Plan your exit strategy to avoid tax penalties

Expats are all destined to leave the UAE. The question is: feet first, or sitting upright.

If you’re an expat and lucky, it’s a planned affair – with your next home and phase of life set and settled. But this is not always the case. There are infinite reasons that can bring about a more hurried exit.

And so because of this, and even if you never plan to go back home – wherever that may be – it’s wise to plan for just that: re-entry to your country of origin, or in the case of more complex ethnicity mixes and multiple passport holders, wherever you have the right to reside, no questions asked. When I say plan, I mean know your facts, your rights and your options. This is a continuous process as laws and circumstance change.

One major issue is that of tax. It can be that if you must leave in a hurry, you end up losing out on expat savings – and having to pay hefty tax bills – because you were unaware of an easy to implement requirement.

Just imagine – all that saving gone to waste.

Your probable knee-jerk reaction if you’re considering mitigating this risk is to reach out to the all-knowing financial adviser – with briefcase full of solutions catering to every eventuality.

If your nationality allows you any tax planning, they’re sure to whip out an appropriate product. But before you get swept up in tax avoidance frenzy, remember, most of us are not talking about the need to shelter millions, and so don’t need to stray into any celebrity-style planning.

Think why you’re doing this. Is it a matter of principle? You have a right to money saved during your expat stint – and come hell or high water you will not be handing any of it over.

Or is it because you want to retain as much of your hard-saved expat wealth as possible? In which case, look at all the fees involved, add them up, make sure you compare this cost with any tax you’d pay if you didn’t buy into the plan.

I had a long conversation with tax adviser, Moniza Syeda of about fact and financial fallacy. Her UK clients mainly want her to ring-fence offshore money, and investors ask her to structure UK property holdings to generate rental income, sometimes doubling up as holiday homes, to avoid UK taxation on the gain.

She states the obvious: there is no one size fits all solution to this sort of tax planning – her advice is to pay for information that is tailored to the specific situation, and where the person giving it is liable, ie if they give you the wrong information you have redress.

She also tells me that one of the biggest and most unfounded fears that returning expats have is that they will get taxed on everything.

This is probably why the tax (avoidance) seminars I attended in the UAE were heaving – helped by healthy doses of fearmongering titles that included words like “tax grab” and told us our assets and pensions are at risk.

Yes, laws change. But it’s about finding out what applies and what doesn’t, and then structuring finances and certain decisions like travel dates and durations of stay. Ms Syeda also gets involved in this side of things and explained that “Sometimes it can be surprisingly easy to avoid UK taxation entirely by simply adjusting travel dates by a couple of weeks”.

Yes, it is scary isn’t it? To think that an innocent decision – say to do with when a ticket is booked or when money for a certain asset is actually paid out – for example shares or property – could mean the difference between tax-free capital versus taxable gains or income. And that’s if you continue to live as an expat. If you need to or want to go back home, it’s more of a minefield. And it can be an expensive one.

My big takeaway from having explored the “how do I deal with tax if I return?” issue is this:

• Don’t be scared. Know your facts.

• Don’t let advisers sell you solutions – unless you really need them. Every single financial adviser I spoke to told me I need a tax-wrapper. I mentioned this to another actual tax expert who said he’d never heard of such a thing.

They’re also called an offshore investor bond, and just in case you do get offered one, let me explain: money is put in an offshore wrapper or bond.

Yes, it means that various investments are under one umbrella (note although not all investments can be included, so check what the platform allows you to do this) – this is a big selling point for them: less admin for you.

Charges are incurred, and these may change. Tax is due on any earnings generated by wrapped up investments after returning to the UK. A maximum of 5 per cent of the capital invested can be withdrawn tax-free in any one year.

In other words, it will take 20 years to access the initial capital. That’s a sufficient turn-off for me personally.

Fact: British expats don’t pay tax on capital accumulated during expat life. A hundred per cent can be repatriated upon return, and will not be taxed.

This money can be invested – tax will be due on whatever it generates, in accordance with local law at the time.

Add to this that we don’t know what future tax laws will be, or what future charges can become for the offshore platform.

Remember, no one knows what the future holds for any of us. The same applies to tax laws: we just don’t know what could come about. So make it simple: pray you exit your expat home sitting upright and toasting the view, and simplify your financial planning so that you can enjoy the next phase of life.

Nima Abu Wardeh describes herself using three words: Person. Parent. Pupil. Each day she works out which one gets priority, sharing her journey on

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