When Donald Trump looked set to win the US presidency, there was a spike in Google searches for "move to Canada" and Canada's immigration website crashed due to the volume of traffic. If you are a US citizen considering a move for any reason, the UK may be an attractive option. The two countries share a common language and a special friendship. Furthermore, with the British pound at a three decade low against the dollar, there are clear opportunities available to investors in the UK.
Despite the strong ties between the US and the UK, the two countries' legal systems – and in particular tax regimes – do not always "mesh" very well. Therefore a prospective expat should obtain advice to ensure that his or her affairs are arranged in the best possibly way for both sides of the pond.
We have set out some points to consider below.
This is not a tax point, but first of all you will need a visa. There are a number of different options, but the one which offers the most flexibility – for those with a spare £2 million to invest – is the investor visa. The investor visa is one of the best ways to secure permanent settlement in the UK ("indefinite leave to remain").
UK "pre-arrival" planning
If you become a UK tax-resident you will – but see below – be taxed in the UK on your worldwide income and gains. "Residence" for these purposes is determined by a statutory test which looks at how many days you spend in the UK and your ties to the country. At the same time, US citizens will also be liable for US tax on their worldwide income and gains. While it is often possible to credit one tax against the other to avoid a double charge, this is not always straightforward so it is important that your investments and assets are structured correctly. There is also no step-up in basis for assets you own on arrival. So, if these stand at a gain, you may need to consider disposing of them before tax-residence starts.
The UK is known for its quaint historic traditions and one of those is that the tax-year commences on the date of the Annunciation to the Virgin Mary, still expressed in the Julian Calendar! (April 6th). Be aware that if you become tax-resident you are generally resident for the whole tax-year, which will probably commence before you actually arrive. There are limited circumstances in which the tax-year can be split, but these are not always consistent or logical.
The remittance basis
If you are resident but not domiciled in the UK, you can elect the "remittance basis" of taxation, which in simple terms means that you are only taxed on income and gains which you bring to the UK (rather than your worldwide income and gains). To make the most of this relief it is important that you put in place certain planning before you become UK resident so that you can remit funds in a tax efficient manner. There are also special reliefs for investors looking to invest in UK companies. Whether it will be worthwhile for you to claim the remittance basis will depend on a number of factors, including how you are taxed in the US.
If you have previously been resident in the UK
If you have ever been tax-resident in the UK before, you may still have historic issues (e.g. unremitted income and gains) from that period. It is usually possible to clean-up such historic issues, but this must be done in the tax-year before arrival.
US estate planning
It is likely that you already have some form of estate planning in place in the US. It is essential that this be reviewed by a UK lawyer, since planning which works in the US can receive negative treatment in the UK (and vice versa). Be particularly wary of trusts, which are taxed very differently in the UK to the US. For example, US advisors often recommend that their clients settle "Living Trusts" to avoid probate, but these can be problematic in the UK – see our briefing on the subject.
Getting married in the UK
You may be lucky enough to meet the man or woman of your dreams and get married. If he or she is not also a US citizen it is particularly important that you plan for what would happen on your death. Although both the US and UK provide exemptions from US Estate Tax and UK Inheritance Tax when one spouse leaves everything to the other, these exemptions can be limited where the surviving spouse has a different citizenship or domicile status. It is possible for an estate to be taxed by one country on the first spouse's death, and by the second country when the survivor passes – with no option of setting one tax bill against the other. There are well established methods for avoiding these double charges.
Purchasing UK real estate
You may be considering purchasing a house in the UK. Assets situated in the UK will be subject to Inheritance Tax when you die. Unlike US Estate Tax, which is only taxed if your assets exceed $5.45 million (in 2016), Inheritance Tax is due at 40% on all your UK assets over a tax-free "nil-rate band" of £325,000 – although there can be additional relief for real estate in certain circumstances. Lifetime gifts can also trigger an Inheritance Tax liability. The right planning can mitigate your Inheritance Tax exposure, and most importantly avoid your estate being subject to a double dose of Inheritance Tax and Estate Tax. The time to think about this is before you purchase a property, as it may determine how you structure the purchase – for example whether you take a mortgage. When it comes to tax planning it is often the case that "a stitch in time saves nine", so don't put off thinking about this to the last minute.
You may wish to consider making an English will, particularly if you own property in the UK. You need to ensure that your English will works with your US will, as a conflict can cause significant problems after your lifetime.