members confidently in order to get the best professional advice available.’ This, of course, is especially helpful to small jurisdictions such as Ireland.
It’s not hard to see why Paraic emphasises the importance of gaining expertise in areas such as how ‘business families’ should best organise themselves for preservation and wealth enhancement. A partner with leading law firm Matheson, he heads up the largest private client practice in Dublin. Among other personal estate- and tax-planning activities, the practice advises high-net-worth individuals who have moved to Ireland on the country’s legal and tax system, as well as advising existing Irish families on their estate planning. It also advises clients who are looking to set up offshore trusts, and the Irish-resident beneficiaries of such trusts. Another aspect of the practice is contentious trust and estate disputes. As Ireland’s succession law makes fixed provision for spouses and civil partners, and equitable provision for children, this is a growing practice area.
The tax landscape
Ireland’s close relationship with the US means the Foreign Account Tax Compliance Act is a concern for many of Matheson’s clients – both wealthy individuals and those in the funds industry, which has a large base in Ireland. In December 2012, Ireland and the US signed an intergovernmental agreement that specifies reciprocal reporting obligations between the two countries for the purpose of preventing tax evasion. Furthermore, additional initiatives to tackle tax evasion – such as the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes – are adding to the complexity of the tax landscape.
‘It’s quite challenging because the developments are coming from different sources and there does not seem to be a broad acceptance of equivalent standards across the financial world,’ says Paraic. ‘Positions are being taken within the EU that are distinct from other regions of the world. That is having quite an impact, particularly when STEP, as a representative body, is endeavouring to represent the interests of members across different regions.’
Disclosure obligations are having a particular impact in Ireland, according to Paraic. People who now live in other jurisdictions, or have lived in Ireland over the years, and have connections with offshore structures, are making enquiries in order to regularise their tax affairs. Since Ireland doesn’t have a specific disclosure regime, these enquiries need to be assessed on a case-by-case basis to determine whether a disclosure is necessary and, if so, what form it should take. It is also important to consider the risk of civil or criminal sanctions under domestic tax law.
‘It will be some time before we appreciate the full impact of the exchange-of-information initiatives that are being established,’ Paraic concludes. ‘But we are focused on them because we have to take them into account when we are assisting our clients and making recommendations to them about the manner in which they organise their family offices and the structures that they use to hold, manage and grow family wealth.’
The downside of disclosure
Another concern is the EU’s Fourth Anti-Money Laundering Directive, which proposes that public registries should be set up to identify the beneficiaries of express trusts. ‘There’s clearly some way to go before we have a directive in a final form,’ Paraic notes, but he warns that publicly disclosing the identity of beneficiaries could have ‘unintended and unwelcome consequences’. This is especially relevant where trusts are established for the benefit of vulnerable individuals. He believes, therefore, that the development of a register, if it does come about, should be undertaken on a proportionate basis.
Paraic is worried by the directive’s proposal that trust deeds and letters of wishes might be considered for public disclosure. He says: ‘Publication of letters of wishes would cut across settled law in virtually all of the common-law countries, which make it clear that wishes in whatever form they are documented, and the consideration of those wishes by trustees, should be confidential.’
In terms of domestic legislation, Ireland has introduced the Assisted Decision-Making (Capacity) Bill 2013, which Paraic describes as a ‘significant overhaul’ of the law. It will mean, on enactment, that Ireland complies with the UN Convention on the Rights of Persons with Disabilities. The Bill will enable people in need of support to have decision-making assistance available to them, through, for example, informal and formal assisted-decision-makers. It will also introduce a new guardianship system. Under the new system, a person’s capacity will be assessed in relation to a particular decision, rather than in an overarching way, as per the existing wards of court system.
The Irish government has also recently confirmed that the provisions of the Charities Act 2009, which established a regulatory function for the not-for-profit sector, are in the process of being introduced. ‘The commencement of the legislation had been delayed because of budgetary concerns,’ Paraic reveals. But some well-publicised failings in the charity sector over the past year prompted the government to speed up commencement of the legislation, which is now expected to be effective from later in 2014. ‘This,’ says Paraic, ‘will be a very significant development that will assist all in the sector to persuade those who are engaged with it that it is a well-regulated, well-managed and well-operated sector.’
In general, Paraic observes, many private clients have faced significant challenges in the wake of the global financial crisis. As such, advisors have had to help them navigate some ‘difficult and stressful circumstances’. The worst appears to have passed, however. ‘Thankfully, many have withstood those financial pressures and are now in a position where their trading businesses are improving and they are rebuilding their balance sheets,’ Paraic says. ‘There is a greater appreciation among clients of the importance of managing risk and greater use of structured estate planning to mitigate the impact of increased capital tax rates.’
STEP in Ireland
Paraic’s involvement with STEP stretches back 18 years. He joined the Society soon after qualifying as a solicitor because he saw it as a way to develop his career in private client work. He was present at the meeting when the Irish branch was formed and went on to serve on the STEP Ireland Committee and later as Chair. STEP Ireland invites a student member from each diploma course to join the committee and Paraic says this has been a ‘very useful way to ensure that the committee develops its membership’. It is also a very helpful means of engaging with students who are taking the diploma course, which is the route that most people have taken to STEP membership.
While STEP Ireland is a relatively small branch of the Society, it is extending its influence all the time. The branch’s current Chair, Catherine Duggan TEP, is a member of the Bar, which indicates the growing diversity of its membership. In the past, solicitors, accountants and tax advisors made up most of STEP Ireland’s population, but now it has a ‘broader reach among all of the professionals who are important to our clients’, Paraic says. The branch has also partnered with other professional bodies to deliver the diploma and make its educational programme available to a wider audience.
After Paraic stepped down from the STEP Ireland Committee, he took up a role on the Society’s Council. As a Council member, he enjoys helping to set STEP’s strategic objectives and acting as a sounding board for new initiatives. ‘Recently, much of our time in Council has been concerned with developing the proposal to take STEP to 2021,’ he says. ‘That has been quite challenging, because the proposal highlights the relevance of STEP to its members in many different jurisdictions, whose focus can be quite different because of the nature of the industry.’
Sitting on Council has also given Paraic a better understanding of how STEP interacts with regulators, and the important work that it does in terms of trying to counteract certain initiatives that could be harmful to STEP members and their clients. He feels STEP needs to do more to communicate the role and involvement that the Society has in policy issues, noting that it is an ‘area where the influence of STEP is probably not as widely appreciated and understood among our members as we would like to be the case’.
This article first appeared in the September edition of STEP Journal