Moving to the UK – confessions of a serial expatriate
Dear Fellow Expats
Nowadays, finding a flatmate, trendy restaurants, good clubbing and a like-minded community have become the easy bite of the relocation process. The social tools and websites certainly are responsible for this major shift (bravo InterNations!).
By contrast, bureaucratic burdens remain vivid, irrespective of the country. Despite similar past experiences in Switzerland, Italy and in the US, it took me almost one entire year before I felt comfortable with the administrative environment of my new home: London. Dealing with all relocation practicalities, certainly is part of the expatriate experience yet burdensome, without saying time (and money!) consuming.
Alas, in my case, there was no assistance of the HR department of an international company, taking care of local registrations and addressing my concerns in a professional fashion. I was not one of these fortunate sponsored expatriates and hence had to go through this mess alone, learning by doing, just like many students, entrepreneurs or other adventurers.
Looking back in the rear view mirror, I felt the need to share my experience, in the form of a "to do" list, featuring some of the critical aspects you may want to think about in the first place. This note should not be considered a legal advice or a substitute for professional assistance. To the contrary, this is a mere testimonial, a digest of my life story, though I admittedly came across many of these pitfalls through my professional practice. The points below are not one-size-fits-all suggestions but mere food for thought.
- Immigration: the UK is member of the European Union, and so EU citizens benefit from the fundamental freedom of movement of persons. So there is no need to apply for a visa or an authorisation beforehand. Similarly, there is no requirement to register before you take up employment. Non-EU visitors are in principle required to apply for a visa.
Investor visas, though quite popular and certainly an important category, are not as easy to get as relocation firms tend to advertise them. In any event, they became quite expensive: you can simply forget this option if you are not ready to invest at least GBP 1million.
- Residence versus domicile: residence and domicile are two different concepts.
Residence is a concept based on physical presence in the country. Residence is thus factual and objective. The authorities apply a statutory residence test, which takes into account both the amount of time spent in the UK and any other connections with the UK. One aim is to ensure that people cannot cease to be resident in the UK without significantly reducing the extent of their connections with the UK. Further, those whose life is (as a matter of fact) connected more with the UK than any other country will find it more difficult to remain non-resident.
On the other hand, the domicile is a more subjective concept. In that respect, long-term intentions are decisive. A wide range of evidential factors may be relevant.
All individuals have a domicile of origin (usually based on the domicile of one of their parents at birth). In addition, they may acquire a domicile of choice in a jurisdiction (in the UK for example) if they are physically present with the intention to live there permanently or indefinitely (not just "permanently"; an intention to stay for an unlimited period suffices). It is always essential to analyse an individual's domicile carefully, as it has an effect on their exposure to the three main UK direct taxes (income tax, capital gains tax, and inheritance tax).
- Tax landscape: The tax regime, known for being quite harsh on high income (top rate amounting to 45%), is in turn highly beneficial for individuals who became resident in the UK without also becoming domiciled.
Non-domiciled residents in the UK are entitled to a more favourable system of taxation than UK domiciled individuals provided they claim what is known as the remittance basis of taxation, as opposed to the arising basis.
The remittance basis means that UK income or capital gains tax are only charged on income that arises in the UK or is remitted to the UK, respectively capital gains arising from disposals of UK assets, or the proceeds of foreign disposals that are remitted to the UK. Whereas the arising basis means you report and hence are taxed on your worldwide income and assets.
The advantage of the so-called "Res Non-Dom" status is well-known among the expatriate community. However, the fine prints, and the distinction between remittance and arising basis in particular, are also an abundant source of misconceptions. One of the most persistent urban legends I came across is that, as a "Res Non-Dom", you do not have to do or report anything to the UK tax authorities, including the filing of a tax return, to enjoy the benefit of this status. This is completely wrong.
The remittance basis is free of charge in the first years of residence. A claim must however be made for it in your self-assessment tax return. It is, in the vast majority of the case, essential to retain an accountant to prepare the annual return. After the first seven years of residence, the claim for remittance basis costs GBP 50,000 each year in which the individual decides to claim it. You are free to navigate between the two regimes: opting for the remittance basis one year and for the arising basis the following.
- Accommodation and council tax: a resident in the UK is subject to a council tax, levied by the local authorities (borough). Its amount depends on the various features of the accommodation (surface, type of building, number of residents, etc.). Each accommodation is allocated to a band, which corresponds to a tax range. As a rule of thumb, the bigger and more luxurious your accommodation is, the higher your council tax will be.
Real estate agents never mention the council tax when you are selecting an apartment. Moreover, they usual do not even know to which band the apartment belongs, which is very unfortunate because significant differences do exist between the different boroughs. Also, because such council tax can be as high as GBP Protected content month, this is definitely an aspect you may want to take into account when making your budget and picking up a location.
Finally, individual living alone may want to notify the borough of their status to get a reduction of the council tax since its default rate is usually based on a two people occupancy.
- Marriage and divorce: You would probably hear that the UK is a good place to get married but not to divorce. You should actually give credits to this popular wisdom!
English law offers interesting possibilities and large leeway when it comes to enter into customized marital agreements. On the other hand, the country is also known as a hub for divorce. The family courts will find themselves competent to rule on a divorce case when either spouse has been residing in the UK for a very limited period of time (as short as six months). Some claim that English family law is highly favourable to the (financially) weak spouse. It is fairer to say that English courts, through their injunctions, have much more intrusive powers to clarify the financial situation of each party and bring worldwide-spread assets quicker out of the closet than their counterparts in civil law jurisdictions.
- Succession & Will: succession under common-law jurisdictions (like the UK) and the same under civil law jurisdictions are two completely different animals (the latter offering much less flexibility). Thus, with a view to facilitate the enforcement of your will, you may want to have your existing will revised (and re-executed) in accordance with the standards of the jurisdiction where you are residing. By the same token, you also may want to consider having your assets located abroad governed by the concerned foreign law.
Thus, expatriates should consider executing several wills, covering different assets, depending on their location.
- Doing business: Moving to the UK is not without impact on the way you do or organise your business.
It will be essential to ensure that any foreign companies are centrally managed and controlled outside of the UK. This is because the UK tax authorities will treat a non-UK incorporated company as being tax resident in the UK if, on the facts, it is centrally managed and controlled in the UK. The practical effect of that would be that the foreign company would be liable to UK corporation tax on its income and gains (subject to any available treaty relief).
Unlike many civil law jurisdictions where the registered office and place of effective administration are relevant to determine where a company becomes resident (and hence taxpayer), the UK will look at where the actual business decisions are taken (including in particular board resolutions). In practice, therefore, it is essential to ensure that a controlling figure does not exercise central management and control in relation to any non-UK company whilst physically present in the UK.
- Insurance: Before it becomes the holy land for bankers, the City of London was the global hub for insurance business (historically linked to vessel and maritime transportation). From this illustrious past, the UK has inherited a very sophisticated and competitive insurance market: it is possible to have virtually every aspect of your life insured, ranging from your health to your favourite shirt, at very competitive price. To the extent that life insurance coverage is very often use as an efficient tax planning tool, as a way to set off inheritance tax liability upon death.
"Home is Where the Heart Is" say the romantics. However, relocation in a foreign country is a life-changing event, whereby many aspects come into play and must eventually click in before you can call this new place "home". You learn that the heart needs to be comfortable and rested before it can start feeling for a city or a country.
It is my hope the above can help you avoiding some pitfalls whilst settling down in a new country and in the buzzing city of London in particular.
Long life to the global village!