UK tax changes could hit British expats

Changes to the rules surrounding UK-earned income could see thousands of British expats living in Australia "sever" their financial ties with their native land.

Moves announced in the UK's Budget earlier this year could prevent non-residents from offsetting income gained from investments, including pension funds, in Britain against their £10,000 personal allowance.

deVere Group chief executive, Nigel Green, said if the British Chancellor, George Osborne went ahead with the proposal it could boost demand for alternative pension schemes that are recognised by Her Majesty's Revenue Commission (HMRC).

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"Historically, British expats have maintained some UK investments due to the tax advantages they have received," he said.

"However should this new rule come into effect, it can be reasonably expected that more and more of them would consider severing financial ties with the UK as there would be fewer than ever incentives for them to keep a financial base in Britain.

"If this latest benefit is scrapped, there would be, typically, no real tax advantage for British expats to invest in UK property or UK pension schemes.

"If expats restructure their finances offshore, as I strongly suspect many will to take advantage of the important associated benefits, they will probably look to cut all what the UK Treasury is calling ‘strong economic connections' to Britain - and this, for many, will include transferring their pensions out of the UK.

"As such, and because British expat pensioners are those who would suffer the biggest hit from the proposed changes, there is likely to be a significant uptick in the already strong demand for HMRC-recognised Qualifying Recognised Overseas Pension Schemes (QROPS).

Green said QROPS would give expats greater tax efficiency, investment flexibility and a choice of currency in which the pension is paid out.

He added that there has been a steady year-on-year increase in demand for QROPS, with around 10,000 expats, or those who are imminently planning to reside overseas, moving their pensions each year.




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