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Expatriates returning to the UK after being resident overseas will benefit from carefully reviewing tax planning, residency, pension and Brexit implications before they leave Europe.

While countries like PortugalSpainFranceCyprus and Malta have so much to offer Britons living there, for some expatriates there comes a time when they want – or need – to return to the UK

An easy mistake is assuming that, since the UK is your home country, moving back is straightforward. When it comes to tax and financial planning, various aspects can trip you up. Careful, early planning is essential to make your move as straightforward and tax-efficient as possible.

Residency considerations 

As soon as you are seen as a UK resident, HM Revenue and Customs can charge you income and capital gains taxes. But do not assume that you will only become a UK resident again when you step back on British soil. In some cases, residency can be triggered before you even leave Europe, potentially bringing you into the firing line for British taxation sooner than expected.

This could happen, for example, if you still own a UK property or buy one before moving back. Even if you keep your property in Europe, as soon as you are seen to stop using it as your main home, you are likely to be considered a UK resident. 

If you plan to spend time in the UK preparing for your permanent return, take care not to bring forward the date of your UK residence status accidentally. It can take as little as 16 days back home to trigger residency if you have been a non-British resident for under three years. If you have been non-resident for longer, you could become resident after 46 days of a tax year, or 30 days if staying in a UK property that is considered your main home. 

While generally you cannot decide where you are resident for tax purposes, you may have some control over the timing of your UK residency. With guidance, you can plan to transition at a time that will minimise your tax liabilities in both your current country of residence and the UK. 

Tax considerations

Your financial arrangements today should be designed to suit your personal circumstances and current residency status. Once you move back to the UK, however, assets and structures that work favourably for you now in your current country of residence may not be so beneficial. On the other hand, you could find more tax-efficient opportunities in the UK once you become a British resident again. 

As well as the tax implications for any income, such as your pension, your residency will influence your tax liabilities when buying, selling or moving any financial interests. Before buying a new UK home, for example, make sure you understand how tax rules locally and in the UK might restrict or eliminate the availability of main home reliefs. Capital gains tax is also important – it may be more beneficial to sell or buy when resident of one country over the other. 

Depending on your situation, you might find it beneficial to either bring forward or delay selling or transferring any assets according to where you are a tax resident. In particular, careful planning of the date of sale of your overseas home is crucial.

Pension considerations 

If you transferred your UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS), you need to take specialist advice on the best way forward. If you made pension decisions based on tax-compliant opportunities where you are resident now, you need to establish what you should do once you are liable to UK taxation. See more about your pension options

Estate planning considerations

Similarly, your estate planning will need a thorough review to consider inheritance taxes, succession law, probate etc. If you have trust arrangements, there could be tax consequences you need to explore before returning to the UK. You should also take specialist advice if you have any UK inheritance tax planning structures set up on the basis that you had a domicile of choice in your current country of residence.

Brexit considerations

While there is still much uncertainty about Brexit, nothing should change until at least March 2019. But, if you return to the UK post-Brexit, you will be moving to a non-EU country – this could potentially trigger higher taxation in terms of exit taxes on the sale of shares or capital gains tax on selling property within the EU. 

Whatever your reasons for returning to the UK, it is important to plan carefully in advance, and review all the tax and wealth management considerations before you leave Europe. Ideally, if you can be flexible around the timing of your move, you should plan your return date around your tax planning. An adviser with cross-border expertise can help you avoid punitive tax implications and make use of tax-efficient opportunities in both countries.

Any questions? Ask our financial advisers for help

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.