Expat Focus Financial Update May 2019

HMRC warns expats 'time is running out'

Taxpayers and expats with offshore accounts are being warned by HM Revenue and Customs that ‘time is running out’ to declare their interests.In addition, all financial advisers who have referred a client to an overseas financial institution or helped them to find offshore advice and services must declare this to HMRC by the end of May.For those advisers who have suggested that their client seeks offshore services or advice since 5 April 2015 must now also warn their client that HMRC has been given new powers for revealing information about any offshore investments and cash being held. That’s because tax information is now shared by more than 100 countries, including British Crown dependencies.

Last year, HMRC collected more than £6.5 million after making requests to a foreign tax authority, up from 2013’s figure of £796,000.

One firm, Access Financial, says not all of the money that was collected was down to expats avoiding their tax obligations and in a statement, the firm says:

"There is an incorrect assumption that someone ceases to be tax resident in the UK when working overseas, but often a tax liability will arise on foreign earnings."

The firm adds that a significant number of British contractors who were working overseas, or who have recently worked abroad, are likely to have not paid the correct amount of tax and HMRC will catch-up with them. The news comes as the Court of Appeal ruled that HMRC can demand that expats reveal their tax details when living in another country.

Expats in GCC urged to check LTA

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Around 350,000 Brits who are living in the GCC are being urged to check whether they have contravened the UK’s lifetime allowance (LTA) limit for pensions tax relief.

The warning comes from Hoxton Capital, a firm of independent financial advisers, who say many expats are working in sectors that offer a generous pension scheme in the UK, for example, construction and energy, and are likely to be affected by the LTA limit. The firm says that less than one in three of those they speak with either do not know of the LTA and many have breached the LTA allowances – and some ‘by substantial margins’.

Essentially, the lifetime allowance puts a limit on the level of benefit that someone can draw from their pension scheme without having to incur extra tax penalties. Currently, the LTA is £1,055m.

Meanwhile, one wealth advisory firm is advising British expats to consider moving their pension to a qualifying recognised overseas pension scheme (Qrops) in a bid to avoid the 55% tax charge if breaching the lifetime allowance.

Blevins Franks says that Britons who live overseas and who exceed the £1.055m LTA can limit the charge by transferring any UK pension funds to a recognised overseas pension scheme. And while this will help reduce exposure to a tax penalty, there are drawbacks.

The firm says that when doing so, the expat needs to ensure that the Qrops is within the European Economic Area, for example in Malta, or they could lose 25% of their pension value with an overseas transfer charge. The firm highlights that with Brexit on the horizon it is now a good time for all expats to review their pension options regardless of whether the lifetime allowance affects them.

Income test warning for British expats in France

According to one national newspaper report, some British expats living in France are being told they have 30 days to vacate their homes for failing to meet the country’s earnings and general residency criteria. The Independent newspaper carried an interview with one expat who says that the French government has started a process to force British expats who do not meet the rules to leave the country.

The ‘Carte de Sejour’ residency permit compels the holder to have sufficient resources under the income rules which vary between regions. While they have existed previously, they were rarely enforced on EU students and citizens.

The report focusing on the expat highlights that despite owning her property in France, she has been given 30 days to vacate it. The interviewee highlights that while media outlets emphasise that expats in France should apply for their ‘Carte de Sejour’, they will need to meet the income threshold and this hasn’t been explained so strongly.

Currently, as EU citizens, British expats are entitled to spend more than three months living in France if they meet the conditions for legal residence, including the ability to live self-sufficiently on their resources, be self-employed or be working. The rules state that single people can earn at least €559 (£491) a month, while retirees need at least €868 (£763) a month, while a couple needs €1,347 (£1,184).

SIPPS mis-sold to expats in Spain

One firm that helps expats claim compensation over mis-sold SIPPs – self-invested personal pensions – has seen a surge in the number of claims being made.
Pension Claim says that mis-sold SIPPs worth £10 billion ($12.7bn) may be held by thousands of British expat retirees in Spain.

They blame ‘dubious financial advisers’ and with Brexit, many of these expats have looked at their SIPPs and found many to be badly performing and mis-sold. Successful claimants have received £30,000 on average in compensation.

Pension Claim says it is handling £4.2 million worth of claims from expats and they are now urging all expats living in Spain with a SIPP to have them checked immediately.

A spokeswoman told the Express:

"Even though the UK may not leave the EU until October, many clients are putting in claims because they are terrified that their pension value will plummet after we exit."

Growing numbers of expats believe that leaving the European Union will mean their claims for the mis-selling of a financial product will not be valid so they are claiming now.

Number 1 destination for HNWI migrants

The number one destination for high net worth individuals (HNWIs) who migrated from their home country last year was Australia, research reveals. The Global Wealth Migration review published by AfrAsia Bank highlights that 108,000 millionaires migrated last year, up from 2017’s figure of 95,000.

Other popular destinations include the USA, Switzerland, Canada and New Zealand.
However, 12,000 HNWI migrants headed to Australia, with 10,000 going to the US. The most popular country for HNWI migrants in Asia was Singapore with 1,000 migrants heading there.

The report highlights that three factors influence the movement of HNWIs including safety, a lack of inheritance tax and issues over US healthcare. The country that saw the largest number of HNWIs leave was China with 15,000 moving last year, with 7,000 leaving Russia. India was in third place with 5,000.

And while the UK has historically been a popular destination for receiving large numbers of migrating HNWIs over three decades, in the last two years, 7,000 of them have left the country after new tax rules for ‘non-doms’ came in. The report also highlights there are 14 million HNWIs currently in the world.

The most expensive city for business travellers

A report from ECA International highlights that the most expensive destination in the world for business travellers is New York. They say that a trip there will cost an average of $799 (£629) per day.

A spokesman for the management consultancy said:

"A large proportion of the costs for travelling to New York is down to the high demand for hotels where a room can cost, on average, $512 (£403)."

He added that transport and restaurants are also expensive for those heading there for business. The most expensive city in Asia is Hong Kong and in Europe it is Geneva. After New York, the top 10 sees Geneva, Zurich and Washington DC make the list, followed by Paris, Reykjavik in Iceland, San Francisco, the Swiss city of Basel, Los Angeles and Bern.

However, a report from Iceland’s Islandsbanki highlights that prices there are 84% higher than the EU average – and prices rose ‘dramatically’ between 2010 and 2017.

Most expensive cities for expats revealed

Meanwhile, the most expensive cities for expats to live in has seen a three-way tie for the first time in 30 years of monitoring.

The Worldwide Cost of Living survey is published by the Economist Intelligence Unit and top place goes to Singapore which has tied with Hong Kong and Paris in the survey which compares prices for 160 services and products. Researchers say that living costs in these three cities are 7% higher than for the benchmark city of New York.

Pension scheme welcomed by private sector

A scheme unveiled by the UAE government to enhance the expats’ gratuities schemes and bring in a retirement scheme for those living and working there has been welcomed by the corporate sector. The aim is to improve the rate of saving in the private sector and help expats enjoy long-term financial security. The move is also aimed at turning in the UAE into a global destination for employers.

Check your pension in Malta

Thousands of British expats with a pension in Malta could face new rules which will mean their adviser being regulated in their client’s jurisdiction. The new rules come into effect from July and will affect the way new scheme applications and current members are administered by pension trustees.

One organisation says that around 30,000 British expats may have transferred their pension into a qualifying recognised overseas pension scheme (Qrops) based in Malta. The new rules will probably see most advisory companies being unable to meet the new regulations.

All retirees are now being urged to check whether their financial adviser is affected by the new regulations to ensure their pension is unaffected. One of the potential issues may be that an overseas pension scheme may not allow the transfer of a pension, while UK based pension schemes may be unwilling to accept funds from an overseas scheme.

In other news…

Female executives say they are being patronised by financial advisers and their use of jargon which creates barriers to their financial planning. The research found that 45% of women in the UK believe there should be more female financial advisers in the wealth sector, both in advisory and leadership roles.

Despite taking steps to comply with the European Union’s new rules on offshore tax havens, it appears that the Channel Island of Jersey is at risk once more of being included on the EU’s tax haven blacklist. The warning comes from a review carried out by the OECD who say that Jersey’s new legal framework is in need of amendments and is not up to its standards. Meanwhile, Bermuda has been removed from the new EU’s blacklist of non-cooperative tax jurisdictions, along with Barbados and Aruba.

Abu Dhabi has moved to allow expats to own a freehold property in its investment areas, along with foreign-owned businesses. They can now buy land on full freehold in Abu Dhabi’s investments areas and expats can have also been given the right to develop properties on the land they have bought.

In a report published by Bloomberg, a parliamentary committee is urging France to renegotiate the Foreign Account Tax Compliance Act (FACTA) agreement with the US and should consider pulling out. They say that more concessions to protect dual nationals, particularly US expats, are needed. FACTA compels international banks wanting to operate in the US to report assets held by American citizens living overseas but this leads to problems for US citizens opening an account while living abroad.

Plans by Kuwait to impose a 5% tax on expat’ remittances has been scrapped after various organisations voiced their concerns. The law was being drafted but has now been dropped from the current Parliamentary term – among warnings that there would be an exodus skilled expats leaving the country if it was brought in.

Growing numbers of wealthy people are looking to exploit the so-called ‘Golden Passport’ schemes which sees someone invest in a country in exchange for residency. According to a report from Knight Frank, the golden passport schemes were worth $2 billion (£1.57bn) in 2014. The global capital of these schemes is the Caribbean while the most expensive is the UK where investors will need $2.7 (2.13m) or Singapore, where they need $1.9 million (£1.5m).

British expats who may have wrongly paid a Qrops transfer charge can now reclaim the money from HMRC. The charge was introduced to avoid expats exploiting tax loopholes when they transferred pension funds out of the UK but they can now reclaim this if they are now exempt or their circumstances have changed.

More than 70 firms in the US have sent a letter to the US Senate urging them to approve various international double tax treaties with other countries. The letter from the US National Foreign Trade Council wants action on tax conventions with countries including Hungary and Poland and for amended tax treaties with Japan and Switzerland to be approved.


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