Moving abroad to save UK tax

Wealthy clients are often initially attracted by the idea of leaving the UK to ‘save tax', but after taking advice change their minds. It is not easy leaving the UK, apart from the huge cultural shift there are practical problems in buying property abroad, dealing with immigration/visa requirements, foreign bureaucracy and, of course, language. Having said that, if the process is properly managed, it is possible to save a substantial amount of UK tax. However, the choice of jurisdiction is all-important as there is no point in saving a fortune in UK tax only to be faced with an equal or larger bill for foreign taxes.

The choice is usually between moving to a mainstream jurisdiction, or a tax haven . Either way, it is important to be fully advised before making a move and our team of experts can help plan your expatriation. We list below some of the possible destinations.

Monaco

Levies no income tax or death taxes at all. However, it is a crowded and expensive place to live and the lifestyle is often not suited to many clients. Furthermore, the authorities are quite strict in making sure you actually spend most of your time in the country.

Switzerland

A much more agreeable and ‘normal' place to live. There is personal income tax but it is possible to negotiate an advance lump sum taxation agreement (a ‘forfait' agreement) which caps the amount of income tax you will pay. Interestingly, this is calculated on your expenses in Switzerland rather than your income. Even for very wealthy clients it is possible to cap the tax at as little as £10,000 to £20,000 pa provided you choose the right canton (county) and the right type of property.

Death taxes are generally not applied between close family members and there is no capital gains tax.

Channel Islands

There is no inheritance tax or capital gains tax in the Islands. Income tax is set at 20% (except in Sark , which has no taxes whatsoever).

The lifestyle in the Islands is very agreeable, but again expensive. Immigrants can only buy houses on the Open Market Register, which represents a small proportion of the total housing stock. As a consequence housing prices are very high – often much higher than in London.

Gaining access to Jersey is difficult, the authorities only let in a certain number of people every year and the authorities expect those immigrants to agree to pay quite substantial amounts of tax every year.

Isle of Man

There are no restrictions on moving to or living in the Isle of Man and it is much cheaper than the Channel Islands for housing, probably because its climate is less agreeable. Income tax is charged at 18% and there are no inheritance or capital gains taxes.

Italy

Whilst income taxes are high the government is abolishing Inheritance Taxes.

Portugal

Inheritance Taxes are being abolished here too.

Spain

Can be very useful for clients wishing to save CGT on the disposal of corporate bonds or for clients with offshore trusts or funds.

Belgium

Has high income taxes but does not tax capital gains made on the disposal of non-Belgium shares. Belgium has a double tax treaty with the UK , which makes it a popular destination for UK clients wishing to save CGT on the sale of their private company shares.

Croatia

Has a very favourable regime for foreigners who become resident there, who are taxed on a source basis, with foreign source income being tax free.

Dubai, Kuwait, Qatar, UAE

Quite a few Middle Eastern countries, floating as they are on oil, have very low or zero taxation. Qatar, for instance, has no direct taxation whatsoever. Most clients however will find the lifestyle a little difficult to cope with, particularly in those countries which forbid the sale or consumption of alcohol!

Living ‘nowhere'

It is remarkable how many clients think they can become non-resident for tax purposes by simply travelling around the world for a year (e.g. a cruise). Individuals who are absent from the UK on travel or holiday (even for more than a year) will almost certainly remain ordinarily resident and as such will remain liable to CGT and possibly income tax too.