How to Ensure a Tax Efficient Return to the UK

International tax and wealth management firm Blevins Franks has identified five key planning issues for UK citizens wanting to avoid punitive tax implications when making their move back to Britain:

Expats planning to move back to the UK should exercise close control over the timing of their return if they want to minimise their tax liabilities in both their current country of residence and the UK.

This is because “as soon as you are seen as a UK resident, HM Revenue and Customs can charge you income and capital gains taxes,” Blevins Franks warned.

In some cases, residency can be triggered before expats even leave Europe, potentially bringing them into the firing line for British taxation sooner than expected.

“This could happen, for example, if you still own a UK property or buy one before moving back. Even if you keep your property in Europe. As soon as you are seen to stop using it as your main home, you are likely to be considered a UK resident,” the company noted.

1. Check the calendar

Expats planning to spend time in the UK to prepare for a permanent return should take care not to bring forward the date of their UK residence status accidentally.

“It can take as little as 16 days back home to trigger residency if you have been a non-British resident for under three years. If you have been non-resident for longer, you could become resident after 46 days of a tax year, or 30 days if staying in a UK property that is considered your main home.”

2. Tax – When in Rome….

Different jurisdictions have different fiscal systems and require country-specific financial arrangements.

This means that once an expat moves back to the UK, assets and financial structures that worked favourably for them in their previous country of residence may not be so beneficial.

On the other hand, they could find more tax-efficient opportunities in the UK once they become a British resident again.

“As well as the tax implications for any income, such as your pension, your residency will influence your tax liabilities when buying, selling or moving any financial interests,” Blevins Franks observed.

“Before buying a new UK home, for example, make sure you understand how tax rules locally and in the UK might restrict or eliminate the availability of main home reliefs. Capital gains tax is also important – it may be more beneficial to sell or buy when resident of one country over the other,” it advised.

Depending on their situation, expats might find it beneficial to either bring forward or delay selling or transferring any assets according to where they are resident for tax purposes.

“In particular, careful planning of the date of sale of your overseas home is crucial.”

3. Pension – QROPS to the rescue

Pension-wise, careful, early planning is essential for expats who have made decisions based on tax-compliant opportunities in their current country of residence.

In order to make their move as straightforward and tax-efficient as possible, it is important to review all the tax and wealth management considerations before leaving Europe and becoming liable to UK taxation.

This is where qualifying recognised overseas pension schemes (Qrops) could come in handy.

“If you transferred your UK pension into a Qrops, you need to take specialist advice on the best way forward,”.

4. Estate planning – Options to explore

Similarly, estate planning will need a thorough review to consider inheritance tax, succession law, probate and the administration of estates.

“If you have trust arrangements, there could be tax consequences you need to explore before returning to the UK”, Blevins Franks warned.

“You should also take specialist advice if you have any UK inheritance tax planning structures set up on the basis that you had a domicile of choice in your current country of residence”.

5. Brexit – Tomorrow comes today

While there is still much uncertainty about Brexit, nothing should change until at least March 2019.

However, expats returning to the UK post-Brexit must bear in mind that they will be moving to a non-EU country by then.

“This could potentially trigger higher taxation in terms of exit taxes on the sale of shares or capital gains tax on selling property within the EU,”.

“Ideally, if you can be flexible around the timing of your move, you should plan your return date around your tax planning”.

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