There are a great many financial planning tasks that need to be on the to-do list of expats planning to return home, and here we outline those that should be at the very top.
There are changes to the regime for Tier 1 UK Investor Visas which came in to force at the beginning of the new tax year, explains Wendy Spires. The start of the new tax year on April 6 brought with it several alterations to the system for Investor and Entrepreneur Visas in the UK – in some ways making things easier and in other ways, more challenging.
The UK has followed a number of countries around the world which have offered foreigners a fast-track to citizenship in exchange for them ploughing a significant amount of their own money into approved investments like government bonds or UK companies (for a Tier 1 Investor Visa) or into a business (for an Entrepreneur Visa).
One particularly challenging new rule is the need for those seeking a Tier 1 Investor Visa to have a UK-based bank or investment account before their application. Naturally, it is difficult to do that without having residency in the UK for some time (to be able to show proof of address) and so applicants can face something of a “Catch-22” situation. Remember, however, that there are several UK wealth managers which specialise in helping those hoping for a Tier 1 Investor Visa and some even help with the process of applying, as well as executing the necessary investment strategy.
One of the biggest changes to Tier 1 Investor Visas was the rise in the minimum investment required from £1m to £2m (net of fees paid to the wealth management institution) and the removal of a 25% allowance for property. Another was an amendment to the rules on being required to top up the investment if the value of the portfolio falls beneath the minimum investment threshold while their application is being processed. Reassuringly, this will now not be necessary if the fall is due to losses (or selling off assets at a loss; here, however, the proceeds must be reinvested in qualifying investments within six months).
The numbers speak for themselves when it comes to the attractiveness of the Tier 1 Investor Visa. In the year to September 2014, 357 Chinese received visas (a 43% year-on-year increase, followed by Russians (184). These individuals escaped the new requirement that applicants be at least 18 years of age (it is common for the children of wealthy individuals to be applicants if their parents wish for them to study in the UK and previously it was actually not uncommon for 16 year olds to be funded for an Investor Visa by their parents).
Entrepreneurs, meanwhile, face a long list of requirements, although they must invest only £200,000 in a qualifying UK-based company. They must, for example, create two full-time positions at the business in question and provide a detailed business plan to deter people from making sham investments. Checks such as making sure that one of the employees works in the business for at least a year form part of the Home Office’s “genuineness test” and shows just how serious the government is about only welcoming genuine applicants.
Currently, over a tenth of the users of the UK findaWEALTHMANAGER.com site are based overseas and we have been able to help many individuals who were seeking assistance with obtaining a Tier 1 Investor or Entrepreneur Visa. Often they are seeking a wealth manager which can offer a broad range of tax planning expertise since they intend to pay tax to HMRC on a remittance basis when they take up resident non-domiciled status. This separates the taxation of UK and overseas income and gains and only gives rise to charge on the latter based on what is remitted to the UK. Currently, after seven years of residence, non-doms are able to settle their tax bill with HMRC on a remittance charge basis £30,000 a year, rising to £60,000 per year after 12 years and £90,000 per year after 17 years. (This is unless they pay tax on a global basis.)
However, in the run-up to the 2015 UK General Election the Labour party announced plans to abolish non-dom status, citing cases where people claiming it have had only the flimsiest of claims that their “real” home is abroad and the need to plug the deficit by making the wealthy shoulder more of the tax burden. Whether the abolition of non-dom status comes to pass or not, it may still be that the regime is significantly altered.
With all these complexities in mind, those seeking either a Tier 1 Investor or Entrepreneur Visa are likely to need a good deal of support on the investment management, legal and financial planning sides of things – not to mention the practicalities around sourcing a home, and schools/universities for children if a family move is the ultimate aim.
There may be many serious benefits to obtaining fast-track residency and then citizenship in another country, however.
With the launch of our sister site wealthinasia.com in Singapore this month we hope to be helping many more people find the best wealth managers for them – both in their home markets and abroad. To discover which wealth managers precisely suit your needs simply try our online smart tool making sure to specify all your financial planning and investment requirements.