Episode 374
Tax Without Bullshit - Special Episode
EP 374 - This episode is probably not for everybody, in fact it’s probably not for 99.55% of people. But if you are a non-dom, know a non-dom or just want to understand what a non dom actually is then this is the episode for you.
I guess if you’ve ever wondered what happens when a bunch of tax law experts hijack a podcast studio - and one of you might have done - you’ll probably also want to give it a listen.
*For Apple Podcast chapters, access them from the menu in the bottom right corner of your player*
Spotify Video Chapters:
00:00 Tax Without Bullshit - Special Episode
01:22 Meet the Tax Experts
02:53 Understanding Non-Dom Status
04:03 Changes in Tax Rules from April 5th
06:59 Implications for Non-Doms and Foreigners
08:33 New Tax Opportunities and Simplifications
18:54 Temporary Repatriation Facility (TRF)
23:06 Understanding the TRF and Its Implications
24:55 Attracting Foreigners to the UK
27:06 Inheritance Tax: Rules and Strategies
33:20 Excluded Property Trusts: A Deep Dive
37:31 Practical Considerations and Future Planning
43:19 Wrap Up
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Transcript
Hello.
Speaker A:This is an episode that probably won't interest 99% of you, possibly 99.55% of you.
Speaker A:So if you aren't a non dom or a foreigner, basically worried about their tax, or someone who knows a non dom and likes to give them advice about their tax, or an obsessive BWB completist, then as they say, look away.
Speaker A:Now go do something useful, interesting and probably more fun.
Speaker A:If you're still watching or listening, then, then you are about to find out what happens when a bunch of tax law experts hijack a podcast studio.
Speaker A:There's definitely some great advice in there, but it really isn't for everyone.
Speaker A:All clear.
Speaker A:Right, let's get chewing.
Speaker A:Hi and welcome to Business Without Bullshit.
Speaker A:We're here to help the founders, entrepreneurs, business owners, anyone who wrestles with the job of being in charge.
Speaker A:And if you like what we do here, please rate and review on Spotify and Apple and come say hi on YouTube if you fancy watching us in action.
Speaker A:Links are in the episode description or just search for WBLondon.
Speaker A:Hello and welcome to Business Without Bullshit.
Speaker A:And a special today, Tax Without Bullshit.
Speaker A:I bet you're very excited.
Speaker A:My name is Andy Urry and I'm joined today by my fellow colleagues and wonderful people, Jeremy Coker.
Speaker B:Hiya.
Speaker A:Jeremy is pretty much tax royalty.
Speaker A:If you wish to google him, don't go to a tax awards.
Speaker A:Takes a long time to get across the room.
Speaker A:And Gemma hotter.
Speaker C:Hi, Andy.
Speaker A:Hey.
Speaker A:And Gemma, perhaps you could both just explain your disciplines would be useful.
Speaker C:Sure.
Speaker C:So I'm on the legal side, I am a private client lawyer and Jeremy is on the accounting side, tax advisor.
Speaker A:And when you say you're a private client lawyer, what does that mean to normal people?
Speaker C:So that means that I help people with trusts, I give trust advice, inheritance tax advice, I draft wills, lasting powers of attorney.
Speaker A:You're also a property lawyer, which is quite useful.
Speaker C:Also a property lawyer.
Speaker C:Yes.
Speaker A:And Jeremy, what's your skill set?
Speaker B:Well, I'm basically an accountant but I have specialized in taxation and so I have the pleasure of working closely with GEM and people who are seeking tax advice to complement, like the businesses that we support, as in people coming to the uk.
Speaker B:So we have very, very many non doms that like, you know, have specialist tax needs and so we try and identify their needs, hopefully before they come.
Speaker B:And now for those who are over here, we need to know what they need to do as the rules change on the 5th of April and you're.
Speaker A:Rather stealing the thunder there, that there is some enormous things to discuss, we are fastly approaching 5 April, a law that has existed since post Napoleon's time and effectively this law called non dom, rather badly reported in most of the press by the way.
Speaker A:And I think the change of the law is rather drawn out of misunderstandings of the law, but effectively, effectively, since after the Napoleonic wars we declared to attract people to Britain, we would not tax them on their foreign income and gains.
Speaker A:So that's their foreign salaries or things they might be selling overseas if that money stayed outside of the uk.
Speaker A:As someone once said, no one ever came here for the weather or the food.
Speaker A:I think this was a means to us trying to attack, attract more wealthy people to the UK who could come to the UK and only be taxed on the money they earned or spent in the uk.
Speaker A:These rules have been around, around for donkey's years and they're actually very complex because over time what had happened is they become essentially more and more complex and restrictive about people trying to get around these rules or bring money in.
Speaker A:So I think, and certainly I've heard you say this, Jeremy, it's a blessed relief in a way for tax advisors that these very complex rules fall away and now the rules have changed.
Speaker A:What is happening now from the 5th of April?
Speaker A:What is happening now, Jeremy?
Speaker B:The remittance basis of taxation, which we've all loved to hate for a long time, goes away.
Speaker B:And what was the remittance basis of taxation where you got taxed based upon foreign income and gains that you actually remitted to the uk?
Speaker B:That will no longer be the case going forward and essentially where mostly for inheritance tax purposes as in the non doms have been like been able to benefit from rather favorable terms if they can plan the affairs.
Speaker A:So let's just break that down.
Speaker A:So a non dom is someone who is non domiciled and if I was to really simplify that, it means a foreigner, someone who's almost not from this country yet connected to this country.
Speaker B:Your father's not from the country.
Speaker C:Yeah.
Speaker C:And who doesn't intend to remain in this country.
Speaker C:And I think that's the subjective part because you would have people who were staying here, living here for say 20, 30 years, but they would say, but I don't intend to stay here, I'm going to go back to wherever, Australia or America.
Speaker C:So I'm not domiciled here.
Speaker A:And if we put it in another way, so in, in tax, certainly from a UK perspective and somewhat an international perspective, you have residence which is a year by year concept.
Speaker A:So where you Spending your time.
Speaker A:Usually different countries have different rules, but where you pay your tax on your annual.
Speaker A:And then for countries that have inheritance tax, the few countries that do, like us, domicile.
Speaker A:So sort of where whether you are foreigner or not, whether you are really from this country or not has a effect on how we tax you.
Speaker A:So effectively, if we take Rishi Sunak's wife, as it was a much lauded position, she was from India, her father was from India, she was born in India.
Speaker A:I think I'm getting my facts right.
Speaker A:She'd obviously started moving the uk, but we hadn't.
Speaker A:She was still a foreigner, so she was still taxable overseas.
Speaker A:And our system would say, okay, that's fine, you can keep your money outside, but the longer you spend here, at some point we're going to say you're not a foreigner anymore.
Speaker A:It's like, when do you become a Londoner?
Speaker A:You know, sort of 10 years or something, you know, it's like, you know, very few people from London are, in a way really from London, but there's this tax concept that you will be fully taxed in this country once you spend a long time here.
Speaker A:So it's this whole thing which is quite complicated for people to understand, but that, that, that.
Speaker A:Is that a fair description?
Speaker C:Yeah.
Speaker C:So for tax purposes, you have at the moment deemed domicile.
Speaker C:So once you've been here for 15 out of 20 years, you're deemed domiciled in the UK for tax purposes.
Speaker C:And so you become subject to UK.
Speaker A:IHT and no longer historically able to get this remittance basis, no longer able to keep your foreign income and gains out.
Speaker A:I know this is complicated and quite chewy, but it's really important to understand this point because I think people get very upset about it, about foreigners, and they certainly got very upset about Richie Sunak's wife.
Speaker A:But, you know, there isn't a tax advisor in the country who wouldn't have been negligent than to tell this person who was foreign and hadn't spent more than 15 years here that she had a right to keep her foreign assets outside of the UK because she was a foreigner in our rules.
Speaker B:I think the thing to be aware of really is for income tax and capital gains tax purposes, residence was really, really important.
Speaker B:Domicile was more important for inheritance tax.
Speaker B:And that was like the differentiation that people found hard to, like, you know, cope with.
Speaker B:But essentially because domicile gave you great advantages once, like Gemma said, once you'd stayed here long enough, you started to pay for the privilege.
Speaker B:So for about seven years.
Speaker B:You're okay.
Speaker B:You can like, you know, keep your Pawnee.
Speaker A:So for the first seven years of Foreigner for Want a better language comes to the uk, there was no charge.
Speaker A:You could keep everything outside that you didn't earn or bring here.
Speaker B:Yep.
Speaker A:And then they started to charge you 30 grand a year or something.
Speaker B:Once it happened seven out of nine years in the UK and that's where.
Speaker A:Richie's wife was sticking a box.
Speaker A:Paying 30 grand to not pay 100 million or whatever the number was, you know.
Speaker A:Yeah.
Speaker A:I mean, you know, I'm only telling the story of Richie Sunak, not to inflame people, but to give it context of this thing that's talked about.
Speaker A:So this is all going.
Speaker A:Not for inheritance tax, you would still.
Speaker A:It's the same.
Speaker A:What's going.
Speaker A:Is this remittance, the ability on an annual basis to keep foreign income and gains out.
Speaker A:Is that right?
Speaker C:That's changing.
Speaker C:But inheritance tax is also changing.
Speaker A:So let's slip it down.
Speaker A:So actually, weirdly, the new rules aren't necessarily bad.
Speaker A:Is that fair?
Speaker B:That's fair.
Speaker B:I think they are a great simplification.
Speaker C:Definitely.
Speaker B:They can give a number of people advantages who would never have had those advantages before.
Speaker B:Definitely not in the current.
Speaker A:So what are roughly the new rules from the 5th of April?
Speaker A:I'm a foreigner, I've been here.
Speaker A:Say let's.
Speaker A:I arrived two years ago into the UK and I've, you know.
Speaker A:No, let's do a simpler example.
Speaker A:I'm about to come to the UK Okay.
Speaker B:The first thing to consider is as long as you've been outside the UK for up to 10 years.
Speaker A:When you do come to us outside, meaning from a.
Speaker A:You can come on holiday, but from a residence perspective.
Speaker B:Tax, residence purposes.
Speaker B:Yes.
Speaker B:You have been outside the UK for at least 10 years.
Speaker B:And when you do come to the UK, your foreign income and gains, I.
Speaker B:E.
Speaker B:Non.
Speaker B:UK income and gains will be tax free for the first four years that you spend in the uk let's say.
Speaker A:Let's do French.
Speaker A:I'm a Frenchman and I'm earning a million pounds a year in France from property.
Speaker A:Let's just take a simple example.
Speaker A:You know, I can now move to the UK and provided.
Speaker A:Well, not even provided I can bring all of that income into the UK the whole million pounds a year.
Speaker A:And it's not taxable.
Speaker C:Not in the UK France will probably still tax you because it's property.
Speaker C:Yes.
Speaker A:Yeah.
Speaker A:But I could have a dividend income from overseas.
Speaker A:Someone might listen to this and it might make them Angry because they want people to.
Speaker A:They say, well, that's not fair.
Speaker A:That guy owns a million pounds a year.
Speaker A:Why are we taxing him more?
Speaker A:I think we must remember it's an international competition and actually we've been playing our cards extremely badly of late in regard to attracting the wealthy.
Speaker A:And while it irritates people, the 1% of population pay 30% of the tax and the very rich are very easily moved.
Speaker A:You know, they have the money and the will to do it and it may be an uncomfortable truth, but we need to love the rich people as much as we love the poor people, you know, in essence.
Speaker B:Yeah, because if I, if I say this, if somebody were to bring he's 1 million, 10 million into the country after the 5th of April and they invest it in this country, then it's a good thing for the country.
Speaker B:Right now they can't do that because it might.
Speaker A:Or even if they spend it, even.
Speaker B:If they spend, they buy a Ferrari.
Speaker A:Or whatever, the more.
Speaker B:I wouldn't say the words aggressive, but like, you know, they.
Speaker B:Anecdotally, a number of people who have businesses outside the UK have been thinking of coming to the UK and spending the first four years over here.
Speaker B:In that four years, they hope to sell their businesses abroad and maybe they won't have to pay taxes wherever they are because they're not resident there, they definitely won't have to pay taxes in the UK in those four years.
Speaker B:So as long as they sell their business at that point in time, depending on what their long term, depending on.
Speaker A:The other country's tax rules.
Speaker A:Remembering that for our tax rules, and indeed many other countries like Australia, you've got to leave the country for five years.
Speaker A:But, you know, but, but in essence, I can come here for a period, draw income or gains and certainly from a UK perspective, not be taxed.
Speaker A:Now, again, I.
Speaker A:Please don't let that wind you up.
Speaker A:This is a good thing because otherwise they're not going to come here and spend any money.
Speaker A:I mean that, it's not a, it's not a zero sum came.
Speaker A:We're not the only country in the world.
Speaker A:If they're not going to do it here, they're going to do it somewhere else.
Speaker A:You know, if you, if, if we can slightly attract some people.
Speaker A:And I think, I think these policies are really important for the sort of work we do where often we're helping companies come into the uk, there's a CEO coming, let's say, from America.
Speaker A:You know, it could be very helpful for them to know that the stuff they've got overseas isn't going to suddenly be subject to tax here for a short period.
Speaker B:Essentially, that's what the remittance basis was supposed to do.
Speaker B:But the rules have been so badly put in and developed over the years that it doesn't quite work as they expected it to be.
Speaker B:So getting rid of them is a good thing and it now gives people the opportunity to come in and they know what they're in for and bring.
Speaker C:More money with them than they would have before, because before they would have sheltered that money offshore rather than bringing it to the uk, if they could or not.
Speaker A:Just rotating.
Speaker C:Sorry.
Speaker C:Yeah, sorry.
Speaker A:It would have never come.
Speaker B:Yes.
Speaker A:So, in short, what we're saying at the moment is, while the UK hasn't getting.
Speaker A:Isn't getting everything right, and while a lot of people don't understand that tax isn't a national thing, it's an international thing, and that if you make it unattractive for entrepreneurs or for wealthy people, they will simply find somewhere else to live.
Speaker A:And actually, this policy, this new policy which being introduced really is a reaction to the anger around Richie Sunak's wife.
Speaker A:That's the truth of it, as far as I.
Speaker C:Even though the rule has been there forever and no one decided forever, we.
Speaker A:Didn'T even have a debate about, no.
Speaker C:One ever raised it before until Rishi Sunak's wife benefited from something that so many others have benefited from.
Speaker A:And the main reporting I saw is what it said, if you have a home overseas.
Speaker A:I mean, you know, I understand why they were trying to say that they meant if you're a foreigner, but it was misreported.
Speaker A:But actually the rules that the Conservatives have put in that we don't believe labor are going to mess with, it's still not impossible.
Speaker A:Is that right?
Speaker A:They could still have a right to.
Speaker A:Because you said to me, Jeremy, recently, well, we still don't know for sure.
Speaker A:These rules are for sure, but it's the 5th of April.
Speaker A:It's a.
Speaker B:There were some tweaks yesterday.
Speaker B:Yes.
Speaker B:You know, minor tweaks.
Speaker B:Minor tweaks.
Speaker B:I think we've got the meat on the bone.
Speaker B:So we know generally what like is being proposed.
Speaker A:So it's four years, I can come in.
Speaker A:So if I've been here a year or two years already, and I am a non.
Speaker A:I'm a foreigner and a non dominance, you know, simply, I wasn't born here, my father's not from here.
Speaker A:If he was married at the time.
Speaker C:It'S more if you.
Speaker C:If you've not been Resident here, that's the point.
Speaker B:Non dom is a relevant now.
Speaker C:Yeah.
Speaker C:It doesn't matter whether you're dom.
Speaker C:Non dom.
Speaker C:So it's now, if you've not been here for 10 years, you've now been here for two years.
Speaker A:Say let's be basic on residence.
Speaker A:Residence is a more complex subject but in simple terms, you spent more than six months here.
Speaker C:For us to be really simple, let's keep it simple.
Speaker A:Yes.
Speaker A:You know, on a basic level, you are living in the uk.
Speaker A:London or UK is your home.
Speaker A:You now, if you've been here for two years for residence, you've got a two year period.
Speaker A:If you've never come here before, from the 5th of April, you've got four years, you can bring in whatever you want from overseas, you can spend it how you want, we won't tax it.
Speaker A:And is there anything else to say about that?
Speaker B:On basic terms, it provides an opportunity for people who are not non dom.
Speaker B:So the average UK expat who's not been in the country for 10 years.
Speaker A:Of course, forget about non dom if you've been living in Spain or America for 10 years.
Speaker C:Yeah.
Speaker C:So my mother, I told her about this this morning.
Speaker C:She is English, born here, as English as they come.
Speaker C:But she's been living in Spain for.
Speaker C:I'm not going to give her away 60 years, you know, 50 years.
Speaker C:And yeah, she could come back and bring in all of her foreign income and gains.
Speaker A:Bring it all in for four years.
Speaker A:For four years.
Speaker A:Now what happens next?
Speaker A:I come for five years, six years, seven years, eight years.
Speaker A:What then happens going forward?
Speaker B:You will be taxable on your worldwide income and gains.
Speaker B:Most like a normal British person.
Speaker B:Like a normal British person.
Speaker A:Which, which means that it doesn't matter where you earn it or how you earn it, as far as the UK government is concerned.
Speaker A:You pay all of your tax here.
Speaker C:Yes.
Speaker C:And you're going to have to report all of your foreign income and gains over here.
Speaker A:And now inheritance tax kicks in.
Speaker A:How, when do.
Speaker A:Now, I must put this just before inheritance tax is only 17 countries in the world according to my googling that have inheritance tax out of 200.
Speaker A:Such a quite a rare thing.
Speaker A:Okay.
Speaker A:And we have very high inheritance tax.
Speaker A:But now what happens?
Speaker B:Can I take us one step back before we go into inheritance tax?
Speaker B:We all come to inheritance tax, but we always do.
Speaker B:Yes.
Speaker B:Because that's the end game.
Speaker B:End game.
Speaker A:Yeah.
Speaker B:I'm sorry.
Speaker A:No, no, quite right.
Speaker B:But essentially we spoke about people who are coming to the uk.
Speaker B:We need to talk about people who are already in the UK right now.
Speaker B:As in.
Speaker B:So we do have the non norms in the UK.
Speaker B:How does life change for them as at 5th of April, from 6th of April going forward?
Speaker B:And life does change from them because today they can like claim the remittance basis on the 6th of April.
Speaker B:They can do that no more.
Speaker A:So at the moment they can keep all their income and gains out of the UK from the 6th of April.
Speaker A:They can't anymore because they've already been here more than four years.
Speaker A:So.
Speaker A:So, so they're.
Speaker A:You're assuming they've been here for four years?
Speaker C:Yeah, if they've been here for more than four years.
Speaker C:That's what we're talking about now.
Speaker A:Yes.
Speaker B:As in.
Speaker B:Yes, as you know.
Speaker B:So.
Speaker B:So it depends.
Speaker A:Yes, no, but roughly speaking.
Speaker A:Roughly speaking.
Speaker A:So you've been here more than.
Speaker A:You can't get these juicy rules.
Speaker A:They're not.
Speaker A:They've gone for you, the people who.
Speaker B:Have been benefiting from claiming the remittance basis, basically.
Speaker B:So essentially what happens is that from 6th of April we still want them to bring this money in.
Speaker B:They've made.
Speaker B:Please, please bring the money they've made.
Speaker B:Shed loads of money.
Speaker A:This firm.
Speaker B:They are making shed loads of money as we speak.
Speaker B:Entrepreneurial.
Speaker B:They do have funds abroad, but they, they won't bring into the UK because it costs them some money from the.
Speaker A:6Th of April because they would be bringing it in and it would cost some money.
Speaker A:And we take a very.
Speaker A:The remittance basis effectively takes a very harsh look at anything you bring in and says maximum taxation 40, 45%.
Speaker A:Wherever we can hit you, we'll hit you, we'll make it.
Speaker A:You know, as usual, with one hand giveth the other hand grabbing, you know, the tax man has said, fine, we won't tax you, but if you bring anything in, we're going to tax the hell out of you.
Speaker B:Effectively, pretty much, yes.
Speaker A:So.
Speaker B:And as simple as I say simple.
Speaker B:Some people go out and buy a car and drive it in.
Speaker B:That's a remittance.
Speaker A:Oh, classic.
Speaker B:You know, so it's like, you know, so you don't get away that way.
Speaker A:No, it's a great example that people would think, well, I'll buy a Ferrari in France and I'll drive it to England.
Speaker A:That is a remittance.
Speaker A:You just brought the benefit of money in.
Speaker B:That's correct, yes.
Speaker B:But essentially with effect from 6th of April to those people who have earned income and gains up to the 5th of April.
Speaker B:So it's income and gains being earned.
Speaker B:Now, if they Bring it in today, they'll probably pay tax 40, 45% with effect from the 6th of April.
Speaker B:We've got what we call the temporary repatriation facility, TRF.
Speaker B:I'll say TRF going forward because I can't pronounce temporary repatriation facility.
Speaker B:But what the TRF gives these people who have kept their incoming gains outside the UK because they wouldn't have been able to bring it in without suffering a cost of 40 or 45, said it gives them the opportunity to bring that in at the rate of 12% for the first two years.
Speaker A:12%, that's an excellent rate.
Speaker A:That's lower than pretty much every tax except bada relief.
Speaker B:Yes, pretty much.
Speaker B:Yes, yes, yes, pretty much.
Speaker B:So essentially we are in a position where if they wanted to bring the money in, it's worth waiting till the 6th of April and saying, okay, I can bring this money in, but I'll pay 12%.
Speaker B:And however you look at it, it's better than 40 or 45%.
Speaker B:So there is an incent for them for those people.
Speaker A:Let's give a simple example that I would see from a client.
Speaker A:They may have money accumulating overseas and may people may think, oh, millions and millions, you know, normal people know, maybe they've got a million quid overseas that is accumulated from the sale of a house that they had in Australia, say, and they really want to buy a house here because they got two kids here, but they can't bring the money in because previously if they tried to bring it in, we tax the hell out of it.
Speaker A:So they've kept it offshore and then suddenly from the 6th of April, you're saying, bring it in and we'll charge you 12.
Speaker A:And 12 suddenly becomes a palatable number.
Speaker A:You know, it's like, I mean, I don't know what you find, but personally, up to 20 people always are not bothered with tax.
Speaker A:You know, they're like, well, fair enough, you know, that's what it is.
Speaker A:So that would be, you know, an example where it'll, it'll actually allow.
Speaker A:I, I guess I don't know what that's going to do, the housing market and stuff, but the will, you know, my experience is I've got a few clients in that position.
Speaker A:They're suddenly going to bring the money in and buy a home in London.
Speaker A:And I mean, it's not bad for us, I guess.
Speaker B:Yeah.
Speaker B:And I've had people who, I've said, like, hold fire, bringing money in, because there was no way they could bring that money in.
Speaker B:There's no way they can bring it in before the 5th of April without suffering the tax charge.
Speaker B:They know.
Speaker B:But all of a sudden right now, as opposed to thinking, I want to leave the UK, it's like, well, 12% is not too bad.
Speaker B:I can buy the house and stay longer.
Speaker B:Because they always wanted to.
Speaker A:Yeah.
Speaker A:And that's the positive message.
Speaker A:We're not here to sell the UK leave if you want.
Speaker A:I mean it ain't perfect, the weather's been terrible, but you know, it' more like by the way these rules come in actually, they're not so bad.
Speaker A:How long's the TP TPR last?
Speaker A:Trp?
Speaker C:Three.
Speaker C:Three years.
Speaker C:Rachel.
Speaker C:Rachel Reeves has had three years.
Speaker C:It was two.
Speaker C:She's increased it to three.
Speaker B:Yeah.
Speaker A:So she gets it.
Speaker A:I mean Rachel Reeves was struggling with on some levels, but she clearly gets it.
Speaker A:She's extending it.
Speaker C:But this is, is it only for people who've claimed their remittance basis?
Speaker C:Right.
Speaker C: And so if it say if we get to: Speaker A:Oh, great question.
Speaker C:Are they.
Speaker C:They're not going to be able to.
Speaker B:Right.
Speaker C:Because they would have never claimed the remittance basis come now or never.
Speaker A:Is that fair or that is my understanding.
Speaker B:There are, there are a number of nuances because if I'll give you another example, as in the people who have left the uk, they've left the uk, they claim the remittance spaces but they have left the UK and it's thought that, okay, I've left the uk, I can REM funds when I've left the UK because, well, I'm not in the UK any which way.
Speaker B:And now they bought a house and what happens if they come back and you know, what's the position?
Speaker B:So there are a number of things that, you know, you may need professional advice.
Speaker B:Yes.
Speaker B:And you know, it's, it's.
Speaker B:And a number of things and I have to like give kudos to the CIO right now, the ica, because they have fed back these like funny things that, that are impossible because the rules are so complicated.
Speaker B:There are just nuances to everything as you need to look at everything that the person has done before and what they're trying to do and make sure that you tick the right boxes and make sure you come in and know that, okay, it's 12%.
Speaker B:And I do think that 15% is a last minute sweetener.
Speaker A:What's the 15?
Speaker A:Where's the 15?
Speaker C:12.
Speaker C:First two years.
Speaker A:Oh, it goes up, yeah.
Speaker A:The third year it goes up to 15.
Speaker B:And we're thinking that, okay, they might not do anything in the first year.
Speaker B:Maybe in the second year they'll say, okay, 12% is pal.
Speaker B:We'll pay the 12%.
Speaker B:Year three and it's gone to 15%.
Speaker B:A number of people might say, my gosh, 12% wasn't too bad.
Speaker B:This is your last chance.
Speaker B:It's 15%, you know, and so.
Speaker B:But if you've waited too long, it's now 15%.
Speaker B:We don't know.
Speaker B:It might be extended.
Speaker B:We don't know.
Speaker B:But like, I think, I think all in all, the TRF is a good thing and it also covers things that now, generally we're not covered before.
Speaker B:We don't want to go there.
Speaker A:Look, in summary, the rules that are coming in for a temporary period, it sounds like between three to four years are extremely attractive for people to come in from overseas and spend their money in the uk.
Speaker B:Most.
Speaker B:No, mostly for people who are already here and who have incoming gains arising up to April.
Speaker A:No, but that's the trf.
Speaker B:Yeah.
Speaker A:So I think you mean just generally.
Speaker A:Yes, generally for foreigners, yeah.
Speaker C:Come for four years.
Speaker A:There's a nice period coming up.
Speaker C:It's a lovely sunny country.
Speaker C:Come four years, honestly, if you check.
Speaker A:The forecast right now, it's brilliant.
Speaker A:Look it up, it's ten days of sunshine.
Speaker A:It's very unusual.
Speaker A:No, but, you know, come for the sense of humor.
Speaker A:But no, the thing is, the rules coming in are actually fairly attractive.
Speaker A:I think is is the summary that's unexpected given the overall climate and conversations that are going on.
Speaker A:And I don't think we've been doing a great job on some levels at, you know, promoting Britain.
Speaker A:But actually, thank goodness, in this case, these rules seem to be attractive.
Speaker A:And perhaps that's either the public were very annoyed about non doms.
Speaker A:I think the public, if they really understood these rules, might get angry about them too.
Speaker A:But we're very lucky labor hasn't messed with them.
Speaker A:And I hope what I'm saying now doesn't affect that.
Speaker C:Well, we do need to attract foreigners to the uk.
Speaker C:We.
Speaker C:We need to.
Speaker C:And if we don't do so, any other countries are doing it.
Speaker C:So many other countries are giving incentives.
Speaker A:Let's give some examples.
Speaker A:You can go in Italy and pay 10% tax up to the first million you earn if you're happy to live in Northern Italy, which is such a struggle.
Speaker C:And I think that's it, isn't it?
Speaker C:It's kind of, you You.
Speaker C:You pay.
Speaker C:No.
Speaker C:Is it in Spain or Portugal?
Speaker C:Yeah, you Pay.
Speaker C:You pay £100,000.
Speaker A:Well, if you earn more than a million pounds, you, you.
Speaker A:The maximum tax rate is 10% on your first million.
Speaker A:Everything after, that's not tax.
Speaker C:Right.
Speaker C:And that's it.
Speaker C:So they are all trying to attract foreigners and ultra high net worths to those countries.
Speaker C:If we don't do something, we lose all of that.
Speaker A:And their weather's definitely nicer.
Speaker B:You know, I think a plus for us as well is for those people who.
Speaker B:The same expats who had left the country hoping never to come back, they have the opportunity to come back now.
Speaker B:And also because of the change of the rules in respect of domicile, there is every possibility that they may not be subject to inheritance tax on their worldwide assets when they do come back.
Speaker B:As long as they don't stay too long, possibly times.
Speaker A:I mean, we know from our US tax team there's British expats returning a lot, and that's quite interesting.
Speaker A:Ones who've been living in America timed with Trump.
Speaker A:You know, I think some people, it bothers them.
Speaker A:Some people, it doesn't bother them.
Speaker A:It depends whether you live in your little world or, you know, it's very interesting that people who are ideologically uncomfortable with Trump, even though it may not affect their daily life, and are returning to the UK as a sort of safe haven.
Speaker A:That's interesting.
Speaker A:And the timing of these rules is no one would have connected it to Trump, but perhaps there's a little serendipity there.
Speaker A:You know, it's hard to get a visa, but if you're a British person returning home after 20 years in America, good time to come.
Speaker C:Yeah.
Speaker B:And I have so many clients who are saying, I want to come back and see the gradkids.
Speaker B:I've never seen them.
Speaker A:Yeah.
Speaker B:I'm going to come back and say for, like, five, six years whilst I'm here and then go back.
Speaker A:And you're saying three to four.
Speaker B:They're not really interested in the foreign incoming gains.
Speaker B:It's more that they've been out so long, most of their estate is not in the UK any which way.
Speaker A:So let's go, let's go, go that next stage.
Speaker A:So here's the.
Speaker A:Here, here's the rub.
Speaker A:The rub is, as I understand it, if you spend 10 years back here again, remembering that very few countries have inheritance tax and we have some of the highest in the world, we will now wish to apply inheritance tax to you globally.
Speaker A:How does it work today as a.
Speaker B:UK domiciled individual, you're subject to inheritance tax on your worldwide assets.
Speaker B:As a UK domiciled individual, the non doms are subject to inheritance tax on the UK assets, basically.
Speaker A:So it means if you're a foreigner and you die and you're living in America and you had a house in the uk, we would tax you on that under inheritance tax to 40% but nothing else.
Speaker B:Yes.
Speaker B:We won't be able to touch your.
Speaker B:If you're British.
Speaker A:It doesn't matter if you're British in terms of you're born here, your father's here, we deem you domiciled.
Speaker A:It doesn't matter if you're living in Thailand for the last 20 years, we're still going to tax you on your global Inc and gains.
Speaker C:Yes.
Speaker A:And that's the current position your inheritance.
Speaker B:Tax will be on your worldwide.
Speaker B:Yes.
Speaker B:Assets.
Speaker B:Yes.
Speaker A:Okay, and what's the new position?
Speaker C:If you've lived in the UK for 10 out of 20 years, then we will tax.
Speaker A:What's 10 out of 20 mean?
Speaker A:Any 10.
Speaker C:So it doesn't have to be consecutive.
Speaker A:It doesn't need to be conservative.
Speaker C:No, it doesn't need to be consecutive.
Speaker C:Any 10 out of the last 20.
Speaker A:Years, we will tax you under inheritance tax fully globally.
Speaker C:Yes.
Speaker C:On your worldwide assets.
Speaker A:So what's going to happen is you, you.
Speaker A:It's very attractive to come here if you're a foreigner for three, four, five, six years.
Speaker A:But then if you had a lot of income and gains overseas, we had a lot of sorry assets overseas and you're no longer 22 years old and you're 50, you may become more uncomfortable about staying here knowing that they're all going to be fully taxable under inheritance tax.
Speaker C:Yes.
Speaker C:Long term you probably you would be thinking about whether you want to stay here, I guess for more than 10 years.
Speaker C:But also on the flip side, you can fall out of UK inheritance tax.
Speaker C:Whereas at the moment, if you're UK domiciled or former domiciled, then you can very easily become subject to UK inheritance tax.
Speaker C:Whereas now you can lose that.
Speaker B:And for those who are thinking of running away so they don't trigger 10 years go away in year nine, just.
Speaker A:Just by the way.
Speaker A:So really I think if I'm trying to understand what you're saying, the concept of domicile was always quite a deep and subtle subjective concept and quite hard to get out of just as much as, you know, so we could give the fun examples.
Speaker A:So traditionally, if you wanted to give up your domicile, let's say you moved to Australia, you know, we would get to the level that you better stop supporting Arsenal and England football teams.
Speaker B:You can never stop supporting Arsenal.
Speaker A:You're an Arsenal fan, aren't you?
Speaker A:I just.
Speaker B:I refuse to answer that question.
Speaker A:No, but the point being that cutting ties meant if you still had a mum there, that better be it and you better only just pop in to see her.
Speaker C:It was almost a case of, you should be buying your burial plot overseas.
Speaker A:Overseas, you support Sydney United or whatever they're called.
Speaker A:You know, you don't return much other than perhaps to see your mother, if that's what you had.
Speaker A:But you have no property here, you have minimal economic and vital interests.
Speaker A:You know, you don't have a lot of friends here.
Speaker A:You have nothing here.
Speaker A:We want to see, especially if you had a lot of money, because we'd be keen to tax it then that you really cut ties.
Speaker A:I mean, and then.
Speaker A:So in other words, it's hard to get out of domicile.
Speaker C:Yeah, it's sticky.
Speaker A:It's sticky.
Speaker A:So now Britain's kind of throwing that out the window, which maybe like makes life simpler and just saying, well, if you spend too long here, we don't care, we're going to taxi worldwide side on your inheritance.
Speaker A:And that's on a global level, actually, quite aggressive and quite unusual because inheritance tax in itself is unusual and it's quite unusual to be that aggressive because most countries have inheritance tax as my understanding, which is very vague.
Speaker A:You know, use domicile, use this sort of concept a little bit more.
Speaker A:And we're kind of saying, sod that we're doing this.
Speaker A:But yeah, at least it makes life simpler that at least you're clearer, it's manageable, you leave on year nine.
Speaker A:It's not like we're saying, well, I don't know, you do like Arsenal a lot.
Speaker A:It's like, it's like, John, get on that plane and don't come back except for holidays and you're good.
Speaker C:Well, you also don't have to go away forever now.
Speaker C:So before you had to possibly you.
Speaker A:Had to cut ties.
Speaker C:Yeah, you've got to.
Speaker A:Which might be 90, might be 120 days.
Speaker A:Depends.
Speaker C:You have to be away for.
Speaker C:If you've been here for 10 years, you have to leave for 10 years.
Speaker C:So there's a 10 year tail and then you fall outside of UK inheritance tax.
Speaker C:So again, for those expats, British expats, who previously, if they would have come back for just one year, they would have become subject to UK IHT on their worldwide assets.
Speaker C:They could now come back, be here for nine years and not become subject to UK iht.
Speaker B:And that's what many people are planning to do.
Speaker B:I have so many people who are planning to come back to the uk.
Speaker B:They've got assets worldwide, but they were always subject to UK inheritance tax and we were always talking about, so why not?
Speaker B:Yeah, yeah, now they're coming back.
Speaker A:I think to conclude on that, it's always the other thing that's really important is people often ask us, as tax people or as the legal advisors that oh, I want something future proof or I want to look way into the future.
Speaker A:I think the thing that's important in this conversation is to remember, only try and plan a few years ahead.
Speaker A:Frankly, planning for four years is a reasonable amount.
Speaker A:You know, at the moment, who knows what life's going to happen, who knows who's going to die or what law is going to change.
Speaker A:So for now there's a great opportunity and I think it's best to revisit this conversation regularly to understand where you are in it and, and, and work out whether for you, on balance between your family commitments, commitments, the taxation, you may suffer.
Speaker A:You know what, you know what, what is the right decision for you?
Speaker B:It's almost rude not to mention the fact that, that based on the rules that exist not today, but existed before October last year, I guess there were very, very good reasons to have a trust offshore as a non dom excluded property trust.
Speaker A:So excluded property trust allows a foreigner before they ever enter the uk to set up a trust.
Speaker A:And a trust is effectively a contract where you pass on the responsibility of assets through trustees, people who are effects, effectively guard of this money.
Speaker A:So it's no longer your money, you put it into trust for some future person or situation and you could, before you enter the uk, you could pick an offshore territory and say, all my property and assets, I'm now passing that into trust for my children in this offshore territory.
Speaker A:And I, I have nothing at this moment to do with the uk, so I'm not subject to their rules at all.
Speaker A:I've never entered the country other than perhaps on holiday.
Speaker A:And you could keep that all out of the UK and that seemed a reasonable position.
Speaker B:You can actually do it whilst you're in the UK as long as you are not deemed domiciled.
Speaker B:So for about, yes, for 14 years, pretty much 15 years.
Speaker A:Of course, because you could claim remittance and you could say as long as.
Speaker B:Once you're deemed domicile, there's no opportunity to create an Excluded Property Trust.
Speaker B:So many people stayed and once they were like on year 12, it was like, well, I probably am going to stay here.
Speaker B:Maybe I need to consider longer term.
Speaker B:And so they then set up Excluded Property Trust to protect those assets that, if I put it loosely, they probably would never need.
Speaker B:You know, it's like enormous wealth.
Speaker B:You know, somebody has.
Speaker A:Well, it doesn't necessarily, you know, this is where people get very inflamed.
Speaker A:Oh, these people coming here and they're not paying tax and they've got all their money and it's all in trust and it's all offshore and it's terribly unfair.
Speaker A:I think we have to understand that.
Speaker A:Again, if you're going to say the moment they arrive in the UK and become resident, you will tax them on all their worldwide income and gains.
Speaker A:And let's take a smaller example.
Speaker A:They're not a billionaire.
Speaker A:They've got 3 million quid or 2 million quid from assets that they've built up overseas.
Speaker A:People were simply saying, well, I'm not going to the uk.
Speaker A:I mean, the weather's not great.
Speaker A:I mean, it was all right in London, but, you know, oh, I could go to Portugal or Italy or, you know, I'll go to somewhere else, you know, and that's the conversation that is more important, that it's not that these people are getting out of tax.
Speaker A:They're just, they're just not from here, you know, and they're only entering our system.
Speaker C:Sorry, I should just, just say so Excluded Property Trust, they only, they only protected you against UK inheritance tax.
Speaker A:Oh, do they?
Speaker C:Right.
Speaker B:That's sort of why I said like, you know, essentially any distribution was potentially taxable.
Speaker B:But if you had a distribution.
Speaker B:Yes, but if you'd had a distribution outside the uk, then you were okay as well.
Speaker C:They would not be subject to UK inheritance tax on your death.
Speaker C:If they were in an Excluded Property trust was kind of why people used them.
Speaker C:The idea is that there is.
Speaker C:Maybe they're from a country that doesn't have inheritance tax or has inheritance tax in the way that the US does, where you have have millions of dollars worth of nil.
Speaker A:Right, let's give that example.
Speaker A:So in the UK, for an individual, it's 325, 000 pounds until we start charging you at 40% on death.
Speaker A:In America, it's $10 million.
Speaker A:So now let's take an individual because I always think people just think about billionaires.
Speaker A:Let's take the example of most of our clients who might be someone who's done okay Maybe they've been left a bit of money, they've got a couple of million quid.
Speaker A:They're now choosing to enter the uk and you're saying to them, oh, if we didn't have the concept of excluded property trusts or things like that.
Speaker A:Oh, by the way, you've come here to sort of live and retire.
Speaker A:You say you're moving lock, stock and barrel.
Speaker A:That's fully.
Speaker A:If you die tomorrow, we'll have 40% of it.
Speaker A:And it's like, wait, I come from a country without inheritance tax.
Speaker A:Like, you serious?
Speaker A:So you have to understand the mindset.
Speaker A:Imagine you come from a country that doesn't have this tax, and now you're being told just by coming here for a year, you'd be like, I'm not taking that risk, man.
Speaker A:I mean, that's like 40 of my.
Speaker A:That's not like 10, you know, got two young kids.
Speaker A:You know, if I die suddenly, I will need them to have as much money as possible.
Speaker A:Or, you know, and that's the mindset you need to run it through.
Speaker A:It's like, you know, would you do that?
Speaker A:You come from a country that doesn't have it.
Speaker A:You know, my experience with tax is everybody loves taxing tax until it affects them.
Speaker A:You know, it's.
Speaker A:Suddenly the conversation changes when you say to someone, well, actually, it's going to affect you.
Speaker A:What?
Speaker A:This tax is outrageous.
Speaker A:You know, why am I, you know.
Speaker A:Anyway, perhaps I'm laboring the point, but I think, I think it's important that context.
Speaker A:To understand why these things get evolved and make sense to some extent, you know, that they, you know, people might say, oh, it's a loophole.
Speaker A:It's not a loophole.
Speaker A:Like, they're quite well defined things to encourage people to come.
Speaker C:Yes, there's reasons for them.
Speaker C:It's not a loophole for a sake of it of people, you know, have sat around a table and come up with, oh, we're going to look at the legislation and find some little way out of it.
Speaker C:No, there is a way out of it, because for a reason, on balance.
Speaker A:We would rather they came.
Speaker C:Exactly.
Speaker C:You want to attract those people and otherwise they are either going to stay in their home country or they're going to go to another country that attracts them.
Speaker B:Can I give an extreme example?
Speaker B:Because I had to do this, somebody who was like really political, for want of a better description, I explained that Joe Bloggs, and sorry, is extreme.
Speaker B:Joe Bloggs has 100 million excluded property trust, 800 million million.
Speaker B:And with that amount of wealth, you Know he does the right things.
Speaker B:He doesn't do anything to disturb the structure.
Speaker B:Today were he to die of that hundred million, we get zero today.
Speaker B:Zero after the 6th of April, screaming, this guy has gone away.
Speaker B:Well, today we're getting zero, okay?
Speaker B:He's gone away after the 6th of April, he's gone.
Speaker A:We're still getting zero.
Speaker B:You know, there's absolutely no difference.
Speaker A:And that's what's happening after the 6th of April.
Speaker A:This doesn't work anymore.
Speaker A:More.
Speaker A:Is that what we're saying?
Speaker B:Excluded property trusts, there are some grandfathering provisions.
Speaker A:So meaning grandfathering provisions means it's already in place before?
Speaker B:Yes.
Speaker B:As in you can't before the 30th of October probably, correct, yes.
Speaker B:So to the extent that things existed and they were done rightly, there is every possibility that they will, they will survive.
Speaker B:I think the best thing that can happen to you with an offshore trust, if you are the set normally offshore trust trust and you're in the UK to sort of die before the 6th of April this year.
Speaker B:So if you do die, then that trust is protected forever.
Speaker B:But if you don't after the 5th of April, from 6th of April, then we have to actually look at the new rules because they get a bit more complicated.
Speaker B:But if you die, everything's good with that trust.
Speaker A:But let's wrap that all together.
Speaker A:I come as a foreigner from the 6th of April.
Speaker A:I won't be taxed on my foreign income and gains for the next four years that I earn.
Speaker A:If I sell a business, if I sell a property, if I'm earning money overseas, I can bring it all in.
Speaker A:In great.
Speaker A:If I stay here for 10 years, then I get subject to inheritance tax.
Speaker A:So up until the 10 years an excluded property trust is irrelevant to me anyway.
Speaker A:It doesn't matter.
Speaker A:I'm not subject to our inheritance tax anyway.
Speaker A:If I die in year eight, doesn't matter.
Speaker A:I'm not going to be taxed here on anything that I don't own here.
Speaker A:So really we're just back to a simpler world that once you start crossing that line, unfortunately there is going to be a harsh decision.
Speaker A:But that's not today, that's in nine years time.
Speaker A:We may, unless the rules change, we may have a lot of foreigners leaving again.
Speaker A:Because certainly I could think of clients and people that would just say, I mean, that's a very expensive moment for me.
Speaker A:I've got one at the moment.
Speaker A:But who he's already been here 10 years.
Speaker A:So the people who are being affected now, he's Australian, American, British, One of the most brilliant people I've ever worked with, credible entrepreneur.
Speaker A:But, you know, obviously rang me up and already worked out.
Speaker A:So I need to leave Andy because it's my ninth year.
Speaker A:So if I stay here, I'm.
Speaker A:He's reasonably young, but he's in his mid-30s.
Speaker A:He's like, you know, it's not happening.
Speaker A:You know, I'm not, I'm.
Speaker A:I'm a fluid person.
Speaker A:I'm from lots of different countries, you know, I think that's the thing I've struggled to explain to some people and I'm like, yeah, it only applies to foreigners.
Speaker A:So think about.
Speaker A:Because people say, what about their national pride?
Speaker A:What about their national duty?
Speaker A:It's like, like they're foreigners, they're not British.
Speaker A:They didn't grow up here being brainwashed that we're the greatest country on earth.
Speaker A:You know, they are literally from.
Speaker A:Pick a country, they're from somewhere else in year 10 as a foreigner.
Speaker A:So imagine it from a British perspective.
Speaker A:We moved to France and in year turn in France, France is going to say, we're going to tax you anything.
Speaker A:And then people are saying, where's your national duty?
Speaker A:It's like, I'm British.
Speaker A:I mean, I literally hate you guys.
Speaker A:No, I mean, I'm just giving silly examples, but as in, that's the interesting thing.
Speaker A:That's why I think, if I'm honest, I don't think that's a very smart move.
Speaker A:I think it's much clearer that it's based on resonance.
Speaker A:But, you know, I'm not sure about someone who's foreign on what they'll do.
Speaker A:It might be better to tape it.
Speaker C:Yeah, maybe.
Speaker C:I don't know.
Speaker C:I.
Speaker C:I do think there's also this practical side that we're not considering with the four years timeline and also, also to an extent with the 10 years thing, people will come to the UK, they're going to bring their kids, they're going to put them in school, they're going to have a job here, you know, they're going to be settled here, they're going to have friends here.
Speaker C:I don't know, you're going to put down time.
Speaker C:And as much as, as tax advisors, we can say, okay, at year X, maybe think about leaving.
Speaker C:There's this emotional connection at that point to the uk.
Speaker C:Are they then going to leave or are they going to stay?
Speaker A:Are they going to rip their kids out of school?
Speaker A:Are they going to break their friendships?
Speaker C:Especially if they're young, if they're in.
Speaker A:Their 30s, where the chance of Dying, hopefully is low.
Speaker B:Anecdotally, the suggestion is that the people who are leaving now are probably those in their 60s.
Speaker B:The younger ones are thinking, I have enough time to consider how things are going to pan out over here.
Speaker B:Maybe I should just stay a bit longer.
Speaker A:Now what the government needs to do is get some assassins, go out there, look for the billionaires and just stop.
Speaker C:Picking them up, give ideas.
Speaker A:I mean, I'm just saying yesas could make a lot of money for the government.
Speaker A:I mean, yeah, yeah, yeah.
Speaker A:You know, it's like, oh, I've just passed my tenure, I know.
Speaker A:Too many people being picked out out.
Speaker A:Just get that guy with that tax return game, Tony, you know, we brilliant at it.
Speaker A:Anyway, I really appreciate both Gemma and Jeremy, the two J's taking.
Speaker A:Taking the time to try and explain this quite complex topic.
Speaker A:I think there is an opportunity here and for those who this conversation hasn't made much sense.
Speaker A:We're of course available whenever you need us or go and talk to your own tax advisors about it and I think this is.
Speaker A:Is there anything further you feel is important to add?
Speaker A:Anything we've missed?
Speaker B:I think, despite what people say, I think it is a good thing getting rid of the remittance basis rules and that non dom concept.
Speaker B:I think it's really, really good.
Speaker A:It's a tax simplification.
Speaker B:Yes.
Speaker A:And we don't get that as often as we're supposed to.
Speaker A:Any final words?
Speaker A:Gemma?
Speaker C:This is going to sound like a legal thing, so I'm really sorry, but it's also very specific to different people.
Speaker C:So certain people will be from countries that have tax treaties with the uk, their rules will be different to what we have.
Speaker A:So great point.
Speaker A:People forget, again, it's an international gain tax and often people can be resident or subject to multiple tax systems and the tax treaties help you govern that.
Speaker A:So therefore we can talk what we want about the uk, but every individual situation has to be looked at and you've got to look at both sides of the fence.
Speaker A:You know, there can be completely separate set of rules on the other side of the fence.
Speaker A:Thank you so much.
Speaker C:Thank you.
Speaker A:That has been tax without and I hope it's made some sense.
