finance brother law” is ignored, and the Spanish Tax Authorities are being very creative in the way they are seeking out ‘fiscal ghosts’, then the penalties are substantial. We would suggest that this is the first indication of the future introduction of a new “expat tax”.
So how do you keep your assets “safe and compliant”?
In considering whether your assets are safe, ensure you have really left the UK for tax purposes. Too often, we meet high net worth individuals who, just because they have left the UK and have kept within the restrictions imposed by HMRC guidance notes, think they are safe from any further UK tax. It is not as simple as that, especially from 6 April 2013. From 6 April 2013, the UK has introduced a statutory residence test to replace the vague and often contradictory guidance previously available. Although Royal Assent is awaited, the legislation will finally set out tests to determine whether an individual has really left the UK. The clarity is much welcomed. The rules will set out the meaning of: Residence including how the 90 nights rule in the UK will operate and of greater importance, the use of ties to the UK as a determining factor. Prior to the legislation, HMRC used a 93 question guide to help determine whether an individual had properly broken their ties to the UK. This will have a significant effect on entrepreneurs who may still have businesses in the UK Workdays in the UK these will be restricted to 31 days per annum where an individual works for at least 5 years in the UK. In addition, the legislation contains other definitions and provisions that will seek to make it more difficult to become truly non UK resident unless almost all ties are broken with the UK. It is understood that HMRC will soon have access to passport information and from 2014 will log the arrival and departure of UK passport holders. So any thought of fudging the number of nights in the UK will become very difficult. HMRC are also monitoring credit card use to identify the location of an individual’s expenditure and whethGIBRALTAR MAGAZINE • MAY 2013
er it is greater than any income that they are declaring. It is vital that anyone who has left the UK or intends to leave the UK permanently seeks professional advice.
requires a different approach to tax planning. Asset protection is paramount. Professional advice should always be sought and any actions carefully thought through. Over the past three years Inheritance Tax (IHT) The Family Office (Europe) has – Domicile not Residence! helped a number of wealthy inWhilst non UK residents are dividuals arrange their affairs not liable to UK income tax or in a manner that gives them capital gains tax, it often is an more control of their assets in a
HMRC will soon have access to passport information and from 2014 will log the arrival and departure of UK passport holders unwelcome surprise that they still remain liable to UK IHT. IHT is based on domicile status and has nothing whatsoever to do with residence. This is a very popular and often expensive misnomer. Domicile is determined with reference to the birth place of an individual’s father, and therefore for many UK expats it is extremely difficult, if not nigh on impossible, for them to lose their UK domicile and avoid IHT on their death. Jurisdictions have different rules when it comes to succession. Most EU members have a Napoleonic succession regime which applies forced heirship rules on how a deceased’s estate is to be allocated. This is often at odds with UK IHT and as a consequence it is prudent to have two Wills, one in Spain/Gibraltar and one in the UK. This is a simple protection measure, but further steps can be taken to protect assets from the ravages of a 40% UK IHT bill on death.
So how can you ensure your assets are safely held and you can sleep peacefully at night now that hiding them abroad is a thing of the past? UK residents need to be fully aware of changes which will affect their tax position, not only whilst actually in the UK, but also if they have or intend to move. Those who have already moved need to be aware of the implications in their chosen jurisdiction. Any pitfalls during or after the move need to be considered. The current economic climate
protected environment. All our clients have, after some simple restructuring, become truly nonresident. Some have taken Category 2 status here in Gibraltar. Others have become resident in Spain using a variety of tried and
Steve Bold, Partner TFO Tax LLP
tested tax compliant strategies.
Richard ran a successful business in the UK and wanted to relocate to Sotogrande to educate his children in the International School, whilst his wife was a keen equestrian. He was initially advised to take Category 2 status in Gibraltar, but it was obvious from the outset he would be living in and commuting from Spain. He had set up a new software business in Spain to mirror his UK business and was employing local people. We advised on taking the Beckham Strategy in Spain, as his other business income from the UK, and investment income outside the UK from a previous business sale would be exempt from assessment. By structuring his income more efficiently, we were able to ensure that he was legitimate in Spain, had left the UK properly and was able to sleep at night. n
Tim Richardson, Managing Director TFO Europe
The Family Office Europe oversees and provides comprehensive private office services including wealth management, international tax advice, generational planning and high-level advice.
The Family Office Europe aims to help high net worth individuals and their families navigate through the shark invested waters that exist in any offshore jurisdiction, where often the man in the pub has the best ideas on how to arrange your affairs. Central to the core belief of the founders is the mantra that clients should expect the same level of service, integrity, fee transparency and professionalism that they would expect to receive themselves.
The Family Office Europe, its affiliated businesses, TFO Tax Strategies Ltd based in Gibraltar and TFO Tax LLP in the UK, and appointed Advisory Board, are well placed to help with all these client concerns.
The Family Office 15 Irish Town, PO Box 1483 Gibraltar
TFO Tax LLP Peter House Oxford Street Manchester M1 5AN
T: +350 200 62084 F: +350 200 49290 email@example.com www.tfoeurope.net
T: +44(0)161 209 3838 F: +44(0)161 209 3836 firstname.lastname@example.org www.tfotax.net
Published on Apr 29, 2013
Published on Apr 29, 2013
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