By Mark Routen, Forth Capital
Things are changing at HMRC, the changes are happening fast and they are certainly not in favour of the expat community. The Government in the UK inherited a vast black hole in the finances and this needs to be filled. They have approached this by arming HMRC to extract as much tax as possible together with running a very successful PR campaign calling into question the morals of those who act within the law to arrange their taxation affairs in an efficient way. They are trying to be seen as a type of Robin Hood taking from the rich and saving taxes for the poor.
This has been a very effective use of the politics of envy and the man in the street now sees the rich as a fair target. This goes further as to identify the rich - in people’s mind they use buzz words and unfortunately for expats the words Expat and Non Dom figure highly on this list.
The end result of this is that we are seeing creeping legislation, which starts off as a fairly mild restriction of allowances or increase in tax but then creeps up year after year until it becomes a real issue. They are already acting in three areas of attack which affect many expats: –
- Taxation of UK residential property owned by non-residents
- Restriction of pension tax relief and benefits
- Attacks on Non UK Domiciled individuals, both entering and leaving the UK.
Added to this the increase in the numbers of countries entering into the automatic exchange of information protocol and life for those who wish to act legally and arrange their affairs in a tax efficient way is becoming harder. The automatic exchange of information is now just one part of the HMRC jigsaw, they have developed an amazing piece of software called connect which can link up thousands of strands of information about a taxpayer and give them a full picture of their affairs. This information can include credit card bills, phone bills, bank statements and much more besides.
Looking to the future, things will only become more difficult as legislation extends into other areas. The extension of tax on non-residents who own UK residential property will almost certainly be extended to commercial property and the restriction of tax reliefs on pensions will be extended. The abolition of personal allowances for non-residents is also an area under consideration along with the restriction of some other personal reliefs.
It is fairly well documented that George Osbourne is a fan of the American system of taxation so we can expect him to attempt to widen the tax net and try and keep more people in it for longer.
While it may look to be all doom and gloom there are still measures you can take to mitigate the effect of these changes. As some of these changes are creeping changes taking action sooner rather than later will help to avoid the worst stages of the increases in tax. This is particularly true with regard to pensions where taking advantage of the current rules particularly in relation to transfers to QROPS and the extraction of lump sums can give some favorable results and protection from future changes. The message is clear: act now or take your chances with HMRC.
If you have any concerns about your tax or pension affairs given the changing climate, please do not hesitate to contact us.
Author's bio
With nearly 30 years experience in the taxation industry Mark joined Forth Capital in 2015 to assist with the development of the company’s tax offering. He has worked in the big four accountancy firms and has also run his own UK taxation consultancy. In addition he has worked in both Hong Kong and India.
Working overseas has given Mark a complete understanding of the tax and other financial issues facing expats and those either crossing tax borders or undertaking cross border transaction.
Mark is an associate of the Chartered Institute of Taxation.
