UK TAXPAYERS AND UK TAXES
Overseas income or assets and migration
UK taxpayers seeking to invest abroad face similar problems to other OECD taxpayers.
Unrealized or unremitted profits or income accruing to overseas entities may be attributed to them so the relevant UK taxpayers are taxed on the overseas income or gains.
While the UK does allow resident but non-domiciled persons to take advantage of a remittance basis of taxation for overseas income (which means the UK is a tax haven for wealthy Russians or Arabs not becoming UK-domiciled), this is increasingly costly and restricted. Most UK taxpayers are excluded from the advantages of the remittance system which now seems a kind of “tax haven” privilege to be sold for a lump sum by HMRC to foreigners.
UK companies investing overseas must consider the rules relating to controlled foreign companies.
UK individuals must consider, among other things, the rules relating to the transfer of assets abroad. and the rules on offshore funds.
UK pension transfers
Where UK-resident persons migrate to sunnier climes such as Australia, they need to ask whether they can transfer their pensions or pension entitlements. The rules governing QROPS etc are complicated and changing but a UK person who can establish a tax-free Australian self managed superannuation fund and transfer his or her pension entitlements into it, may find himself or herself substantially better off.
UK inheritance tax
In addition, UK-born emigrants (as well as UK residents) must consider the possible application of UK inheritance tax, even if they may have left the UK for many years. It is the practice of Her Majesty’s Revenue and Customs (appropriately based in Nottingham for this purpose) to seek a full UK inheritance tax return where any person born in the UK dies overseas but leaves UK assets in his or her estate.
Hence UK migrants to Australia, or “Poms in Oz”, need to consider making new wills and the manner in which remaining UK assets are held. (www.pomsinoz.com is a useful starting resource for migration issues.) It is fortunate in this regard that Australia has no death duties and a well advised UK emigrant should be able to ensure that he leaves UK inheritance tax behind.
Similarly, UK based overseas investors also need to consider the income tax and inheritance tax position in relation to their overseas income or assets. In some cases, divestment or restructuring may be desirable to reduce current or future income tax or inheritance tax problems. Obtaining probate in several countries, for example, can be a long and expensive process.
Conclusion – UK taxpayers investing or moving overseas
We can assist UK taxpayers or emigrants and their advisers with their UK tax issues regarding overseas income and assets. While not UK tax lawyers, we are generally familiar with the UK and have worked with UK advisers. We are happy to respond to inquiries from UK persons, whether you are simply considering placing assets or investing overseas or leaving to take up residence abroad.