“Self-made” expats, who do not enjoy the support of an HR department, often have to cut through the “red tape” on their own. This week’s guest author, Florian, gives a few helpful pointers on what to keep in mind when you try to figure out bureaucratic issues.
Nowadays, finding a flatmate, trendy restaurants, good clubbing venues, or a like-minded community has become the easy part of the relocation process. Social media and websites are certainly responsible for this major shift (bravo, InterNations! :)).
By contrast, bureaucratic burdens remain a drag, irrespective of your destination. Despite similar past experiences in Switzerland, Italy, and the US, it took me almost one entire year before I felt comfortable with the administrative environment of my new home: London.
This brief guide to relocating to the UK should not be considered a legal advice or a substitute for professional assistance. On the contrary, this is a mere testimonial, so to speak, a chapter in my life story, though admittedly, I came across many of these pitfalls through my professional practice as a lawyer.
The points below are not one-size-fits-all suggestions, but mere food for thought when you prepare your own move.
1) Immigration: The UK is a member of the European Union, and so EU citizens benefit from the fundamental freedom of movement for all people. So there is no need to apply for a visa or any permit beforehand.
If you are not a national of an EU member state, however, you will often need a visa. One word of advice: Investor visas, though quite popular and certainly an important category, are not as easy to get as some relocation companies tend to advertise them.
In any event, investor visas are quite expensive. You can simply forget about this option if you are not ready to invest at least GBP 1million.
2) Residence versus domicile: Residence and domicile are two different legal concepts.
Residence is a concept based on physical presence in the country. Residence is thus factual and objective. Local authorities can apply a statutory residence test, which takes into account both the amount of time spent in the UK and any other ties with the UK.
On the other hand, your domicile is a more subjective concept. In that regard, your long-term intentions (e.g. for staying and settling in the UK) are decisive. A wide range of evidential factors may be relevant.
Why is this important, though? It is always essential to analyse a resident’s domicile carefully, as it has an effect on their financial burden under the three main direct taxes in the UK (income tax, capital gains tax, and inheritance tax).
3) Speaking of taxes: The tax system, known for being quite harsh on high-income earners (top rate amounting to 45%), is in turn highly beneficial for individuals who became resident in the UK without becoming domiciled there.
Non-domiciled residents in the UK are entitled to a more favourable system of taxation, provided they claim what is known as the remittance basis of taxation. In this case, their foreign income will only be subject to taxes in the UK if they transfer – “remit” – it to the UK.
The advantage of the so-called “Res Non-Dom” status is well-known among the expatriate community. However, the fine prints, and the distinction between the remittance and arising basis in particular, are also an abundant source of misconceptions.
One of the most persistent urban legends I came across is that, as a “Res Non-Dom”, you do not have to do or report anything to the UK tax authorities in order to enjoy the benefit of this status – not even complete a tax return! This is completely wrong. If anybody tells you this, you should not put too much trust in their tax advice…
4) Accommodation and council tax: Any resident in the UK is subject to a council tax, levied by the local authorities (borough). Every accommodation is assigned to a so-called “band”, which corresponds to a tax range.
5) Marriage and divorce: You will probably hear at some point that the UK is a good place to get married – but not to file for divorce. You should actually give some credit to this popular wisdom!
English law offers interesting possibilities and large leeway when it comes to enter into customized marital agreements. If you think about tying the knot, don’t neglect the legal practicalities amidst your whirlwind romance!
6) Succession & wills: Succession under common-law jurisdictions (like the UK) and the same under civil law jurisdictions are two completely different animals. The latter offers much less flexibility.
Thus, expatriates with a considerable fortune should consider executing several wills, covering different assets, depending on their location.
7) Doing business: Moving to the UK will also have an impact on the way you do or organise your business. It will be privotal to ensure that any foreign companies are centrally managed and controlled outside of the UK.
The reason? UK tax authorities will treat a non-UK incorporated company as being tax resident in the UK if it is centrally managed and controlled from within the UK. And tax residents – both people and legal entities – are again subject to UK taxation!
8) Insurance: The UK has developed a very sophisticated and competitive insurance market. You can have virtually every aspect of your life insured, ranging from your health to your favourite shirt, at very competitive prices.
This might explain why life insurance coverage is very often used as an efficient tax-planning tool, as a convienent way to set off inheritance tax liability upon death.
“Home is where the heart is,” or so the more romantically minded say. However, relocation to a foreign country is a life-changing event: Although those areas and aspects described above are definitely less romantic than just enjoying the ambience of a new place, they do need to be taken care of.
Once you have dealt with the practicalities, you can relax and feel truly comfy. Then your heart will also feel at home in a new country or city – especially one as great as London!
Florian Rochat is currently practising as a lawyer in London at a major law firm. He has been advising individuals and companies on business law for more than a decade (previously in Switzerland and in New York City). He also knows where to eat a decent Swiss cheese fondue in every country he has ever lived in!
(Photo credit: 1) The “Gherkin”: Florian Rochat 2) St Paul’s at Twilight: Florian Rochat 3) Routemaster Bus, Piccadilly Circus: Andrew Dunn, 2005 4) Big Ben at Dusk: Andrew Dunn, 2004 5) Underground Sign at Westminster: Public Domain)