Covid has made many expats thinking about heading back to their home country.
In December 2020, Brendan Dolan, global sales director at Quilter International, said that there was an “increasing opportunity” for firms in the advice market to become a household name for repatriation services as demand rose during the pandemic.
UK-based advice firm Partners Wealth Management (PWM), which was bought by 7IM in October 2020, is one company looking to bolster its reputation in the repatriation market.
Nathan Prior, head of international at PWM, told International Adviser: “I think UK advice practices have been burnt by going out of their comfort zones. As soon as you start giving advice into areas, which you’re not doing every day of the week, that brings risks and the potential for not getting it right.
“That’s driven most firms just to say, ‘we don’t give advice on that, we give advice to people who are tax resident here and physically present’. It does, therefore, leave this gap of people who are experienced in giving advice for people who are multi-jurisdictional or mobile.
“There are a handful of firms who offer advice in this area. When I joined Partners Wealth Management five years ago, I started our international service, and it’s been building up ever since. We’ve hired an additional two advisers to focus on the international service, and we now have four core advisers.
“We do think that it’s a growth area, and we want to make sure that we have the right experts in place so we’ve got an established team who do it day-in day-out and can make sure we have the right expertise.
“We’re always talking to advisers who are thinking about joining Partners Wealth Management, and certainly any who have an experience in international business are welcome to come and talk about that as well.”
Expat steps for repatriation
Partners Wealth Management is not the only advice firm to discuss repatriation as an area of ‘growth’.
During its rebrand, Skybound Wealth Management UK, which was formerly GWM Financial Planning, said it was “perfectly placed to assist returning expats”.
But expats shouldn’t think moving back is a quick, short-term project, it needs long-term planning.
PWM’s Prior said: “A lot of people, perhaps, if they were moving out of the UK probably did it before Brexit, whilst they could be allowed to. But I think there is a reverse where people returning to the UK because they don’t want to get stuck somewhere.
“We’ve certainly seen that you’ve got to start planning this early. There’s no point turning up in the UK, and then saying, ‘I’m here, what do I need to think about?’ A lot of what you could have done or should have thought about has gone.
“Step one is you probably need to think about this about 18 months before you move back because there’s certainly action you may want to take on a tax year in advance. It’s really important that people understand how UK tax residence works. The statutory residence test in the UK is complex and quite clear in determining when you become tax resident in the UK.
“Individuals need to pay attention to the days they are in the UK, the number of times they have here to determine when they are going to become tax residents. I think that is an important place to start.”
Temporary non-resident rules
He added: “The next bit is not to be caught out by the temporary non-resident rules. If you’ve been non-UK resident for less than five years, and come back to the UK, then actually from a HM Revenue & Customs (HMRC) point of view the temporary non-resident rules apply and that could well catch you out.
“If you think you have done some clever planning, left the UK to a tax-free jurisdiction, sold some property, and go back to the UK with a load of cash if you’ve not been non-resident for more than five years, HMRC will tax you at that point of return.
“Even if you’ve not done that as part of your planning, it’s important to look at because you might have sold something while you’re away for the last four years and you need to look back to see if you are going to be hit by UK tax on these things which you never accounted for.”
IHT and CGT
Some people may have move quickly and do not have the time to prepare 18 months in advance, as the pandemic has shown, things do not always go according to plan.
This can lead to slip ups including being hit for inheritance and capital gains tax bills.
Prior said: “I think the biggest mistake people make is not engaging in advice early enough, doing it too late or after they return.
“People might have an investment portfolio, they come back to the UK, and then they say, ‘what do I do with this investment portfolio?’ You look at it and see all of the capital gains that are unrealised, when people sell those, they need to pay capital gains tax in the UK, even though they made the gains outside of the UK because they haven’t crystallised them.
“It’s when you crystallise it, that’s when you’re going to pay the tax. By crystallising those gains whilst you’re outside of the UK, you’re potentially saving yourself 10 or 20% tax.
“Also, when people have lived abroad for a period they may have forgotten about inheritance tax when come back to the UK. I think that is really important for people to think about, especially if they’re coming back in late retirement because they may not have long to plan their estate.
“That should certainly be within the considerations of an individuals’ planning and how they’re structuring their assets and cash flows.”
Retirees vs workers
Moving is a stressful time for anyone. It can be even more difficult when its repatriating back from a foreign jurisdiction to the UK.
But who has to think about more when they move back to Britain, workers or retirees?
Prior said: “For example, take the family who has gone to work somewhere else for a period, and quite often it’s a low tax jurisdiction, the difficulties they will often have is readjusting to the cost of living in the UK.
“But also, they probably haven’t been contributing to UK pensions and they might just have most of their investments in unwrapped and unstructured accounts, which would become fully taxable on return. They need to think about how they are going to be tax efficient, when they come back to the UK.
“Also, they might have accrued foreign pension schemes if they been in a taxable jurisdiction and their company has been contributing to them.
“So quite often, we have people coming back with international pension schemes, which might not be quite what you think a pension scheme actually is, and when you dig into the details of it, it’s not flexible like a UK pension scheme.
“It perhaps is only ever going to pay out in euros or dollars. Those really do need looking into because clearly if you’re coming back to the UK and spending in pounds, having an international pension scheme, which is going to pay you an annuity in euros is possibly not ideal.
“It is slightly different for people who have lived and worked in the UK, they then decided to retire abroad, converted their pensions and transferred their assets into offshore bonds. Again, those things they all need reviewing and considering as to whether they’re going to be efficient for when they’ve come back to the UK.
“Quite often there’s not a need to make a change from a tax point of view. But there might be a benefit to making a change from a cost point of view, if you take the consideration that a Qrops might cost somebody a thousand a year in administration fees, a standard UK Sipp might be a few hundred pounds or less.
“Not every decision is tax driven, there are other considerations as well.”