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Expat Returning to the UK? Residency, CGT, IHT & Pensions

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Expat looking to return to the UK? Taxes for Expats – help & advice – facts & FAQs

Introduction

Expats may return to the UK for a variety of reasons. However, it is unlikely that such a person will want to create tax issues on their return. As such, we recommend that one takes time to properly prepare financially for the return ‘home’. (Taxes for Expats)

Expat returning to the UK – Timing is key

As the UK has an odd 5th April tax year end, it means that the UK tax year is unlikely to match the tax year of the country from which departure is planned. As such, one will need to plan carefully around precise timings.

In terms of capital gains, one might want to make sure that any disposals take place before coming to the UK as a tax liability would arise on becoming resident in the UK. However, whether this represents a saving will depend on the treatment in the jurisdiction of residence (ie the rates might be higher).

In other words, beware of jumping out of the frying pan!

One might consider whether spending slightly more time outside the UK will mean that the temporary non-residence rule for CGT does not apply.

Similar considerations might apply for income tax where there is an awareness that a large sum of non-UK income, or indeed a UK dividend, might be payable.

Of course, tax is not the most important thing in the world (don’t say it too loudly!) so all of this is in the context of your personal and commercial circumstances and objectives.

Expat returning to the UK – When will I be UK resident?

Firstly, it might be the case that you are considered to be UK resident before you even set foot in the UK.

How so?

For example, buying a UK property in contemplation of a return could result in one becoming resident before arrival in the UK. Ceasing to use your foreign property as your main home could be seen as a UK resident straight away, even where it is retained.

Clearly, where one is spending time in the UK preparing for your return it is important not to spend so many days in the UK that one inadvertently becomes UK resident ahead of schedule. It should be noted that one can become UK resident after just 16 days in the UK in certain circumstances.

For further information check out the Statutory Residence Test.

Inheritance Tax & Estate Planning for Expats

Generally speaking UK IHT is predicated on being UK domiciled. As such, where one has not based their estate planning strategy on being non-domiciled, then little will have changed.

However, new tax rules introduced in April 2017 single out a particular type of individual for special treatment. Care should be taken if:

  • You were born in the UK;
  • Have a Domicile of Origin in the UK (even if a domicile of choice elsewhere); and
  • Become resident in the UK

These individuals are referred to as Former Domiciled Residents (“FDR”). Further information on the consequences of being a FDR can be found here.

In any event, we would recommend a trip to the solicitors to update wills etc. Where assets are retained in jurisdictions overseas we would recommend that local wills should be contemplated dealing with those assets.

Pensions & Expats

It is quite possible that a non-resident might have transferred their UK registered pensions into a Qualifying Recognised Overseas Pension Scheme (“QROPS”) or made other pension planning choices based on a former residence. Of course, these decisions should be reviewed.

If you are an expat returning to the UK and want to understand the tax implications, then please get in touch.

Expat returning to the UK was last updated on 3 July 2019

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