Tips on returning to UK .. tax efficiency

PLANNING A TAX-EFFICIENT RETURN TO THE UK

British expatriates waiting to return to the UK after living overseas will benefit from carefully reviewing tax planning, residency, pension, and investment implications before they leave Europe.

While countries like Portugal, Spain, France, Cyprus, and Malta have much to offer Britons living there, some expatriates eventually want or need to return to the UK.

An easy mistake is assuming that, since the UK is your home country, moving back is straightforward. But when it comes to tax and financial planning, various aspects can trip you up. Careful, early planning is essential to make your move as seamless and tax-efficient as possible.

Even if you have no intention of leaving Europe right now, it’s worth bearing the possibility in mind while setting up tax and financial planning arrangements, as some can be more flexible than others.  In our experience, many expatriates who expect to live here permanently do eventually return to the UK, for example, when they get much older or after one spouse passes away.

Residency options

As soon as you resume UK residence for tax purposes, your worldwide income and gains become taxable. It can be costly, however, to assume that you will only become a UK resident again when you step back on British soil. In some cases, residency can be triggered before you even leave Europe, potentially bringing you into the firing line for British taxation sooner than expected.

This could happen, for example, if you still own a UK property or buy one before moving back. Even if you keep your property in Europe, as soon as you are seen to stop using it as your main home, you are likely to be considered a UK resident.

If you plan to spend time in Britain preparing for your return, take care not to accidentally bring forward the date you become a UK resident. Under the UK Statutory Residence Test,  it can take as little as 16 days back home to trigger residency if you have been a non-UK resident for under three years. If you have been a non-resident for longer, you could become a resident after 46 days of a tax year or 30 days if staying in a UK property is seen as your main home.

While you cannot generally decide where you are resident for tax purposes, you may have some control over the timing of your UK residency. Since the tax years of the UK and several European countries start months apart, with guidance, you can plan to transition at a time that will minimise your tax liabilities in both your current country of residence and the UK.a

Tax considerations

Your financial arrangements today should be designed to suit your personal circumstances and current residency status. But once you move back to the UK, assets and structures that work favourably for you now in your current country of residency may not be so beneficial. On the other hand, you could find more tax-efficient opportunities in the UK once you become a British resident again.

As well as the tax implications for income, such as pensions, your residency will influence your tax liabilities when buying, selling or moving any financial interests. Before buying a new home, for example, make sure you understand how tax rules locally and in the UK might restrict or eliminate the availability of main home reliefs. Capital gains tax is also important – it may be more beneficial to sell or buy when resident of one country over another.

Depending on your situation, you might find it beneficial to bring forward or delay selling or transferring any assets according to where you are a tax resident. In particular, careful planning of the date of sale of your overseas home is crucial.

Pension considerations

If you transferred your UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS), you need to take specialist advice on the best way forward. If you made pension decisions based on tax-compliant opportunities where you are now a resident, you must establish what you should do once you are liable to UK taxation.

Estate planning considerations

Similarly, your estate planning will need a thorough review to consider inheritance taxes, succession law, probate etc. If you have trust arrangements, there could be tax consequences you need to explore before returning to the UK. You should also take specialist advice if you have any UK inheritance tax planning structures set up on the basis that you had a domicile of choice in your current country of residency.

Early Planning

Whatever your reasons for returning to the UK, it is important to plan carefully in advance, and review all the tax and wealth management considerations before you leave Europe. Ideally, if you can be flexible around the timing of your move, you should plan your return date around your tax planning. The same applies if you decide to relocate to a new, third country.

Taking tax advice before moving from one country to another will prove beneficial. It could save you a sizable amount of tax or, at the very least, make the tax transition easier and provide valuable peace of mind. Use an adviser with cross-border expertise so they can help you avoid punitive tax implications and make use of tax-efficient opportunities in both countries.

With thanks to Blevins Franks

https://www.blevinsfranks.com/planning- … to-the-uk/