Taxman targets overseas homeowners
The Revenue is getting tough with thousands of people who have bought abroad. By David Budworth. HUNDREDS of thousands of families with overseas homes face greater scrutiny from the taxman after the government launched a crackdown on foreign property last week. Revenue & Customs thinks that many families are using their overseas homes to dodge inheritance tax and has warned that people could face prosecutions and fines if they fail to declare them properly.
Even families that have settled overseas could face an official probe: while most imagine that once they have emigrated they are safely out of the clutches of the UK taxman, the truth is that many will still have to pay inheritance tax (IHT) to the British authorities. Anita Monteith at the Institute of Chartered Accountants in England and Wales said: “If you have inherited foreign property and not declared it, the Revenue is saying we are coming after you. Even if you have failed to pay the tax accidentally you should be worried.” About 250,000 British residents own property overseas, according to the Office for National Statistics, and a growing number are moving abroad permanently. About 200,000 Britons emigrate every year. One in five of us — nearly 10m adults — is considering fleeing the country for a new life in foreign climes, according to a recent poll by researcher ICM, and Britain’s high taxes and soaring cost of living are the prime motivations. David and Susan Le Cuirot from Fleet, Hampshire, are typical. They plan to retire overseas after buying a three-bedroom villa near Paphos, Cyprus. David Le Cuirot, 49, an IT consultant, said: “I’m disillusioned with Britain and don’t think it has anything to offer in retirement. “I can run a house in Cyprus for £1,200 a year, which wouldn’t pay half my council tax in this country.” There is widespread confusion about how British income, capital-gains and inheritance tax apply to foreign property, however, as shown by the government’s latest crackdown. UK inheritance tax, which is levied at 40% on assets above £285,000, will apply to your worldwide assets, including your home, for as long as you remain “domiciled” in the UK. The law says you normally take the domicile of your father, and it is extremely difficult to revoke it even if you emigrate (see below). Justin Rix at Grant Thornton, an accountancy firm, said: “It’s a common misconception that if you move overseas permanently you are no longer liable to UK inheritance tax. “Even when you are living in a foreign country, your family may be subject to British inheritance tax on your death.” And tax officials are getting tougher. In a newsletter to tax advisers last week, they warned: “For the remainder of 2006 we will be paying particularly close attention to foreign assets. Where it appears the accountable people have been negligent we will consider whether a penalty is appropriate.”
Even families that have settled overseas could face an official probe: while most imagine that once they have emigrated they are safely out of the clutches of the UK taxman, the truth is that many will still have to pay inheritance tax (IHT) to the British authorities. Anita Monteith at the Institute of Chartered Accountants in England and Wales said: “If you have inherited foreign property and not declared it, the Revenue is saying we are coming after you. Even if you have failed to pay the tax accidentally you should be worried.” About 250,000 British residents own property overseas, according to the Office for National Statistics, and a growing number are moving abroad permanently. About 200,000 Britons emigrate every year. One in five of us — nearly 10m adults — is considering fleeing the country for a new life in foreign climes, according to a recent poll by researcher ICM, and Britain’s high taxes and soaring cost of living are the prime motivations. David and Susan Le Cuirot from Fleet, Hampshire, are typical. They plan to retire overseas after buying a three-bedroom villa near Paphos, Cyprus. David Le Cuirot, 49, an IT consultant, said: “I’m disillusioned with Britain and don’t think it has anything to offer in retirement. “I can run a house in Cyprus for £1,200 a year, which wouldn’t pay half my council tax in this country.” There is widespread confusion about how British income, capital-gains and inheritance tax apply to foreign property, however, as shown by the government’s latest crackdown. UK inheritance tax, which is levied at 40% on assets above £285,000, will apply to your worldwide assets, including your home, for as long as you remain “domiciled” in the UK. The law says you normally take the domicile of your father, and it is extremely difficult to revoke it even if you emigrate (see below). Justin Rix at Grant Thornton, an accountancy firm, said: “It’s a common misconception that if you move overseas permanently you are no longer liable to UK inheritance tax. “Even when you are living in a foreign country, your family may be subject to British inheritance tax on your death.” And tax officials are getting tougher. In a newsletter to tax advisers last week, they warned: “For the remainder of 2006 we will be paying particularly close attention to foreign assets. Where it appears the accountable people have been negligent we will consider whether a penalty is appropriate.”
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