Whilst we tend to write with the British expatriate living abroad in mind, that’s not to say the information on Degtev is exclusive to this particular group of people. Rather we aim to bring as broad and informed an opinion to the table as possible to benefit all of our readers…which is why it’s important we raise the issue of UK tax rules again targeting expats living in Britain.
Expats living in Britain are referred to in the financial business as ‘non-doms,’ which relates to their non-domiciled status in the UK. For those who are resident in Britain but who were not born in the UK and whose fathers were also born outside of Britain, the tax status of non-domiciled is usually applied. This status has a direct impact on the type and amount of taxation paid by such individuals to the British taxman.
In the past the UK was considered an attractive tax haven for such individuals as the UK revenue offered many tax breaks for those who were resident in the UK but who were domiciled elsewhere. Under the Labour Party leadership however, these benefits have been slowly but consistently eroded to the point at which a widely used tax efficient mortgage mechanism is now also no longer of use to expats living in Britain.
Many non-doms used to find that using an offshore interest-only mortgage was a beneficial way to purchase property in Britain in a tax efficient way, because payments made to cover such a mortgage were made with offshore funds which were not subject to taxation in the UK. However, this benefit was removed this year, and now any such interest-only offshore mortgage arranged after the 12th of March is considered a taxable policy. I.e., the interest payments made from offshore income are deemed ‘remitted income’ and these payment amounts become taxable.
This is just one more nail in the whole Great British coffin as far as non-doms are concerned – the latest stab in the back by HM Revenue and Customs. It follows hot and hard on the heels of last years ruling that now sees all expats who have been living in Britain for 7 years or more taxed on their worldwide income and gains by the British taxman. The only other alternative such non domiciled individuals have is to pay a fee of GBP 30,000 annually to avoid this tax – clearly making Britain only of interest to those who are super rich or slightly crazy!
If you think you may be affected by any of the issues raised in this article, you should speak immediately to an international taxation adviser.