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Part 2: What to do with your assets abroad?

Simon Cahill19 April 2021

This article is part of a series. Please scroll to the bottom of the page to see all the articles in the series.

In this section, we will discuss assets which you have accumulated whilst offshore.

You will learn about:

  • UAE property
  • Investment accounts which you manage yourself
  • Investment policies which you were advised to take out
  • Overseas pensions

Each individual’s situation is different. This guide is intended as a generic guide which highlights good practice relevant to the majority of individuals who are due to repatriate back to the UK from the UAE. It should not be taken as individual advice.

All returning expats would benefit from speaking to a UK based tax adviser regarding their specific situation prior to repatriation.

What to do with your UAE property?

UAE Property

If you have purchased a property in Dubai or Abu Dhabi at any point in the last few years, the unfortunate likelihood is that it may be worth less now than when you purchased it.

Things to consider if you choose to sell:

  1. The UAE property market has consistently declined in recent years.

  2. Whilst you may be undergoing a capital loss by selling now, it is difficult to know what the situation may look like in the future.

  3. Given the continuous building there appears to be in the UAE and the huge oversupply of housing, it is possible that the market may continue to decline for many years. Such is the risk of investing in less developed markets.

Things to consider if you choose not to sell:

  1. If you do not sell your UAE property before repatriating, as a resident of the UK, there is also the consideration of a potential income tax liability on any rental income you receive from your overseas properties (UK income tax will be covered in greater detail in Part 4 of this series).

  2. That said, certain planning opportunities do exist so it is worth considering all angles and not rushing into a decision.

Bayut.com has a good guide on selling mortgaged property in Dubai and lists out the steps you should follow.

If your property has increased in value:

Of course, there is the possibility that you may have made money on your UAE property!

If this is the case, it may be in your interest to consider selling before you repatriate so as to avoid any potential future capital gains tax liabilities.

The amount of time you have spent offshore will be relevant here so again, be sure you take the appropriate advice before acting.

Investment accounts which you manage yourself

Investment accounts If you hold your own investments through a self-managed investment account which you have taken out whilst offshore, you will need to consider your position.

Again, this is something which you should take advice on from a tax perspective as situations will differ.

The general rule:

  • The general rule, depending on the length of time you have spent overseas, is to sell your assets before you repatriate.
  • The reason for this is to avoid a potential capital gains liability (assuming you have made gains!).
  • You will not be taxed for realising the investment gain whilst resident in the UAE, but you may be liable if you still hold it after returning to the UK and realise it at a later date.
  • Sell the investments, move home with cash, and consider the tax wrappers you have available to you as a UK resident (see Part 7 of this guide) before reinvesting.

    This is a general rule and therefore not applicable to all expats. The time you have spent offshore may affect your liability to capital gains tax. Book a call to discuss your situation before disposing of assets if you are unclear on your personal situation.

Investment policies which you were advised to take out

Investments

What are these products and why do they exist?

The UAE is unfortunately rife with “advisers” who recommend investments held via insurance companies such as Zurich, Friends Provident, Generali (now Utmost), Old Mutual (now Quilter), Hansard and others.

These can come in the form of regular savings contracts or lump sum investments.

Regular Savings Contracts

In my experience, if you have one of these products, there is usually only one reason: commission.

This guide is not the platform to express my feelings about these vehicles, but the reality is that if you still hold one of the regular savings policies, you will have some level of exit penalty attached to it if you were to surrender.

These products are purposefully opaque. If they weren’t, no one would buy them.

The costs make it extremely difficult to achieve growth, although most people are unaware of these costs. I spent 4 years dissecting these products and explaining them to clients who regrettably had been mis-sold to.

These types of policies were outlawed in the UK years ago, when commission in financial services was also banned. Consequently, most UK advisers who have not spent time overseas also struggle to understand them.

Step 1: How to identify if you have a regular savings contract

  • You are contractually required to contribute to the policy on a monthly basis (though there may be an option to take premium holidays)
  • It is provided by an insurance company, such as the companies named above (others do exist)

Step 2: What should you do?

  • Seek professional advice - not from the person who sold it to you. Whilst you may trust this person, the fact that you have one of these products suggests you shouldn’t be asking them for financial advice
  • Speak to a UK based adviser, ideally before you repatriate

If you have one of these types of products and are unsure what to do, please book a call.

Lump Sum investments

When it comes to lump sum investments, if you have taken advice in the UAE, you are likely to have what’s called an ‘offshore bond.’

Step 1: How to identify if you have an offshore bond

  • The provider is an insurance company, such as one of those mentioned above
  • It required you to pay in a lump sum at outset
  • You do not make a regular payment into the product

There is nothing inherently wrong with these policies. The problem is how they are used and sold offshore involving heavy upfront (and often hidden) commission to the “advisers”.

If it comes with an exit penalty, you paid a commission.

Simple as that.

There may be other costs inside which you could be unaware of. Hidden commissions for any structured products and trail fees on funds to name a couple.

Step 2: What should you do?

  • There is unfortunately no general rule for what you should do with these investments before repatriating.
  • Your personal situation, the length you’ve held the investments and many other considerations will all be a factor.
  • It is imperative that you take advice from a UK based tax adviser and a UK based financial planner before repatriating with these policies.

Overseas pensions

If you have a Qualifying Recognised Overseas Pension Scheme (QROPS), these are the things you need to know:

QROPS

  • If you are returning to the UK with a QROPS, you are not obligated to transfer it to a UK scheme.
  • You will be able to withdraw income from your QROPS whilst resident in the UK if you wish to.
  • You are however required to inform the QROPS provider when you have returned to the UK.
  • If you are at pension age and then take income from your QROPS, the income will be subject to the tax rules in the UK as well as the tax rules of where the pension is domiciled (usually places like Malta, Isle of Man and Gibraltar).

What should you do?

It is vital that you seek financial advice around the double tax treaties in place with the UK and avoid paying more tax than you need to. There are many factors which need to be taken into account as to the best course of action for you personally and this is where UK financial advice is key.

You may wish to consider switching your QROPS into a UK scheme as not only is it likely to be cheaper, it will also ensure that you are only subject to UK tax rules. However, this may not be the best option for everyone.

If you have exceeded the UK lifetime allowance, currently £1,073,100 (2021/22), you could face a hefty tax charge on the excess for switching schemes.

Whether you have an overseas scheme or a UK scheme, if you have started drawing income whilst abroad, you will be liable to income tax on the income after returning to the UK. How you draw your income in retirement should be at the centre of your financial planning in order to minimise your ongoing tax liability.

For those who will still be working after returning to the UK, it is likely that you will wish to pay into your pension to ensure you benefit from tax relief. If this is the case, a QROPS may not be suitable and you will most likely need to consider alternative schemes.

Conclusion

Providing generic guidance on what to do with assets abroad can be quite difficult due to the varying personal situations, assets, and rules which exist.

The key as mentioned in Part 1 is:

  1. Start planning early to give yourself time to decide on the best course of action;
  2. Seek the appropriate advice where necessary. A UK based tax adviser who understands the international market (most don’t!) is essential, as well as thinking ahead and seeking advice on your overall financial planning.

If you have questions on any of the content in this guide or believe that you would benefit from taking advice, you can contact me here.

Part 3 of this series will look at UK bank accounts and UK property.

Part 1: How to successfully leave the UAE

Part 2: What to do with your assets abroad?

Part 3: UK bank accounts and property: the 6 expat scenarios

Part 4: UK tax: 8 points which could save you money

Part 5: Retiring to the UK: 4 areas which you need to consider

Part 6: You’re back in the UK: 6 things you need to organise

Part 7: Financial advice in the UK. Do you need it?

Important information

Circumstances vary for individuals and any personal opinions or firm opinions represented above should not be seen as advice or a recommendation to take any specific course of action.

We are not tax advisers. The value of an investment, and any income from it, can fall or rise. Investors may not get back the full amount they invest. Past performance is not a reliable indicator of future results.

Personal opinions may change and should not be seen as advice or a recommendation. This post is based on current legislation as at the time of writing, which is subject to change and will not be kept up to date. This document is for UK retail investors.

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