Experts at Expat Pensions are warning British expats claiming to live abroad to be absolutely certain they are following HMRC rules and have made a “distinct break” from the UK if they want to avoid swingeing tax penalties.
“The Court of Appeal has made it absolutely clear that if you are a UK national abroad, but have maintained connections with the UK, you are at risk from the UK taxman and could be subject to a 50 per cent tax on your worldwide income,” she warned.
Businessman Robert Gaines-Cooper had maintained that he did not owe taxes in the UK because he had been a resident of the Seychelles since 1976. In his defence, he highlighted HMRC’s own rules that define a non-resident as one who spends less than 91 days per year in the UK.
Angela South said: “The Court of Appeal disagreed and handed him a £30 million tax bill for the years 1993 to 2004.
“Taxpayers must show a ‘distinct break’ from social and family ties to the home country, and that spending 91 days outside the country is necessary, but not sufficient in itself to establish non-resident status.
“Mr Gaines-Cooper has been granted leave to appeal to the Supreme Court, but unless you have virtually bottomless pockets to pay lawyers, we are advising expats to take this ruling very seriously.
“Last year HMRC established a special new team called the High Net Worth Unit to investigate the lifestyles of some of the UK’s richest individuals, including those who are said to be expat.
“In the first instance, it was set up following the introduction of the £30,000 non-domicile levy, the introduction of the 50 per cent top rate of income tax and the super tax on the City of London bonus pool – and so you might ask what this has to do with you.
“But, as we have seen in the seas around our shorelines, a trawl like this often nets the little fish as well as the big fish at which it was aimed.”
She pointed out that while Mr Gaines-Cooper was targeted because he had a house in Henley on Thames where his wife and son lived, he kept a valuable collection of art and guns, his son attended a UK school, he had a UK will and he regularly attended Ascot racecourse, the same principle applied to everyone.
“Your attendance at Ascot may not be quite so regular, but if you have kept up a golf club membership, have a season ticket for a football club, or anything that suggests ties in the UK, you may come up on an HMRC radar which is becoming increasingly sensitive,” she said.
And she highlighted the importance of following the QROPS rules – Qualifying Recognised Overseas Pension Scheme – when moving UK pensions offshore.
“It is essential that you not only sign a declaration that you have been out of the UK for five full tax years, but also that you have not left anything behind that could be construed as a continuing link to the UK.
“This could include a property that you rent out and pay Council Tax on, evidence that you paid a utility bill during that period, or any number of catch-all circumstances that HMRC may wish to pick up on to prove that you are not properly non-resident.
“Your financial affairs may have been planned on the basis you believe you are satisfying the conditions surrounding living abroad.
“The critical factor is that just because you leave the UK to live or work abroad, you are not necessarily a non-UK resident for tax purposes.
“Without proper planning you may have to pay tax at up to 50 per cent on each and every source of worldwide income – potentially going back over the years from when you first declared non-residency,” she said.
She stressed that UK expats living abroad should review their arrangements and where they planned to move their pension offshore, using a vehicle such as QROPS, they should take independent, professional advice from experts.
“Not all so-called financial advisers working around Europe are regulated by the Financial Services Authority in the UK as Expat Pension Providers Ltd is, through their IFA network.
“Unregulated advisers do not carry the professional indemnity cover we are required to hold.
“And most importantly, if you have not followed the rules, HMRC does not allow you to rewrite history in a manner favourable to your tax position.
“The advice from Expat Pensions is – ‘Do it right and make sure you do it right first time’.
“If you take professional advice from experts in the field who are regulated and carry requisite professional cover, you are going a long way to mitigating the risk,” she said.
Source: typicallyspanish.com
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