The Finance

Expatriate tax and finances

UK Non Residency Status

A case has just been decided in favour of HMRC which, if it stands following appeal (which it probably will be) could fundamentally alter the rules on UK residency for people who rely on the 90 day rule.

Instead of disregarding days of arrival and departure, the commissioners have ruled that it should be nights spent in the UK which determines a “day” for residency purposes. 

So, for example...  Someone who comes to the UK on a Monday and leaves on a Wednesday each week under current rules only has 1 day in the UK (Tuesday).  Under this interpretation they would have two days (Monday and Tuesday).

Our clients do not travel back and forth so frequently but an extra day or two in each rotation back in the UK could impact their residency status. 

What is worse is that the rule is being applied retrospectively (to 1993 in this case).

The defendant, Robert Gaines-Cooper has long been living in the Seychelles, but traveling to the UK for his full allowable amount each year, relying on travel dates not being included, this case drastically alters this common mis-conception. His claim was that he only spent 78 days in the UK, the HMRC managed to prove with the new rule, that in fact he spent some 128 days in the UK.

This is all part of the wider scheme by the Chancellor to plug a £3.5 billion hole in his budget, with expatriates proving to be a soft target with no clear political voice in the UK, it is now more important than ever to pay close attention to your financial and tax status if you are a UK citizen.

Keeping your time in the UK to a minimum and ensuring that you bank with the appropriate offshore body will ensure that your money and your information remains private, and out of the hands of the HMRC.

 

Foreign Exchange

The war of words between banks and consumers for unreasonable charges has now extended into an area that all expatriates are familiar, and frustrated with, foreign exchange.

Banks are known to levy fees of up to 4% for a forex transaction, offering well below market rates and sometimes even additional charges on top of their highly priced structures.

This has given rise to the private exchange houses, sometimes as small as a single independent professional currency broker who charge as little as 0.8% as opposed to the whapping 4% currently experienced.

Whilst this sort of tactic is no news to anyone living in Nigeria where bank rates and street rates on the Naira offer a significant gap, expats often pay less attention to what is happening to the funds that they send home through the “legitimate” banks.

In the face of an ever sliding USD it has become more important than ever for expats to pay close attention to the international currency markets. Those seeking to move funds back home for special purchases, or abroad for that holiday home, need to look at all the options available to them before giving thousands to the bank for no clear reason!

If you are seeking further advice or pointers on future major currency fluctuations, get in touch with your financial adviser or professional broker for ways to save on these transactions.

 

State of US$

In recent days the US Dollar has once again weakened dramatically. The exchange rate has moved decisively above 1.3000 against the Euro and above 1.9000 against sterling propelled by concerns about weaker economic growth in the US and fears that Asian Central Banks who have amassed huge US dollar reserves will reduce the proportion of reserves they hold in the US currency.

Several commentators now expect the dollar to hit 2.0000 to the pound, possibly before year end. 

For expatriates and others holding or paid in US Dollars this is bad news as the value of their savings and earnings decline when measured in other currencies.

Some may wonder if it isn't too late to sell US Dollars and indeed it is possible that if the US economy shows signs of improvement and if the concerns about Asian Central Banks' diversification of their reserves prove to be overblown  then the dollar could strengthen again.

Right now though, and bearing in mind that it is impossible to predict these things with any accuracy, it seems that the risk is for the dollar to weaken further and it would therefore seem to make sense for expatriates holding dollars but who will at some point be moving those funds back home to use any short term strength in the US currency as an opportunity to sell some of their dollars and buy their home currency instead.

HSBC

Do you bank with HSBC International? 

Further to my last piece on high street banks having their “offshore” account compromised, HSBC has decided to make a further attack on its own client base by introducing a whole range of pricing structures that will occur in the next few weeks.

At present, the required minimum balance to avoid a £15 monthly service charge is £5,000. Some clients are exempt from this if they hold a mortgage or investment product with the bank.

As of 01 January 2007, the required minimum balance to avoid the monthly service charge will be raised to £25,000. At the same time, the service charge itself will be raised to £20 a month.  Consequently, unless you can maintain a balance of over £25,000 in your HSBC International account, you will be charged up to £240 (US$ 450) per annum for the pleasure of banking with them!

Additionally, mortgages no long appear to give exemption, although certain investment products do, and it would seem the new rules also apply to HSBC International offshore savings accounts; even if you do not hold a current account. Which when combined with not even guaranteeing your financial privacy, means that such accounts are no longer an attractive option!

In Conclusion

If anyone requires further information on any of these articles please get in touch and I will be more than happy to provide some pointers. Please do remember though, that these articles do not constitute formal advice and the author cannot be held responsible.

The next piece will contain information on savings and investment vehicles that are available to expatriates, and how to take advantage of them to make your time overseas as profitable as possible.

All future correspondance with be handled directly by the author. We will have no involvement in your financial matters or queries.