Brits jumping ship likely to cop inheritance tax bill in foreign climes

Britons leaving the UK to live a new life in the latest property hotspots could face huge financial disadvantage in the years to come if they don’t plan according to the inheritance tax laws of their new home, warns wealth manager and IHT planning specialist the WAY Group.

As well as disillusioned workers relocating abroad for a more relaxed and prosperous way of life, the number of pensioners making plans to retire overseas continues to rise.

Of an estimated total UK population of 12.2m pensioners in 2010, 9.8% are predicted to leave the country to spend their retirement abroad. And by 2050, this figure is expected to reach three million.*

“Whatever your age and wherever you’re going, it’s vitally important that the issue of inheritance tax planning is addressed before you leave the country,” says WAY Group’s Paul Wilcox.

“Every country has its own rules affecting IHT and the result of an altered domicile status without a tax mitigation strategy could be financially disastrous.

“We are now seeing countries like Turkey attracting more Brits as permanent residents – but this is a territory with incredibly complex, family orientated IHT planning laws, and retirees could seriously lose out if they do not take expert advice,” he adds.

The two-pronged appeal of low cost air travel and new players in the affordable overseas property market has opened up the choice of destinations for emigrating Britons way beyond steady favourites Spain and France.

With its high standard of living and positive attitude to attracting foreign investment, Dubai is the latest country to become a retirement hotspot for UK citizens. Morocco is another newcomer to the most popular destinations for the exodus of over 60s from the UK, thanks to its constant climate, proximity to Britain and new budget airline routes.

And Turkey’s booming property market has also seen a huge surge in popularity with UK buyers wanting to pass on sizable sums in equity to the beneficiaries of their wills. It’s also likely that in the future some of the Britons who have bought in countries such as Bulgaria, Croatia and Cape Verde will move to their holiday home properties permanently.

“Spain and France remain top choice for a retirement destination but IHT rules in these countries are well known to be punitive for expat Britons,” says Wilcox.

“If a couple retire to Spain to live in a jointly-owned property there will almost certainly be a very costly ISD charge (Spain’s version of IHT) upon the survivor when the first dies.

“Cyprus, on the other hand, with its historical links to Britain and benign tax regime, has no inheritance tax whatsoever which creates a very different scenario, although the country’s succession laws that restrict the disposal of assets after death can still lead to financial disadvantage.”

Rules can be complex and personal circumstances are viewed differently depending on the laws of the country, for instance whether you are married or not. Regardless of where you are going, it’s vital that all your assets are taken care of with an appropriate IHT mitigation plan.

The WAY Group offers an extensive range of IHT mitigations solutions designed to meet most scenarios, from HNW individuals to those on more modest retirement incomes. These are constantly reviewed to keep one step ahead of any changes to taxation laws that might adversely affect UK taxpayers, wherever they reside.

“It’s vital to be aware that wherever you go and whatever tax regime you may be affected by in your new country of residence, you may still incur IHT within the UK as well, possibly on the same assets,” Wilcox adds.

“And whilst there are double taxation treaties between the UK and many preferred destinations for those emigrating, they often exclude concessions on IHT.

“Although the UK authorities may allow ‘unilateral relief’ against any IHT paid elsewhere you may be hit with the double whammy of having to pay tax twice because of your domicile status.

“For anyone planning to emigrate, the message is money, tickets, passport – IHT mitigation plan.”

Incorporated in 1996, The WAY Group is a privately owned financial services group.

The founders of the company include ex-independent financial advisers who specialised in offering portfolio management services to private and corporate investors.

They have combined their experience and skills with a number of ex-institutional fund managers to design, construct, oversee and market, suitable portfolio solutions to the IFA marketplace. The ethos and approach to product design continues to reflect an appreciation of the requirements of IFAs and their clients.

For further information about The WAY Group products and services please call 01202 890895, or visit www.WAYinvestments.co.uk

* HM Revenue & Customs (HMRC) June 2008

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BDS ties up with Simply Off Plan

The BDS Mortgage Group is offering its appointed representatives (ARs) access to UK and overseas property firm Simply Off Plan.

Simply Off Plan Ltd offers investment opportunities linked to high-end developers. Many properties are exclusive to Simply Off Plan Ltd and are offered with discounts from retail value.

ARs will receive free training and marketing support and in addition, they will be provided with an online link to add directly onto their own website or opt for a stand alone white label version of Simply Off Plans approved website template.

Bob Hope, sales and marketing director at BDS, said: “BDS has a reputation for offering its members added value across the board and this has never been more important. The Simply Off Plan opportunity is so good it practically sells itself. They are experts in their field and are offering generous commissions, superb and proven service along with marketing support and properties that are exclusive to them.”

Jo White, managing director at Simply Off Plan, said: “I am delighted to be making the Simply Off Plan proposition available to the BDS Network as initial feedback is really positive. There is a genuine appetite for services that earn decent commissions and ours is an excellent sales opportunity for both new and existing clients – in fact I have already booked three appointments.”

Conti launches remortgaging service

Conti Financial Services, the UK’s leading overseas mortgage specialist, has launched a remortgaging service to owners of overseas residential property in 15 countries across Europe, Africa and the USA.

Remortgaging an overseas property can help to pay off UK or foreign debt, finance further property investment or possibly reduce one’s future inheritance tax liability. Conti says it also offers an alternative to people who feel under pressure to sell their property abroad because of the current “credit crunch”. The strong euro means demand for European property has decreased, so owners are finding it more difficult to cash in their asset. One solution is to remortgage their property in Europe, where interest rates are lower, and use the currency-boosted proceeds to repay debt in the UK.

This is the latest development in Conti’s expansion plans for 2008. It already has 14 years’ trading experience in offering expert packaging services for loans secured against overseas residential property, and can arrange finance on holiday homes, investment and retirement properties in over 45 countries, with more than 225 mortgage products currently available.

If someone owns a property in any of the countries below, and that property has no existing mortgage debt, or has an existing mortgage but the property has increased in value since it was purchased, they may be able to remortgage in order to raise funds through Conti.

Conti says that the biggest reasons for people to remortgage their property abroad (other than for home improvements) are:

  • To repay existing debt in their home country by releasing equity from their overseas asset. For example, they could set it against their UK property in order to help get a better mortgage deal as lenders tighten their criteria.
  • To reduce current monthly repayments on their overseas property by remortgaging it with a more competitive rate of interest (if available).
  • To buy another property or provide the deposit for a property purchase in their home country or overseas.
  • To possibly reduce one’s inheritance tax liability, where applicable, in certain countries (subject to local tax legislation). For example, in France and Spain, it may reduce your liability as there is a debt/bigger debt on the property.

Simon Conn, Conti’s Sales and Marketing Director, says: “We’ve built up a large portfolio of overseas lenders who not only assist with mortgages for house purchase, but can now also assist our clients with the re-financing of existing residential properties in fifteen countries and we hope to expand this list in the future.

“Despite the current ‘credit crunch’ and the strength of the euro, the market for overseas property is still buoyant and the majority of our local overseas lenders have not made changes to their lending criteria.”

Additional options through the remortgaging service at Conti are:

  • Loans with higher LTVs may also be available for home improvements to the existing overseas property.
  • By combining one or more overseas property (plus possibly an existing UK property) 100% + mortgages may be available for any new property.

And in some countries 80 per cent of the rental income from an existing contract can possibly be taken into account.

For more information on Conti’s new remortgaging service, please visit www.mortgagesoverseas.com

Two new appointments for Property International

Property International, specialists in providing investment opportunities in North Cyprus, has appointed two new sales directors, Chris Hyde and Alasdair Carroll.

Hyde will work as the UK northern distributer, and Alasdair as the southern distributer, for Property International’s developments across North Cyprus, including The Palms, a five-star resort in Famagusta.

As part of their role, the new sales directors will focus on training mortgage intermediaries, to sell Property International’s North Cypriot developments.

Dermot O’Kane, director of sales and distribution, said: “The appointments of Chris and Alasdair come as a result of our growth in the UK, and will both prove invaluable in aiding the increased interest from investors.

“North Cyprus had long been overlooked by investors, in favour of the South, but people are coming to release that the North has much more to offer, especially with prices 50% lower than in the South. The potential in the region is huge, as not only does it offer fantastic beaches, weather and beautiful scenery, but the cost of living is significantly lower than in the UK, and both property prices and rental yields are set to soar.”

Buyers look beyond Europe

Interest in buying property in typical euro destinations such as France and Spain is decreasing as British buyers are affected by exchange rates.

In contrast, the latest HiFX Monthly Global Property Hotspots Report reveals increased interest in American properties as buyers who are put off by the strong Euro are attracted by the weaker dollar and US property prices which have fallen by around 30% in the last eight months. Traditional emigration destinations such as Australia and New Zealand are experiencing a seasonal upturn however currency specialist HiFX reports that, whilst interest is high, many would-be British émigrés are struggling to sell their UK properties and realise their emigration dreams.

According to the report, enquiries for France and Spain have decreased by 11% and 12.5% respectively since March.

Mark Bodega, director of HiFX, said: “Sterling weakened significantly against the euro over recent months, reaching an all-time low of 1.2344 in April. This has increased the cost of property for people buying in sterling. However Spain has also been particularly badly hit, with talk of falling property prices, especially in the over supplied Costa regions, making new buyers wary of investing in the country. Property prices in France seem relatively stable although British buyers are negotiating hard to make up for the inflated costs caused by the weak pound.”

Interest in the US has doubled since April, following a turbulent year for the dollar in which wild fluctuation against the pound has seen it hit a series of all time lows. With the pound looking weak against the euro, canny investors are attracted to its strength against the dollar and property prices which have significantly fallen as a result of the US credit crisis.

However, recent signals from the Federal Reserve have indicated that the Bank may pause from cutting interest rates, which had caused such fluctuation in the currency, as inflationary pressures begin to show signs of resurgence.

Popular emigration destinations Australia and New Zealand have continued to attract interest from Brits looking to move abroad.

Bodega said: “We often experience a seasonal increase in emigration at this time of year because as Visa applications made during the autumn and winter months begin to come to fruition. So, despite the pound looking relatively weak against both the Australian Dollar and New Zealand Dollar and there being a lot of fluctuation in both currencies, HiFX figures show that thoughts of moving to a new life overseas continue to burn strongly within much of the UK population. However the feedback that we are getting from our customers shows that, whilst there are lots of people in the process of emigrating, many are unable to make the final jump as they can’t sell their houses in the UK. For most this means they are unable to unlock the funds needed to secure their move overseas and they are being forced to delay.”

Moneycorp supports online overseas property service

Moneycorp, the international foreign exchange and payments firm, is backing a new service from IndependentOwners.com that generates tenant enquiries for rental property owners worldwide free of charge.

Moneycorp has secured the services of IndependentOwners.com to offer all of its customers – typically overseas buy-to-let property investors – the opportunity to advertise their property to the worldwide rental market.

The alliance with IndependentOwners.com will allow Moneycorp customers to supply details about their new property to a dedicated online design team and have a website created specifically targeted at marketing their villa or apartment to a global Internet audience. From registration, the customer will receive their website within 28 days, completely free of charge.

Marc Morley-Freer, commercial director of Private Clients for Moneycorp, said: “Moneycorp is pleased to announce a partnership with IndependentOwners.com. We believe that they offer a genuine value added service to our clients, providing a feature rich and informative website solution for individuals looking to rent out their overseas properties.”

“Allying with a powerful brand such as Moneycorp reinforces our commitment to work with the world’s leading overseas property companies and their partners,” said Brett Cahill, head of operations for IndependentOwners.com