Expat Financial Clinic

YOUR FINANCIAL QUESTIONS ANSWERED

Below we have published a selection of your questions to our financial experts. The comments below do not however constitute advice but guidance. A proper consultation should always be undertaken before acting on any comments below. If you wish to submit a question to one of our experts, please contact us.

• Should I put my property in trust?
  
• Residency and tax status
  
• Bringing cash into the UK
  
• Using a pension to pay the mortgage
  
• Confused over residency status
• Will my pension rate be updated?
  
• Bringing QROPS back to the UK
  
• Do I have to declare my Dutch pension scheme?
• Retaining UK residency
  
• Why can't I open an offshore account if I live in Australia?
• £55K non-domiciled spouse IHT allowance
• Healthcare rights in Menorca
• Can I transfer my Guernsey pension back to the UK?
• What will happen to my pension if I take up Belgian citizenship?
• Tax on UK Property
• How is foreign income determined
• Will I get stung for tax on my return to the UK?
•  Is Anglo Irish Safe?
•  Building up a pension
•  Problems with my Abbey Life pension
•  What is my NHS entitlement when abroad?
•  Remittances to the UK
•  UK Life cover when living overseas
•  What is my domicile status?
•  Living in Australia but want to return to the UK
•  Can I use a UK adviser if I live in Spain?

Q: SV writes I am 55 years and resident in Australia having left UK in 1982. I hold 
British and Australian passports and would be considered to be domiciled in
 Australia. I am thinking of purchasing an investment property in London and 
anticipate that the net rental income after mortgage interest will be close
 to zero. I would like to eventually pass the property to my children and wish 
to ensure the property escapes UK Inheritance Tax. However, I may at some 
stage return to the UK to live and so it has been suggested to me that I
 should purchase the property in an offshore company (such as Isle of Man) and
 possibly also have the offshore company in a trust. Would this structure 
ensure the property avoids Inheritance Tax?

A: Karen Marks, a partner at legal and wealth management firm, Maitland Group answers: There are two issues to be considered in your question which need to be very carefully analysed. First the treatment of income  rental stream from a UK property investment and, secondly, domicile.

The net rents from a UK property investment will be subject to UK tax regardless of the fact that you are not resident in the UK. You should register as an overseas landlord so that the rent can be paid gross rather than subject to the tax being withheld at source. Depending on the level of the net rental stream, it may be efficient for you to purchase the property through an offshore company  as the company will pay a lower rate of income tax. However, this will mean that the extraction of cash from the company will need to comply with its corporate procedure – ie by way of dividend. You will also need to ensure that the company is properly managed and controlled outside of the UK  and Australia  so that it is not treated as a company resident and subject to tax  in either of those jurisdictions.

Depending on value, the mortgage secured over the property will reduce its value for UK inheritance tax  purposes and so at death, its net value may be less than the threshold for inheritance tax. If the property is held through an offshore entity, the value will be shielded from inheritance tax but only if the owner is not UK domiciled at death.

You state that you are thinking of returning to the UK. I am concerned whether you have in fact lost your UK domicile of origin if you have always had this thought as you will not have abandoned your UK domicile and permanently settled in Australia. In any event, if you were to return to the UK without any intention of leaving again, you may well revive your domicile of origin. Living in a property owned by a company owned by a trust is likely to prove costly and creates potential charges to income tax if not managed correctly. The creation of a trust by a UK domiciled person creates upfront inheritance tax charges. There are also potential issues if assets held are in trusts from an Australian perspective.  You should be aware that if you leave Australia, you may be liable to exit charges.                                                                                                                                                                   Back to the top

Q: C.S. asks: We have been living abroad for more than 15 years. We are definitely non-residents in the UK. We are now at a stage where we want to send the children back for normal schooling in the UK. If my husband continues working overseas and I stay in the UK with my kids, is my husband obliged to pay tax to the UK?   

A: Aidan Bailey, The Fry Group, answers: Providing your husband remains employed overseas on a full time basis with no UK duties, your change in residence status should not impact upon him. He would need to ensure that his visits to the UK remained with the limitations and that his centre of life remained away from the UK.     Back to the top

Q: If I return to the UK in June and bring a substantial amount of cash with me, will I be liable to pay tax on that cash? Will it be classed as income earned in the coming tax year and, therefore, be taxed? My only other income in the coming year will be my pension, unless I take up some part-time work.

A: Aidan Bailey of The Fry Group answers: The transfer of cash to the UK is not a taxable event. What will have a bearing on the potential tax liability of this cash is actually:

i) the source of the cash (e.g: investment proceeds)

ii) where/how the cash is held at the moment (e.g.: a current account in the Isle of Man)

iii) how long you have been overseas.                    Back to the top

Q: C. asks: I'm buying a home in Malaysia and plan to use my UK private pension to pay the mortgage. What's the best and cheapest way to arrange this? I have both a regular UK and Malaysian current account, so could make occasional transfers, or my pension provider is able to pay direct to Malaysia, so these are both options. Someone mentioned setting up a currency or international account instead, would this be a better option?

A: Matt Williams from Moneycorp.com answers: Unfortunately, the Malaysian Ringgit (MYR) is a closed currency that can only be traded in Malaysia. One solution is to send US dollars that are converted on arrival to MYR. But this is an expensive method of transfer as it involves two conversions with the MYR transfer performed at an unknown rate, i.e., you only find out afterwards what rate was applied. The client's pension provider may well be able to pay the payments directly to Malaysia. However, they would send sterling directly to a MYR account and be subjected to the same process as above.  Back to the top

Q: DS asks: I've been living and working in the UAE since February 2012, on a full-time job that I secured before moving here. The job could be for 1 year +. My wife and children still live in the UK, but I haven't returned since I got the job. I haven't yet filled out a form (is it a P85 form?) to tell HMRC I'm working abroad - Is it essential that I do this? I would like to know what are the residency laws so that I can work out if I do not need to pay UK tax. I know the rules were due to be changed in April 2012, but this was delayed so I'm still unclear. Is it just returning to the UK for less than 91 days that will determine this, as I'd heard that HMRC also consider lifestyle connections (eg if your house and family are still there). I'm trying to get clarity on this so that I know clearly my position - so any guidance that you can provide would be really appreciated.

A: Dean Power, Assistant Tax Manager/Technical Tax Co-ordinator, The Fry Group, answers: Provided your overseas employment is on a full time basis and no substantial duties are performed in the UK, then in order to be classed as non-resident, the employment would need to last for at least a UK tax year (having left in February 2012, this would mean still being employed overseas come 6 April 2013) and that your visits remain within the limitations of less than 183 days in any one tax year, and less than 91 days on average over the period of your absence or four years, whichever is the shorter. A day in the UK is counted if you are here at midnight. Lifestyle connections are considered if you depart the UK for anything other than full-time overseas employment. As you say a statutory residence test is due to be implemented with effect from April 2013.      Back to the top

Q: DM asks: I read somewhere a while back that if you came back to the UK for 12 continuous weeks your pension would be updated to the present rate and then stay at that rate you retuned back to your place of residency. Is this correct or as I have recently heard its a six month stay that will give this increase.

A: Dean Power, Assistant Tax Manager/Technical Tax Co-ordinator, The Fry Group, answers: If you are living in a country outside the EEA or that does not have a reciprocal national insurance agreement with the UK then your state pension will not be uplifted each year. However if you visit one of these countries, it is possible to receive an uplift for that period only. For a permanent uplift, the minimum period in the UK would be six months, I'm not sure where the 12 week period has come from. Back to the top

 Q. A.M. asks: I returned from working in the Netherlands in 2011 and am now a full time student. Working in the Netherlands for 4 years I had a company pension scheme. I have been told that I cannot take this out of the Netherlands until I retire
(something to do with the amount of money involved). I have also been told 
that I can no longer make contributions to it as it was a company pension.
Basically, it has to sit there until I retire. I get no income from it. I have been advised by Dutch tax professionals that as it is a pension fund, I
do not have to declare this to Dutch tax authorities until it starts paying
out an income - years ahead. Do I have to declare this fund to the UK tax
 authorities every year until I retire?

  Q. P.P asks: I retired to Australia 5 years ago on a temporary visa and only need to pay tax in Australia on my Oz income. All of my pensions and investment income is paid in the UK and taxed at source and I have retained bank accounts. I have moved some savings offshore. However, HSBC International, Lloyds TSB Offshore and NatWest offshore have all said they will not let me open an account because I reside in Australia, saying their regulations do not allow.  Can you please find out what regulations are causing the problem.

A. ExpatMoneyChannel responds: Certain countries, and this includes Australia, operate strict licensing regulations which restrict the sale of financial products to retail customers by companies that are not licensed to do so. The USA and Japan are two other countries that apply these strict licensing laws. The main reason is to protect retail customers. Although there are exceptions. See the full story here.

Q. P.W asks: Please could you comment on the current £55k Non Domiciled spouse UK allowance and why is this allowance not revised say annually in accordance with inflation etc. It appears this £55K figure has been in effect for many years, is never revised and appears to be unfair especially if ones non domiciled spouse is domiciled within an EC country. Why is the £55,000 figure not periodically revised and why should it not apply to EC citizen. I would appreciate your comments. It appears to be a very unfair allowance considering ones UK IHT allowance of £325k can be passed in full on to the surviving spouse.

 

A. Karen Marks from Boodle Hatfield answers: UK inheritance tax is payable on UK-situs assets (whatever the domicile of the owner) and by UK-domiciled individuals (wherever their assets are located).  The spouse exemption (which applies also to civil partnerships) is unlimited for transfers from UK-domiciled spouse to UK-domiciled spouse, non-UK domiciled spouse to non-UK domiciled spouse and non-UK domiciled spouse to UK domiciled spouse.  It is only the transfer from UK-domiciled spouse to non-UK domiciled spouse in relation to which the exemption is limited to £55,000.

 

The £55,000 limit has been around for many years and is not revised annually.  Whilst the more common and more important limits such as the nil rate band for inheritance tax are revised more regularly, the less common limits are not.  I suspect this is simply a question of practicalities, the government simply having neither the time nor the inclination to review all such tax limits regularly.  One could ask why such limits are not index-linked in the original legislation but the answer would probably be that any government (and indeed HMRC) would want to keep more control on exemptions and reliefs, hence provision is more usually made for limits to be adjusted by deliberate act (such as a Statutory Instrument) rather than limits and exemptions rising automatically.

 

Much legislation depends on the distinction between UK and non-UK (but including other EU) domicile but this only becomes an issue for the European Court or Commission if such discrimination breaches one of the principles of the EU. 

 

If you have properties in two jurisdictions, this is likely to bring into play the inheritance tax (or equivalent) rules of each country.  Changing domicile might be an option, depending on your circumstances but you should plan carefully.  You may find, for example, that there is a double tax treaty between the UK and the other relevant country which contains anti-avoidance rules to catch tax schemes involving a change of domicile and you should take advice.  Back to top 

 

Q. D.E: My wife and I plan to move to Menorca within the next year we plan to rent first then buy when we find the right property we know Menorca well we holiday there twice every year, we both will be retired when we move, are there reciprocal medical facilities under the EU any advice would be gratefully received.

A. Katrina Osman of IHC responds: The reciprocal agreements in place will only cover state provided care i.e. services which form part of the local healthcare system including treatment in public hospitals. The agreements do not cover private treatment or dental costs. If you're receiving a UK state pension, or in receipt of long-term incapacity benefit, you may be entitled to state healthcare paid for by the UK. You will need to apply for an S1, which you should then present to the Spanish health authorities. However, if you move to Spain to live but not work and do not receive a UK benefit, you may be eligible for up to two-and-a-half years of state healthcare cover, paid for by the UK. Again, you will need to apply for an S1 form. ExpatMoneyChannel adds: We have also covered this in our special report on Menorca.  Back to top

Q. T.B, Guernsey asks: Having lived and worked in Guernsey for a few years I now have to go back to the UK and need to transfer my Guernsey employer's pension to a fund that will accept a Guernsey pension fund and will be acceptable to the UK tax/pension authorities for further contributions and payment in the UK. Can your experts suggest what my best option might be?

A. Graham Barnes, of The Fry Group answers: When T is resident in the UK then further contributions to the Guernsey scheme would not attract UK tax relief and so future contributions will need to go into another scheme. The real question is what should happen to the current Guernsey scheme? Transfer to a UK SIPP seems possible, as it is unlikely that it would be accepted by an employer's scheme. However, it could even be better to leave the scheme where it is - dependent on what Tony's future holds for him.  For example, if Tony is likely to work overseas again, indeed even retire overseas again, then he will be better retaining a Guernsey scheme than bringing money into a UK scheme.  Back to Top

 

Q. F.H asks: My brothers have been living in Belgium for just under seven years. They are both pensioners and are receiving the British State pension. They are contemplating taking up citizenship in Belgium. Would there be any advantages or disadvantages in doing this? Does it affect their State pension or any other benefits - Winter fuel payment for example?

 

A. Graham Barnes,  of The Fry Group answers: As I understand the entitlement to UK State benefits, there is no requirement that British citizenship be held or retained. Entitlement to State Pension is much more to do with a past contributions record. UK State Pensions are payable to people outside the UK. With regard to winter fuel payments If you live abroad, you may be able to continue receiving Winter Fuel Payments if you qualified for a Winter Fuel Payment when you lived in the UK and have moved to another European Economic Area (EEA) country or to Switzerland. However you would need to check whether taking up Belgian citizenship affects these payments by contacting the Winter Fuel Team at The International Pensions Centre. Similarly, you would need to check with each individual benefit provider. 

 

Karen Marks of Boodle Hatfield also adds on the tax side: In terms of tax, your brothers should consider the position from a Belgian perspective to ensure taking up citizenship does not impose increased tax burden on them. If they take up Belgian citizenship and a domicile of choice in Belgium by virtue of their severing all ties with the UK and having the clear intention not to return to the UK, this may mean that Belgian succession rules would apply to their estate on death. The position from a Belgian perspective needs to be checked.    Back to Top

Q. J.H of Malaysia asks: We live in Malaysia. We bought a house in UK in which our daughter lives rent free. How does the tax man view this? Under the double taxation agreement he is happy to return tax payed on pensions, but is asking about the house. Should we be paying tax when a member of the family is the occupant? Hope you can help.

A. William Hadley of Boodle Hatfield answers: I have assumed from what you say in your query that you are currently resident for tax purposes in Malaysia and HMRC have accepted your non resident status.

You do not say what HMRC has asked you about the UK property: HMRC is probably asking about your house because immovable property is treated differently from pensions under the Double Taxation Agreement with Malaysia. Under Article 6 of the Agreement, immovable property in the State where you are deemed not resident ( i.e. the house in the UK) can be taxed by that State (UK), regardless of whether or not the State where you are resident also taxes your income from that immovable property.

So, if you did receive rental income from the UK house, you would have to pay UK income tax on that rental income. The fact that the occupant is your daughter would not make any difference to this. However, you say she occupies rent free so there is no income received from the property.

HMRC may also be asking about the house more generally in order to check if you should in fact be deemed to be resident in the UK rather than Malaysia. If you have a permanent home available to you in both the UK and Malaysia and your personal and economic relations are closer to the UK, HMRC could argue that you should be deemed for the purposes of the Double Taxation Agreement to be resident in the UK. Your daughter's occupation of your UK property may preclude its availability to you but you may wish to formalise her occupation (if you have not already done so) in these circumstances.  Back to Top

Q. D.C asks: I thought foreign income was exempt as soon as one was non-resident, even [by concession] in the tax year of departure from the date of departure? However one of your article states: [Expats who are non-resident for at least three complete tax years and with a “settled purpose” are exempt from paying UK tax on foreign earnings and income.] Which is correct?

A. Martin Rimmer of The Fry Group answers: In short, you are both right. It is true that foreign income is exempt from the point of departure from the UK (provided one becomes non-resident for UK tax purposes). You can claim exemption from income tax on foreign income the day after the date of departure from the UK, provided that non-resident status is achieved. However, there are fairly limited circumstances in which that status is only granted retrospectively after three years. While most people don't fall into that category, the three year rule is necessary under certain circumstances - the point is that foreign income is exempt from the point at which NR status begins, regardless of what conditions a taxpayer has to fulfil. For example,

1.  One complete tax year of continuous full-time overseas employment + remaining within visiting limitations if someone is leaving the UK to work or be self-employed.
2.  Three years from the point of departure for someone leaving for any other reason - change of lifestyle, less than full-time employment, retirement etc. Back to Top

Q. C.R, UAE asks: I am moving back from the UAE to UK in either Feb or March of next year. I have not paid UK tax in the 4 years I have been here. I am classed as a Non Resident. I do pay NI contributions. I pay tax on my Army pension and I send money back to my wife’s UK account. Quick question. Will I get stung for tax in this tax year if I return back to UK before April?

A. Karen Marks of Boodle Hatfield answers: As you state that you are classed as non-resident, I have assumed that HMRC have accepted your non-resident status. You will be returning part way through a UK tax year which runs from 6 April to 5 April so, strictly speaking, the tax year cannot be split and you are taxed for the whole year even if you are resident only for part of it. However, assuming that HMRC accept that you were not resident or ordinarily resident before your return and that you have come back to take up permanent residence, you should be able to use Extra Statutory Concession A11. This splits your year of arrival so that you will only be taxed on the portion of your income arising after your return in February/March 2011 (regardless of your NI contributions). 

It sounds as though you are a “temporary non-resident” since you were presumably UK resident for at least four out of the seven years before your departure and you will be UK resident on your return and there are fewer than five full tax years between the years of departure and arrival.

This will be important if you have a non-UK domicile and claimed the remittance basis on your non-UK income and gains before you left the UK. You should take advice to check if the funds which you sent to your wife’s UK bank account would amount to a remittance of foreign income as this could well be taxable on your return to the UK.

Whether or not you are a “temporary non-resident” has important implications for capital gains tax purposes. You will not be able to claim split-year treatment for your years of departure and arrival back in the UK and so if you make a gain on a disposal in tax year 2010-11 even before your return to the UK you will be charged CGT upon your return. You will also be charged CGT in the year of your return to the UK on gains made on assets owned prior to your departure from the UK and disposed of during your non-resident years. You should take further advice to check your position.   Back to Top

Q. M.W asks: The Anglo Irish Bank offers very good interest rates for Instant Access accounts, and although it is owned by the Irish Government, is it really safe?

A. Guy Vanner of AKG Actuaries & Consultants answers: It’s a good question and in some ways has shades of fundamental issues of what really constitutes safe and is anything, including cash deposits, ever risk free. The answer to the the second question is no and the first, more along the lines of what is felt to be safe enough by one person may not be for another.

But turning specifically to Anglo Irish Bank, it was indeed nationalised on 21 January 2009 following the signing into law of the Anglo Irish Bank Corporation Act 2009. Since then the position of the Irish economy and its banking sector in particular has if anything worsened and Allied Irish remains rated relatively poorly by Standard & Poor’s for example. On the plus side there has been evidence of further support coming when required, in the form of capital injections from the Government, albeit the fact these are required is something else!

In summary then, nothing is entirely safe and there are undoubtedly stronger banks out there. However the Government ownership and demonstrable support to date may mitigate this for some people. Back to Top

Q. S.D, UAE asks: I am an Expat living in Kingdom of Saudi Arabia for 10 years now. I am 39 years old. My current take home salary is £60,000 and I have a property back in the UK with a small mortgage on it. I also have savings and investments. I plan to return to the UK within the next 2-3 years. However, I have no personal pension. Can you help?

A. Graham Barnes of The Fry Group answers: It could be that Stuart's existing 'savings and investments' will be capable of meeting all or a part of Stuart's eventual pension needs. Usually, a future 'pension' is built up by regular contribution in some form or another. If Stuart's not taking advantage of the UK State Pension, by contributing either Class 2 or Class 3 National Insurance contributions, he should look into the advisability of doing so. On the face of it, this is an excellent investment with a relatively modest contribution which produces an index linked pension for life - depending on which country you retire in. There are growing doubts that, thoughout Europe, about Governments ability to afford such pensions but at this time getting that basic pension on board would seem to be a sensible step.

Stuart is then into surveying the complicated world of investment products and savings schemes and will need to take a decision as to what product or combination to use so as to build up that lump sum on which he can live in retirement. First, a word of warning. If Stuart has just two or three more years of expatriate life, and presumably expatriate savings, to look forward to then it is key that he avoid any long term, inflexible plan. Stuart can identify a flexible savings plan, usually into a unit trust or fund rather than a life policy, which would be more flexible as the costs are generally lower. Stuart is 'adverse to risk' it might make sense to reduce the mortgage, depending on the interest rate, or simply build up funds on deposit which can be used to pay off the mortgage on his return.

Many expatriates face the question of how to build up their pension. There is no one easy answer, it is a question of individual solutions to individual problems. Back to Top

Q. R.H, Brazil asks: I am having the most awful and distressing time getting Abbey Life to forward my pension payments to me in Brazil, where I now reside. This year I have received two of my monthly payments which took 3 months to process, and cheques just received for 4 months, which will again take a total of 3 months to process (395.00 pounds each). They refuse to discuss any matters with anyone but myself (I have two sons, and a financial adviser, and an accountant in the UK) but only by letter. An airmail letter takes 4-5 weeks to reach me, and the same time to get a response, then they want 4 weeks to answer me, and so it goes on. Abbey refuse to pay by electronic transfer, or correspond by email. I am now in a most distressing situation having borrowed from Brazilian Banks at 14% interest per month to cover my shortfall. What on earth can I do to get a realistic service from Abbey. I have another small pension from Canada Life, who are a dream by comparison. Can you help?

A. Graham Barnes of The Fry Group answers: Abbey Life used to be one of the UK's leading life businesses from its founding back in the early 60's. It was acquired later by Lloyds Bank and subsequently sold on to Deutsche Bank having closed to new business at the start of this decade.

Unfortunately for Mr Hogg he now has a policy with an organisation which is clearly not keeping its act up to date. It is of course very difficult to persuade such large organisations to play a different tune.

Depending on the nature of the underlying contract it might be possible for Mr Hogg to switch or transfer this pension elsewhere. I see in his email that Mr Hogg refers to financial advisor and an accountant in the UK and I am sure that they will be able to advise Mr Hogg if a transfer to an organisation (hopefully one with better admin) was possible.  Back to Top

Q. P.I asks: I am travelling abroad at the moment. I was told by my doctor that I could loose my NHS status if I am out of the country for longer than 6 months and considering changing my flight to be back with-in that time. Initially I was supposed to be out of the country for 7 months and rented my house out in England where I will return to and work again. I am volunteering in a hospital in Guatemala at the moment and hope to be here for the next couple of months as my house is still rented out. Can you advise me on my rights as I consider myself to be a British Citizen and just wanted the chance to visit other places for an extended holiday and is it advisable I change my flight home. Worried traveller.

A. Katrina Osman of IHC answers: After consulting the Department of Health website, this indicates that should UK citizens spend more than three months abroad, but then return to the UK to take up permanent residence, they will continue to be entitled to receive free NHS treatment from the date they return to the UK. Should you need to access NHS treatment upon returning, it is down to the hospital to determine whether you are eligible for free treatment, and they may ask you to provide documentation to support your claim for NHS treatment such as evidence of your residential address. GPs also have a measure of discretion in accepting applications onto their patient lists and hopefully your GP will allow you to remain on the patient books whilst you are away, or simply reinstate you.

On another note, given the length of time you are away for and where you are visiting, i would recommend ensuring that you have some form of medical or travel insurance in place. Back to the Top

Q. M.M asks: Do remittances from abroad to the UK that have been taxed in your main residence have to be declared seems some confusion about this and wondered if this is covered on the site?

A. Karen Marks of Boodle Hatfield answers: Broadly, if you are not resident and not ordinarily resident in the UK for tax purposes, there is no tax liability on you when you send funds into the UK. However, there are certain exceptions if you return to the UK and depending on how long you have been resident outside of the UK. If you have continuing connections with the UK, this may affect your claim to be non resident. You should seek further advice as the issues are complex.

If you continue to be treated as resident in the UK, you are taxed on your worldwide income and capital gains on the arising basis. You may be able to claim double tax relief for the foreign tax paid. Back to the Top

Q N.L, Greece asks: I had an interesting experience last week. I visited an insurance broker here in Greece to enquire about life insurance and CI cover. I think it's important to have these things in place, so that if something happens to me I can afford treatment, still have an income and make sure my family remains financially secure. So I was dumbfounded when he laughed and asked me why I wanted to pay for such insurance. "Had I had a premonition?," he asked. Only in Greece!! With that attitude, I quickly left. I'm now wondering, can you take out life and CI cover with a UK-based company if you are living overseas in Europe?

A. Katrina Osman of IHC answers: There are a number of UK insurers who are able to offer life and critical illness cover to those who are no longer resident in the UK. The main decision that applicants need to make is whether they require a level life plan i.e. one where the sum assured remains the same for the duration of the plan and premiums are guaranteed for the term of the policy or an annually renewable policy where the premiums increase with the age of the member. If you need any more help please feel free to contact me Back to the Top

Q. J.D, US asks: I am a British expat, now aged 60, who has lived in the US since 2002 and I have become an American citizen. I still own a property in the UK and I still have UK bank accounts, largely because I have widow's pensions and a small occupational pension paid into it. I currently transfer money online from my HSBC UK bank account into my HSBC US bank account when I need it. I know I have to sell my property to become non-domiciled, and I intend to do that next year (my daughter and her husband currently rent it from me and will need it until then). I cannot get a straight answer from HMRC about whether I can do this and still keep one bank account open to enable me to have the facility of a UK bank account for my pensions to be paid into, or whether I have to close it, which means I have to pay four separate fees a month (and another fee as and when I start drawing a UK pension - and I am not even sure if I can do this as a non-domiciled person) to have them paid via an intermediary into my US bank account. Any words of wisdom from an expert would be welcome.

A. Martin Rimmer of The Fry Group answers: Firstly, whilst it is certainly true to say that the absence of UK property would help your claim for a domicile of choice in America, it is by no means a given that you must dispose of the UK property. Much depends on the quality of your remaining ties to the UK and the ways in which you have built up your ties in the United States. Domicile is decided primarily in answer to the question ‘where do you intend to remain permanently’. It that is decided in the favour of the country in which you are living, we then must look at the strength of your ties to the two countries, in order to determine whether your claim can realistically be pursued. Retaining UK property is not necessarily an impediment to take a domicile of choice in the United States, but obviously we would need to undertake a more detailed review of your position to be sure of the position in your case.

Secondly, I would also want to mention that because the USA is a Federation of States, it is not possible to have a domicile of choice in the ‘United States’ as a whole. It must be narrowed down to a particular state and so it would not be possible for you, for example, to take a domicile of choice in Florida if that is where you live, if your intention is to move to Georgia at some stage in the future.

Thirdly, I do not see any problem in retaining UK bank accounts. It seems to me that you need them and this is a matter of practicality rather than anything more emotive, such as the retention of property or other affiliations.

Deciding your domicile position will ultimately be a value judgement and HM Revenue & Customs will not comment on the strength of your claim unless either you die, you move back to the UK for a temporary period, or you transfer sufficient non UK assets into a non UK Discretionary Trust. Back to the Top

Q. L.V, Australia asks: I have been living in Australia for the past 10 years. I am now divorced and want to come back to the UK. I have a property in Australia but don't want to sell it as my two children (22 and 24) are staying in Australia. Is there a suitable structure I can put the property in for my children? I own the property but it still has a small mortgage on it.

A. Karen Marks of Boodle Hatfield answers: The answer to your question depends on a number of key issues - your domicile status for UK inheritance tax purposes, whether you plan to make use of the property in the future and the value of the property.

For UK tax purposes, a person will have a domicile of origin which will follow the domicile of their father at their birth. However, you may have taken an Australian domicile of choice if you have lived there and considered that country to be your permanent home. However, if you always planned to return to the UK, you will have retained your UK domicile. Domicile is a difficult concept and you should take advice on the subject particularly as a return to the UK within ten years could prompt HM Revenue and Customs enquiry into a claim to have non-UK domicile status.

If you are not UK domiciled at present, there may be tax advantages in gifting your Australian property into a trust for the benefit of your children before you return to the UK. This would put the Australian property outside your UK inheritance tax estate. You will also need to consider any trust planning with your Australian advisers to ensure there are no adverse Australian tax consequences. If you are UK domiciled, your worldwide estate is subject to UK inheritance tax. A trust structure is unlikely to be appropriate.

If you return to the UK and you are UK resident and domiciled, you may face capital gains tax charges on any gain or deemed gain made on the sale of an asset wherever it is located.

Depending on the value of the property, it may be most efficient for you to gift the property to your children - you will need to decide whether they will take on the liability of the mortgage and if so how this impacts on Australian tax as their assumption of the liability will be a cost to them and so not a gift of all the value . For UK tax purposes, the gift element of any transfer of the property will not be chargeable to inheritance tax at the time of the gift and provided you survive seven years of the gift no inheritance tax is payable on the value of the gift on your death. If you sell or gift an asset in the tax year before you become UK resident, any gain is outside UK capital gains tax. If you gift the property, you should not expect to continue to enjoy any benefits from the property - the children must enjoy the property without any conditions that it is available for your use.

If you keep the property in your name, its net value will be included as part of your estate for UK inheritance tax purposes on your death. You should have a will to cover your wishes relating to the property that has been drawn up or approved by an Australian adviser. Back to Top

Q. M.H, Germany ask: I am really keen to invest in climate change investment opportunities such as solar energy. I have come across a closed-ended company incorporated in Jersey, however they are only distributing via professional investment advisers in the UK. As a British expat based in Spain, am I ok to invest in this via a UK-based adviser?

A. Graham Barnes of The Fry Group answers: Firstly, the UK adviser must be FSA regulated and either ‘passported’ to advise clients in Spain or have a local branch to do so.

Secondly, the fund will be classified as either FSA recognized in which case the fund can be purchased through the UK adviser without too much preamble. Alternatively it will be unrecognized in which case you will need to be given an unregulated funds disclosure notice which will state that the fund is not FSA regulated and that there may be limited compensation arrangements and other potential drawbacks (e.g. liquidity issues). The adviser will therefore be required to check that the investor has sufficient skill, knowledge and experience to invest in the fund.    Back to the Top