Expats to cut ties with UK should Chancellor’s tax raid plans go ahead
Following reports this week that George Osborne is looking into introducing measures to force British expatriates to pay tax on income earned in the UK, I have publicly stated that I believe this will lead to many people severing financial ties with the country.
The Chancellor’s plans are to impede non-UK residents from offsetting revenue earned in the UK against their £10,000 personal allowance. As it stands now, expats are permitted to offset any income generated in Britain, including property rentals, against this allowance.
The idea, which if it comes to fruition could affect some 400,000 expatriates, was first suggested during this year’s Budget, and is now under consultation.
Over the years, a significant number of UK expats have continued to maintain investments in the country to benefit from numerous tax advantages. However, should Mr Osborne’s plan come into effect, I am of the opinion that an increasing number of expats would cut all ties with their home country as the financial incentives diminish.
British expats would have little reason to invest into UK-based property or pension schemes. I therefore speculate that as more and more expatriates move their finances to offshore jurisdictions, they will no longer wish to maintain any economic connections with the UK, which could in turn lead to more pensions being transferred out of the country.
These new plans would, most experts agree, hit expat pensioners the hardest, so I’m confident of a substantial upsurge in demand for HMRC-recognised Qualifying Recognised Overseas Pension Schemes. There are a whole host of advantages to QROPS, namely people can choose the currency they wish their pension to be paid out to save on costly exchange rates, and they offer much wider investment flexibility and significant tax efficiency.
Since QROPS were introduced in 2006, there has been an annual rise in demand. At present, approximately 10,000 expatriates, and those planning a move abroad in the future, transfer their pensions into a QROPS every year.