It’s fair to say that Donald Trump’s surprise victory in the US Election in November was not universally welcomed. In the UK, it was widely reported that as the result unfolded, the Canadian immigration website crashed because of high levels of traffic. The UK immigration website stayed active, but we are seeing increased numbers of enquiries from US residents about coming to the UK.
Speaking alongside Google boss Sundar Pichai in November, London Mayor Sadiq Khan said
"If talented people based in the US want to come here to London, my message is simple - London is open.
And despite Brexit uncertainties, the UK has a strong economy; a stable government; world class financial and judicial systems and is well located for easy access to east and west. Coupled with a strong real estate market and a vibrant cultural scene, it’s an attractive place to live.
So, whether you are considering a first-time move to the UK or if you’re an ex-pat thinking of returning, here are top ten legal and tax tips to bear in mind:
- If you don’t have a UK domicile of origin, the UK tax regime can be friendly (for 15 years at least), and foreign assets can be excluded from tax here if the structuring is correct.
- Becoming UK tax resident can result in family trusts becoming UK tax resident for income tax and capital gains tax due to residence rules for trusts being based on the residence of individual trustees. ‘Living Trusts’ are popular in the US, but inadvertently importing such a trust by moving here can trigger adverse tax consequences. It may be enough to appoint new non-UK trustees, but care should be taken to avoid unforeseen consequences.
- If you are a US-dwelling Brit, you may immediately re-acquire UK domicile on your return to the UK, rendering your worldwide assets subject to inheritance tax, income tax and capital gains tax in the UK. Further, if you were UK tax resident and have spent less than 5 years outside of the UK, you can find income and gains arising during that period of non-residence can become subject to UK tax on your return to the UK.
- Complexity (and a tax charge) can arise on death where one spouse is UK domiciled, but the other is not. There are some solutions, but these need careful planning.
- Acquiring a UK home through a company (which has long been favoured by non-domiciled individuals) now carries a high tax cost – extra taxes arise in the form of the Annual Tax on Enveloped Dwellings, additional Stamp Duty Land Tax – and no longer removes it from the scope of Inheritance Tax on death. Make sure you look into the true tax cost of acquiring property in advance.
- Timing is important. There are new rules on the tax treatment of individuals arriving in the UK part way through a tax year (our tax year runs from 6 April in one year to 5 April the next). Mostly this can be managed, but it is a trap for the unwary.
- If you are a US resident with offshore investments, you should check that your investments are structured to ensure clean capital, income and capital gains are segregated into identifiable accounts, before arriving in the UK. This is important for non UK-domiciled individuals who are taxed on the remittance basis in the UK and may need to bring non-UK funds into the UK. This forward planning can result in a much lower UK tax outcome on remitted funds.
- Subject to local tax issues, it may be advisable to realise income and latent gains before you become resident in the UK, to secure optimum tax treatment between the two jurisdictions.
- If you are acquiring assets in England, particularly real estate, you should make an English Will. If you’re retaining assets in the US, it’s sensible to have a separate US Will.
- If you’ve entered into a pre- or post-nuptial agreement, have it reviewed by a UK lawyer. Although these arrangements can be binding in the UK, they need to follow strict criteria to carry any weight.
There is clearly going to be complexity in switching between two sophisticated jurisdictions such as the US and UK. But it’s a well-trodden path, and much of the complexity can be managed. Most important of all is to take advice early and to ensure your advisers in both countries talk to each other and understand what matters most to you.