Understanding whether a client will continue to be domiciled in the UK and which country they intend to be tax resident in if they move abroad are the crucial parts of the conversation for wealth managers.
Minesh Patel, an adviser at EA Financial Solutions in London, said: “We find clients often get confused between tax residency and tax domicile. And this is important because, for example, in the UK inheritance tax is calculated based on where the beneficiary is domiciled, not where they are resident. To understand where a client is domiciled, the important consideration is how many years they have lived in the UK over the past decade, compared with how many abroad, and also, the country of birth of the client’s father, that is a major determinant of the tax domicile of an individual.”
More broadly he said an adviser needs to understand the tax rules in the country a client is moving to, if they are to become tax resident there rather than in the UK. Obviously if they become tax resident in another country, they can no longer pay into an Isa in the UK, and can only make personal contributions into a pension.
A question here that often comes up is whether the client intends to continue to have an address in the UK, even if they mostly move abroad. This is important because, for example, most investment platforms that an advised client may have assets on, require a UK address. So if they don’t have one, that creates a task for the adviser.”
Mark Pollock is a partner at Evelyn Patners and heads up the department dealing with clients moving abroad.
He said: “We need to know what jurisdiction they are moving to because many countries have taxation treaties with the UK and the tax treatment is understand through understanding those. For example, if they have an Isa in the UK, what happens to income they may receive from this, or if they have a pension, should they retain it or move it abroad with them?
"Then we look at the assets they own now, and plan to keep owning in future. I guess the key question here is whether the client moving abroad is likely to move back to the UK in future, and whether they want to keep some assets in the UK. If they are only leaving temporarily, then coming back to the UK after a short period of time could trigger a tax liability."
