Packing essentials – sunscreen/umbrella and tax advice!


Moving abroad, whether for work, to retire, or simply for a change of lifestyle, can be a rewarding experience. However, it is rarely stress-free. There are many issues to consider - obtaining visas, finding a job, renting or buying a property, finding schools for children, not to mention possibly learning a new language.

International Adviser's article linked below highlights an important consideration that is often missed - finding banks and financial advisers who will be prepared to deal with you, as a previous resident of one country, when you move to another. This has become a significant issue since the introduction of international information disclosure legislation, such as FATCA from the US and the OECD's Common Reporting Standard (CRS). For UK individuals, Brexit has led to a further increase in the institutions in other jurisdictions that prefer to avoid taking on British clients.

Their article highlights the importance of doing your homework on such potential problems before leaving your home country, so that you have banking facilities and financial advice available when you arrive in your new place of residence.

Tax and succession planning considerations

While advice to plan ahead is important in relation to banking and wealth management, it holds equally true for succession and tax planning. For anyone who is thinking of coming to the UK to live, if you take advice in advance of leaving your original country, you may be able to make gifts, and establish trusts and other wealth-holding structures in a way that is tax-efficient in the UK, and continues to be beneficial for years after you have arrived here.

Formerly domiciled residents 

How you are taxed once you take up residence in the UK will depend on your domicile status both when you arrive, and as you spend longer as a UK resident. If you were born in the UK with a UK domicile of origin (generally the place your father was domiciled when you were born), you will be classed as a "formerly domiciled resident (FDR)" for tax purposes when you arrive in the UK, and will be unable access the tax advantages that a foreign domicile provides.

For most tax purposes, you will be treated in the same way as a UK domiciled individual while you are resident here, and it is very important that you take UK tax advice in advance of your arrival to understand your tax position and take advantage of, or protect, those structures and benefits that are still available to you.

Foreign domiciliaries and the remittance basis

For anyone who is foreign domiciled without being an FDR, once you arrive in the UK, you can take advantage of the remittance basis of taxation without cost until you have been UK resident in at least seven of the preceding nine tax years. Under the remittance basis, you pay UK income tax and capital gains tax (CGT) only on income and gains that arise in the UK. Your foreign income and gains are only liable to UK tax if you "remit" them to the UK – either bring them into the country or otherwise use or benefit from them here.

Once you have been UK resident in at least 7 of the preceding 9 tax years, you can continue to claim the remittance basis provided that you pay an annual charge of £30,000, which increases to £60,000 for those resident in at least 12 of the preceding 14 tax years. When you have been UK resident for 15 of the preceding 20 tax years, you are deemed to be UK domiciled for tax purposes, and will be taxed on the arising basis in the same way as those who are UK domiciled and resident.

Inheritance tax

How you are treated for inheritance tax (IHT) purposes also depends on the length of your residence in the UK. As for income tax and CGT, you become deemed domiciled in the UK when you have been resident here for 15 of the previous 20 tax years. Until then, you will not be within the UK IHT net in respect of your assets outside the UK. This allows you to make gifts and establish trusts of such property (other than overseas property that derives its value from UK residential property) without having to consider the implications of IHT. However, you should always take tax advice in the UK, and elsewhere, if relevant, before doing so.

Take advice early

For those who are domiciled outside the UK, it may be possible to achieve some of your tax planning aims after you take up residence, if you take advice as soon as possible.  But it is always preferable to seek advice before you arrive.

FDRs, or anyone who has sufficient links with the UK to have acquired a domicile of choice in the UK, should take UK tax advice before coming to the UK. In this way, any pre-arrival tax planning that may be available to you can be undertaken in good time. For example, depending how many years have elapsed since you were last UK resident, it may be possible to realise capital gains before arrival at a time when, as a non-resident, you are not liable to UK CGT.

Leaving the UK

Anyone thinking of leaving the UK to take up residence elsewhere should consider taking tax and estate planning advice in the country to which you are moving, to ensure that any pre-arrival planning you may be able to carry out to maximise your tax position in that country can be achieved in time.

Whether you are proposing to return to the UK in the future or not, it would also be sensible to seek UK advice on the planning opportunities that may become available to you for UK tax purposes once you have been non-resident for specified periods of time.

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“So, before anyone moves it is very sensible to ask these questions because it’s much easier to reverse what you have in place at the moment whilst you’re still in country A in my example, because once you’ve arrived in country B it can become quite painful.”
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