 Photo left: Paul Wilcox (WAY Group)
Paul Wilcox, Chairman & Technical Director of the WAY Group, explains how to avoid the IHT pitfalls that lie in store for the unprepared emigrant. "Many Brits are leaving these shores for good. They are fed up with the weather and they are fed up with the increasing social problems within the UK. According to the Institute for Public Policy Research (IPPR), an estimated 5.5 million British people are living abroad on a permanent basis – nearly 10% of the UK population. The BBC reports that in 2005 an average of 2,000 British citizens moved permanently away from the UK every week. As an example, some three quarters of a million expatriates are living permanently in Spain, enjoying the sun, the cheaper cost of living and the golf. The missing statistic here, however, is how many of those migrants have given a thought to Inheritance Tax or, more importantly, to the Spanish equivalent ISD (Impuesto sobre Sucesiones y Donaciones)? How many of them know that there are no spousal exemptions from ISD, so that a surviving spouse will normally have to pay ISD when their spouse dies? With an effective Nil Rate Band of only some €16,000 (Euros) this is of more than academic interest even when considering joint ownership of a modest Spanish property. Many emigrants also seem to think that they will automatically avoid UK Inheritance Tax (IHT) on their assets because they have moved abroad. This is another misconception since IHT is levied on the basis of domicile (generally where you were born) rather than on residence (where you live). So many unsuspecting emigrants to Spain could well finish up paying the equivalent of Inheritance Tax in both countries on all worldwide assets! Whilst there are many international tax treaties, most do not cover IHT. Of course you can change your domicile to one of 'choice' but this is not particularly easy because the HMRC takes a lot of persuasion that you really have moved on a permanent and final basis. The message here is twofold: (a) Make sure you take the most comprehensive advice you can before making a decision to permanently flee these shores, AND, (b) do your best to resolve your IHT position whilst you are still within the UK. This is because many other countries do not recognise the British concept of trusts, the most important tool for use in IHT planning, and you will therefore have some difficulty divesting yourself of assets once you have moved abroad. By moving assets into trust before you go, in line with British law and IHT rules, they can no longer be counted as belonging to you when you arrive in sunnier climes. So long as you survive 7 years or become non-domiciled in the UK, then those assets should be beyond the reach of the tax authorities both here and in your next place of residence. Of course, you could always move to Cyprus or Dubai where there is no IHT but even there you need to be very careful about local succession laws which may stop you passing your estate freely as you wish." How to contact us
If you wish to discuss this article or any of WAY's products, please feel free to call either your local Regional Sales Manager or Tony Lyons, IFA Support Manager, head office telephone number: 01202 890895. Or you can use the website: Contact Form to get in touch. We look forward to hearing from you. - Ends -  Link to the: WAY suite of trust structures
Paul Wilcox,
Chairman & Technical Director, WAY Group. Press Release Date: 5th August 2008. |