Jeremy Duffy, Head of Private Wealth and Judith Fitton, Head of Family provide some pointers on which issues to focus on when moving to the UK. See the article and much more information in The 2020 Expatriate’s Guide to Living in the UK
Moving overseas is certainly a
daunting prospect. Indeed, it will be one of the most difficult milestones in
your life. It will take time to come to terms with all of the nuances of the
new society and culture. Unfortunately 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 effective.
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 your
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
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 as often the decisions you take at the time of purchase
will have tax implications in the future. 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 left to.
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.
Following 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 ATED charge.
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 your needs whilst you live
in the UK?
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.
Whilst many expats will view the UK
as their home and integrate into the English way of life, the majority will
still retain strong connections with their homeland. Nevertheless in the event of you either
marrying or your current relationship breaking down there will be additional
legal issues over and above the routine ones to deal with. International family law is a highly complex
and specialist area. Any husband or wife with international connections should
take legal advice from a solicitor here who specialises in international family
Pre-nuptial Agreements aim to set
out how assets are shared between a couple in the event they get divorced. They are common place in many Countries and
binding. This is not the case in England and Wales although their status has
increased considerably in recent years and there is a growing recognition of
their important role in society. For couples who wish to have a Pre-nuptial
Agreement then the current guidance is that each seek independent legal advice
as to what would be a fair and reasonable provision in the event of a divorce.
It would be prudent to include a review clause in the Agreement in the event of
children being born. In addition you must provide full details of your
respective wealth and ensure that any agreement is signed by you both well
ahead of the wedding. Providing these
guidelines are followed the presence of a Pre-nuptial Agreement in the event of
a divorce will be a factor that the Court will give consideration to and
potentially considerable weight.
In the unfortunate situation where
you believe that your marriage has “irretrievably broken down” then you will
need to be able to demonstrate that you are both habitually resident here or at
least one of you is or you are domiciled here.
It is imperative that you seek
specialist legal advice about where you can start Divorce Proceedings urgently
as these are legal terms which you would need to consider to establish whether
you will meet the criteria to commence proceedings here. The English Courts
will have a different approach to divorce and family law to the American
States. The choice of Country (and State) can have a huge impact on the outcome
of financial arrangements. Your English solicitor will want to speak to their
counterpart in the States to establish the range of financial orders available
to you in either Country so that you are fully equipped to make an informed
decision. If there is an English divorce
then the English court will only apply English law and consider all of your worldwide
assets. The English Courts have long enjoyed a reputation for being financially
generous to wives. It would be wise to also consider the practicalities of
commencing proceedings in another Country especially if there will be Court
Hearings that you will need to attend.
In the event of a breakup of a
relationship you may wish to return to your homeland with the children. If this is the case then careful thought and
preparation must be made. In the event
that your Partner does not agree to you moving back then you will need to seek
the permission of the Court. The Court
will base any decision on what is in the best interests of the children. You
will need to show the Court that you have considered where you will live, where
the children will go to school and what are your proposals for the children to
see their other parent. These are a few crucial considerations to address. If
the children are old enough then their views will also be taken into account. It can take a long time to resolve any
disputes and this will affect any final financial settlement that is
It is crucial that you either obtain
consent from your Partner to return home (or stay longer here, if they have
returned first) or obtain a court order. Failure to do so could see you
inadvertently committing child abduction which is a criminal and civil offence.
The UK is a signatory to the 1980 Hague Convention which enables co-operation
between signatory countries to facilitate the swift return of an abducted child.
In the event you think there has been an abduction then it is imperative that
you take prompt legal advice from a family solicitor.
Judith Fitton is a Partner and Head
of the Family law team at Mundays, she is a Resolution accredited specialist in
high net worth divorce and cohabitation disputes and is named as a Leading
Individual in the region by The Legal 500 directory. Clients of the team have
access to considerable international expertise, further accredited specialists,
mediation and collaboratively trained solicitors. Contact email@example.com tel:
Jeremy Duffy at Mundays advises 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 firstname.lastname@example.org tel:
The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP.