Expat Tax Havens
Sandra Nattrass at accountancy firm KPMG says: “You need
to look at the tax rates in the country you are in as well as the
UK. Get yourself an ice pack and a gin and tonic and make some calculations.
“It’s better generally to come back in the middle of
the tax year to hit the lowest rates in both countries. Generally
you need to have been in each country long enough to equalise the
rate bands.
“However, if you are in a country with higher income tax
than the UK, you can afford to be back in the UK for a longer period
of the year without hitting the highest rate bands.”
Expat Tax Havens & HSBC
Benbow at HSBC agrees that a careful review of your tax affairs is
very important. It would usually suggest the closure of offshore bank
accounts. “You wouldn’t have to pay tax on income
in your savings account while you were overseas, but you will once
you are back in the UK,” Benbow says.
However, Benbow makes the point that a lot of expatriates stay
as expatriates and any return to the UK may be a temporary one.
In this instance offshore accounts would probably be kept open.
Nattrass at KPMG agrees: “If you’re going back to the
UK and are likely to leave again you may not be resident in the
UK, so don’t cut off any avenues,” she says.
Expat Tax Havens - Your Investments
Your investments will need sorting out before you return to the UK.
The change in tax law in 1998 means that gains made outside the UK
can be taxable in the UK. The changes in that year’s Budget
extended Capital Gains Tax liability to cover expatriates for up to
five tax years after their departure. Any disposals during an absence
of less than five years will be treated for tax purposes as happening
in the tax year in which an expatriate returns. This means that expatriates
only have the one tax year’s CGT allowance - currently £7,200
- to claim against any gains. Nor, any longer, can you sell
investments and buy them again the next day in order to reduce their
base cost for CGT purposes - known as bed and breakfasting. You
must either sell them and not buy them again for a minimum of 31
days, or sell them and buy something similar with the proceeds.
The major problem, of course, is that often an expatriate will
get little or no notice that they have to return to the UK. In this
scenario, damage limitation is the answer.
Expat Tax Havens & Your Tax Position
“It’s as well to sort out your tax position before you
leave a country as it may be difficult dealing with them from abroad.
Some countries won’t give you an exit visa until you sort out
your tax position,” Nattrass says. “If you are
likely to be in the position of having to leave at little notice,
review your situation every year anyway. If you look at it every
December the most you can be adrift is 15 to 18 months.
“The other thing is to have contact with an accountant in
the country you are leaving so they can help you sort things out
when you’ve left.”
Nattrass and Benbow share the view that expert financial advice
is essential if you are not to be caught in the tax and currency
traps mentioned above.
“A lot of employers will pay for you to get advice. If they
offer, take it up,” says Nattrass. “Take it before you
leave, in the host country and when you come back.”
Expat Tax Havens And HSBC
Benbow points to the fact that HSBC has financial planning managers
in all of its 1,700 UK branches who can set up offshore and local
accounts and provide you with tax facts on any of 80 countries and
lifestyle guides. Ultimately, your time abroad shouldn’t
cost you money. As Benbow says: “You need to make the most
of the money you earn whilst you are away in order to have a better
life in the future.”
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