Julie Man and Jeremy Duffy provide a short guide to moving to the UK in the American in Britain Summer 2019 issue.
Whether you’re a Hollywood
celebrity like Julia Roberts, an intrepid traveller, entrepreneur, expatriate
moving for work or simply relocating for love. Moving is always an exciting
time and if you are moving to the UK in particular you will no doubt have a
list of interesting and exciting things you may want to do on your arrival such
as check out the vibrant theatre and gastronomic scene, visit Buckingham Palace
to catch a glimpse of Meghan or decide which football team you are going to
declare undying allegiance to for the rest of your life.
Unfortunately (and realistically)
understanding your tax status and ensuring your estate planning arrangements
are in order is often not a top priority when blinded by so many exciting new
experiences and challenges. This article will give you a few pointers as to why
you should give these issues some attention and consider whether your existing
planning arrangements, such as your Will and nuptial agreements are still
What happens if you fall ill
whilst you are living in the UK? We will explore some key points for you to
consider. Furthermore if you take to the British lifestyle and weather you may
wish to consider purchasing a UK property and putting down more permanent roots.
You should always take advice on your arrangements to ensure that they meet
Mundays is a full service law
firm, and is able to advise on these issues to ensure that your move to the UK runs
as smoothly as possible.
The UK does offer a favourable
tax regime for foreign nationals relocating to the UK. This can be particularly
advantageous for individuals who have non UK source income and funds held
outside of the UK. It is possible to elect to pay tax on foreign income and
gains only once it is remitted to the UK as opposed to on an arising basis
which UK citizens are charged on. There
is also opportunity to identify ‘clean capital’ prior to your arrival in the
UK. These funds can be remitted to the UK without charge. The rules are quite
complex and it goes without saying that advice should be sought on this as soon
as you are considering relocating to the UK, as the opportunity to identify
clean capital may be lost on your arrival.
Ownership of UK property
With a stable democratic
political and financial system compared to many countries around the world,
buying a property in the UK can be an attractive proposition. Even more so at
this time in light of the relatively weak pound. There are a number of options
for owning property and, although it is beyond the scope of this article to
consider them all, advice should be sought on these options. Our property team
will be able to walk you through the process of purchasing a UK property.
This is the most common form of
ownership. Property can be purchased in your personal name; this can be as a
sole owner or if you own a property with another person (such as a spouse)
there are two ways this can be achieved. As ‘joint tenants’ or ‘tenants
Joint tenants means that each ‘tenant’ owns the whole of the
Property, so that when one person dies the ‘whole’ of the Property passes automatically
to the surviving owner, despite any Will
they may have. Married couples often
hold Property in this way.
By holding as tenants in
common, each party will own a specified share in the Property which will
pass in accordance with their Will and not automatically to the surviving
co-owner. For people who own property in this way, it is essential that
they have a valid Will which covers who their share in the Property should be
The most suitable method of joint
ownership for you may be based on your home country’s tax rules and we can advise
you on this. For instance where a US citizen is married to a UK national it may
be more beneficial for the property to be held in the name of the UK spouse. Circumstances
of each family arrangement will need to be considered.
UK property is subject to UK
inheritance tax regardless of your residence or domicile status. Briefly, UK
inheritance tax is payable currently at 40% of the net value of a ‘death
estate’ which exceeds £325,000, the current ‘Nil Rate Band’. If a Property is purchased using a mortgage to
acquire it, the mortgage is a deductible liability for inheritance tax purposes
as inheritance tax is payable on the net value of an estate. The rules surrounding the use of debt to
reduce the liability to UK inheritance Tax have been tightened therefore if a
foreign national is considering the use of foreign debt care should be taken to
ensure that the debt will be effective for estate planning purposes.
the introduction of the annual tax on enveloped dwellings (ATED) and higher
rate SDLT charges, corporate ownership of a residential property, worth over
£500,000, has become less popular. However, corporate ownership may be tax
efficient for properties which are being rented out and are exempt from the
Trust ownership may also be
beneficial and all prospective property purchasers should take specific legal
advice to ensure that they purchase property in the most tax efficient way for
them, taking into account their individual requirements.
Estate planning: Wills
Many people move to the UK and
already have a Will in place in their home country. Will it be valid if you die
whilst UK resident? Is your Will tax efficient for my needs whilst I live in
Generally, if a Will is validly
executed in the country where it is made, it should be recognised and
enforceable in the UK. However, from a practical perspective, if your Will is
drafted in a language other than English, the UK probate office will require a
certified translation and if some of the estate planning language is different
to that used in the UK, it can be more difficult to obtain grant of probate to
administer your estate and sell or distribute your UK assets.
When you purchase UK property it
can be preferable (and is recommended) to cover this using a UK will which can
be co-ordinated with your existing will in your home country (and any other
wills in other countries) to prevent any delay.
In any case, having your current
documentation checked can prevent problems.
For example, many US citizens have a revocable or living trust. The
trust should be reviewed to see how it is treated under English trust laws, as a
trust which holds UK assets are subject to the ‘relevant property regime’ – a
lifetime inheritance tax charge, which is an expensive trap for the unwary. Indeed it is often best to take advice on
these matters prior to arrival in the UK.
Lasting Powers of Attorney (LPA)
What happens if I become seriously ill or lose my ability to make decisions whilst I am UK resident? Making a LPA ensures that you choose who you trust to make decisions on your behalf when you are no longer able to. There are two types of LPAs:
- A Property and Financial Affairs LPA, which gives your Attorney/Attorneys authority to deal with your property and finances, as you specify;
- A Health and Welfare LPA, which allows your Attorney/ Attorneys to make welfare and health care decisions on your behalf, but only when you lack mental capacity to do so yourself. You can also decide whether you want them to be able to give or refuse consent to life sustaining treatment.
An attorney (you can have up to 4) basically ‘steps
into your shoes’ and makes decisions on your behalf. Attorneys can be appointed jointly (so that
they have to make decisions in agreement) or jointly and independently. LPAs are
useful to ensure that if you or your spouse falls ill whilst in the UK, your chosen
attorney will be able to make decisions for you and this prevents what is
normally a costly, time consuming and stressful formal court application which
is the only alternative.
Jeremy Duffy and Julie Man at Mundays advise on tax, trust and estate planning for individuals and trustees, with an emphasis on advising non-domiciled clients and work with an international element. Contact email@example.com tel: 01932 590597
The contents of this article are for reference purposes only. They do
not constitute legal advice and should not be relied upon as such. Specific
legal advice about your specific circumstances should always be sought
separately before taking any action based on this publication.