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"Tim, I have decided to leave Dubai regrettably and anticipate returning to the UK by the end of the year. I have money that I want to take back but am worried about paying tax on it. How do I get around this problem?" - Tony

 

Read on for Tim's answers.

 

Tony, remember when dealing with any tax authority that you should avoid such terms that could upset their attempt to squeeze every drop of blood from you. It is clear that tax authorities from around the globe are tightening the nut and casting their nets much wider in an attempt to extract every bit of revenue they can. That said, if you play by the rules then they are generally an understanding bunch.

It sounds like you have been misguided, like many, that taking money back home will incur a tax bill. This is not the case since you only pay income tax on that capital when you put it in a bank account and in turn it starts to earn interest. This interest is considered income and would be added to all your other income sources in order to determine which band of income tax you will be charged. So if you are to send the money home for deposit or indeed to purchase a property; go ahead. Also remember, that as a non-resident there are no Capital Gains taxes either.

Traditionally, expats would leave money in an offshore account when they returned home safe in the knowledge that the taxman would be none the wiser. This is no longer the case and the EU Savings Directive dictates that either your bank declares what you have to your tax authority or you elect to pay between 18 – 35% withholding tax. This includes offshore locations like Channel Islands, Isle of Man and Switzerland to name but a few. The key point here is that this affects those who reside/repatriate in the EU so if your home is outside of this then you are OK. One way of leaving your money offshore is to place it in Trust, Investment Wrap or to establish an offshore company to hold your monies. This requires more complex explanation and you should take further professional advice before opting for this solution.

Timing your return is another consideration since you could expose yourself to income taxes in the existing fiscal year. If you could delay your repatriation until the beginning of the new tax year then you would limit this risk. Hopefully, you have completed a P85 which tells the taxman you have gone overseas and lists your assets at that time. On your return, you should fill in a P86 to let him know your home ideally detailing everything (omission of details will upset them too!). It would certainly make a lot of sense to get some advice before you go home since the tax benefits of being an expatriate are rarely exploited to their maximum benefit. This is a rare occasion where you can determine the amount of tax you pay unlike your resident counterparts back at home.