Cyprus-Forum.com

[Cyprus Vending]

British taxman eyes expat assets
By Leo Leonidou

TENS of thousands of British expats living in Cyprus are set to face greater scrutiny from the taxman after the British government launched a crackdown on foreign property.

According to the Sunday Times, Britain’s Inland Revenue and Customs department thinks that many families are using their overseas homes to escape inheritance tax and has warned that people could face prosecutions and fines if they fail to declare them properly.

Even families that have settled overseas could face an official probe: while most imagine that once they have emigrated they are safely out of the clutches of the UK taxman, the truth is that many will still have to pay inheritance tax to the British authorities.

Anita Monteith at the Institute of Chartered Accountants in England and Wales said: “If you have inherited foreign property and not declared it, the Revenue is saying we are coming after you. Even if you have failed to pay the tax accidentally you should be worried.”

About 250,000 British residents own property overseas, according to the Office for National Statistics, and a growing number are moving abroad permanently. About 200,000 Britons emigrate every year, with high taxes and the soaring cost of living as the prime motivations.

David and Susan Le Cuirot from Hampshire, are typical. They plan to retire overseas after buying a three-bedroom villa near Paphos.
David said: “I’m disillusioned with Britain and don’t think it has anything to offer in retirement.

“I can run a house in Cyprus for £1,200 a year, which wouldn’t pay half my council tax in this country.”

There is widespread confusion about how British income, capital-gains and inheritance tax apply to foreign property, however, as shown by the government’s latest crackdown.

UK inheritance tax, which is levied at 40 per cent on assets above £285,000, will apply to your worldwide assets, including your home, for as long as you remain “domiciled” in the UK.

The law says you normally take the domicile of your father, and it is extremely difficult to revoke it even if you emigrate.

Justin Rix at Grant Thornton, an accountancy firm, said: “It’s a common misconception that if you move overseas permanently you are no longer liable to UK inheritance tax.

“Even when you are living in a foreign country, your family may be subject to British inheritance tax on your death.”

Accountants also warn that British people who own property abroad through an offshore company also need to beware of the UK tax authorities.
In popular destinations, it has been common to use offshore companies to avoid local taxes and inheritance laws. But the Revenue recently said homes owned by UK residents through a company structure may be taxed as a benefit in kind. The charge would be based on an assumed value for the property, and can run into thousands of pounds. If you want to avoid the tax, seek specialist advice from independent solicitors.

Accountants say it is easier to escape capital-gains tax on your assets by moving abroad because it relies on the more flexible concept of residence. You may be able to apply for tax residency overseas if you stay there for more than six months a year. You then pay local rates on most of your worldwide profits.

A popular ruse used by taxpayers about to make a large profit, say through the sale of a business, is to move overseas for several years. It used to be possible to do so for only a year, but now there is a minimum of five years.
Responding to the news of the government crackdown, Vince Martin, manager of independent financial advisors, Blevins Franks International (Cyprus), described it as nothing new.

He explained there was a common misconception that Britons moving abroad would escape the UK taxman in all respects.
“The island is a beneficial place for people to emigrate to, both from an income tax and capital gains tax point of view,” he said. Apart from Cyprus’s low income and capital gains tax rates, he said that, “the double tax treaty between Cyprus and the UK means you only pay tax once and only in your country of residence.”
According to the financial advisor, “there is no capital gains tax to pay on the sale of overseas property for Cyprus residents, with lower income tax rates in Cyprus than in the UK on rental income.”

Inheritance tax was abolished in Cyprus in 2002, “with the key being that a person is still liable to UK inheritance tax if they are domiciled in the UK,” Martin said. “To show that you are not UK-domiciled, a person must prove to the UK authorities that they have cut all ties with the UK, for example, by selling property, shares, investments and limiting visits, while establishing ties in Cyprus such as a local will and driving licence.”

Howard Jordan, a British resident of Cyprus who says he has done his research in order to protect his assets told us that, “as back-up, a British will should be made in case the Inland Revenue successfully rejects a claim that domicile of choice is in Cyprus”.
When asked whether UK inheritance tax, which is levied at 40 per cent on assets above £285,000 was unfair and penalised the poor, Jordan replied: “It depends on where you draw the line on poor. The Treasury has been under fire for some years as the £285,000 threshold has fallen way behind the increase in value of property. The Chancellor, recognising this, has moved the threshold up at more than the rate of inflation and it will rise to £325,000 in 2009.”

Sam Orgill, tax advisor with Proact Partnership, a private client service for expats, explained in further detail the reasons for the Inland Revenue clampdown.
“When somebody dies, all their assets go into their estate with the executor required to complete a final tax return, which is where the assessment for inheritance tax comes from,” he said. “In the past, the Inland Revenue checked a random sample, but from this year, every individual case is checked. This can be done by looking at bank statements, land registry documents, pensions and tax returns. This also means that the practise of under-declaring by foreign solicitors has to stop as they could become personally liable for any tax lost.”

Orgill said that none of the money in the estate could be released to family members until the tax is paid. “A widow who owns a property in Cyprus can’t sell up and receive the money until the Inland Revenue is satisfied. Gordon Brown’s view is that everybody must pay their fair share of tax, but his definition of fair is different to everybody else’s.”

There are estimated to be 50,000 British passport-holders in Cyprus at the moment.

Copyright © Cyprus Mail 2006

[Cyprus Vending]

ONLY 50,000 passport holders!

Have you ever tried getting a beer in Pegeia on a Saturday night!!!

[Snad]

OMG can we not get away from these people. We live over 4000 miles away and they can still get their hands on our money, bloody taxman. Good at taking it off you but not so good when they owe you money.

[andri_cy]

Maybe you need to change citizenship....

[laptanige]

The uk tax man can not touch you over here in the north !!! ( for now)

[lysi]

The uk tax man can not touch you over here in the north !!! ( for now)

Thats why so many WANTED BRITISH CRIMINALS live in the occupied north of cyprus. They can freely use there HARD DRUGS profits to BUILD PROPERTY built on STOLEN GREEK CYPRIOT LAND.
THE OCCUPIED NORTH OF CYPRUS HAS NO EXTRADITION TREATY WITH ANY COUNTRY, ALL CRIMINALS ARE WELCOME TO LIVE & DO BUSINESS HERE.

[twinkle]

Lysi - I agree with you on this point! Its BS!!

[Snad]

Oh great!!

Can't we just have one thread were no one mentions NORTH CYPRUS please?

I know this is a Cyprus forum, but it gets drag along into every thread. It would be nice, just for once to have a light hearted conversation, even if is only to slag off the taxman

[lysi]

Oh great!!

Can't we just have one thread were no one mentions NORTH CYPRUS please?

I know this is a Cyprus forum, but it gets drag along into every thread. It would be nice, just for once to have a light hearted conversation, even if is only to slag off the taxman

YES SNAD, lets all forget about the occupation. but i cant forget because there are thousands of greek cypriot refugees waiting to return to there homes & lands.
AND ITS OCCUPIED NORTH CYPRUS
AND lets not be racist by slagging off the BRITISH taxman

[unique_earthling]

Oh Lysi do shutup, you are driving every one away including me, i cant even be bothered to air any views on here as you change it all to the cyprob, the world is sick of the victim mentallity as if your the only people to have had a war, and that was over 30 years ago..