Smart planning for a move to the UK

In this article Tax Manager Martin Rimmer outlines the key considerations for a return to the UK and how to negotiate the complex personal financial implications to maximise your assets.

It’s not unusual at this time of the year to be saying goodbye to people who are on the move out of Singapore and to be welcoming new arrivals. Anecdotally the number of British expats returning home this year seems to be on the rise as companies in under pressure sectors like Oil & Gas and Financial Services restructure teams and reduce or in some cases, eliminate what were the previously typical expatriate packages.


Much as it’s great to go back to friends, loved ones and familiar environments, the organisation and arrangements can be daunting and not everything is clear cut. If you think you will probably move back to the UK at some point, it is worth getting a sense of the tax and financial issues involved. In the midst of packing, address changes, leaving parties and general arrangements, it is easy to overlook sensible financial planning and there is potentially a lot of tax to be saved. 


For example, you may be required to transition over a period of time into a new UK based role. If you are spending time in your UK office you may unknowingly qualify for UK resident status before you actually move. In addition, moving part way through a tax year may impact tax payable on any investments you hold and plan to sell here.


Let’s take a look at your portfolio. You probably have bank accounts here and in the UK, some share investments, a property in the UK (or more than one), perhaps a holiday home and a retirement plan in place. You won’t just experience the sticker shock of higher rates of income tax - all of these assets are likely to be affected to a greater or lesser extent.


A good tax adviser will be invaluable to help you navigate some potentially tricky tax matters around all these issues. However, here are some things you should know and consider before you seek advice and make choices.

 

  • If possible, review your situation in the tax year prior to leaving and take some actions at that time.
  • Make sure you review all your financial interests including property, accounts, life assurances, pensions and investments.
  • Consider liquidating any assets that are gainful while you are overseas and only sell the ones making losses after you have become resident in the UK.
  • Consider closing non-UK deposit and savings accounts so interest is not unnecessarily taxed after return.
  • In the last four years, HMRC has established a fixed set of rules to determine who qualifies as resident and non-resident. Be sure to check how that applies to you on the HMRC website and maintain a record of your “midnights” in the UK in the tax year prior and for ideally 5 years before that. If for instance at short notice you are required to manage a team back in the UK which requires you to be on the ground for several months, this could affect how you are classified.


Getting the most favourable tax outcomes may involve some restructuring. For example:

 

  • If you have UK property, consider selling it whilst you are still non-resident, thereby avoiding unnecessary Capital Gains Tax (CGT). If you plan to live in it for some time, you can get a bit of a break on your CGT but not necessarily full exemption.
  • It may be possible to use trusts to avoid a large measure of eventual CGT.
  • Consider investing surplus funds into offshore bonds prior to leaving to provide tax free income while in the UK and to shelter from UK IHT.
  • If your spouse is not British, you could look at how you can shelter non-UK assets from IHT by using their “non-domiciled’ status effectively.

Typically, a more diversified portfolio will give you greater tax breaks. ISAs and a range of further allowances can all be used to minimise your annual tax bill. Also some life assurance bonds or non-UK pension schemes can deliver tax-favoured income in retirement.


Much of this planning can be done well in advance so that if notice of a move to the UK is short, you can be largely ‘ready to go’. In the fast changing world today, you may be required to move swiftly. If you have planned well ahead of time or at a minimum in the tax year before your return, the tax implications of your move back can be hassle free.

 

ABOUT THE AUTHOR

 

Martin Rimmer is Tax Manager – Asia Pacific at The Fry Group and a specialist in residence, domicile, inheritance tax planning and tax-efficient wealth structuring and protection. Based in Singapore, Martin joined The Fry Group in 1999 and now has responsibility for Private Clients throughout South East Asia, providing bespoke UK tax planning and compliance solutions, opinions and technical briefings.  Martin is ATT qualified and holds a BSc Hons in German with Economics and International Business. For more information visit www.thefrygroup.sg

 

 
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