Osborne’s tax raid would trigger expats to cut ties

Robyn Hall

August 12, 2014

The prediction from Nigel Green, founder and chief executive of deVere Group, which has 80,000 mainly expatriate clients, comes as it is reported that Chancellor George Osborne is preparing to prevent non-residents from offsetting income generated in the UK against their £10,000 personal allowance.

Under current rules, expats are able to offset income earned in Britain, such as income earned from renting out their properties, against the personal allowance.

The measure, which has now been put out for consultation, was first mooted in the Budget in March and could affect up to an estimated 400,000 expatriates.

But Green said: “Historically, expats have maintained some UK investments due to the tax advantages they have received. However should this new rule come into effect, it can be reasonably expected that more and more expats would consider severing financial ties with the UK as there would be fewer than ever incentives for them to keep a financial base in Britain.

“If this latest benefit is scrapped, there would be, typically, no real tax advantage for expats to invest in UK property or UK pension schemes.

“If expats restructure their finances offshore, as I strongly suspect many will to take advantage of the important associated benefits, they will probably look to cut all what the Treasury is calling ‘strong economic connections’ to the UK – and this, for many, will include transferring their pensions out of Britain.

“As such, and because expat pensioners are those who would suffer the biggest hit from the proposed changes, there is likely to be a significant uptick in the already strong demand for HMRC-recognised Qualifying Recognised Overseas Pension Schemes, or QROPS.”

Amongst other major benefits, QROPS give the expat greater tax efficiency, investment flexibility and a choice of currency in which the pension is paid out.

Established by HMRC in April 2006, there has been a steady year-on-year increase in demand for QROPS. Currently around 10,000 expats, or those who are imminently planning to reside overseas, move their pensions each year.

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