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Expatriates Newsletter

            Winter 2012             

 
 
Expats Newsletter 
This issue covers the subjects of: Tax, Inflation, Olympics, Financial Services, Properties, Education, Golfing and Immigration.
 
 
 

TAX

Draft Finance Bill 2012 and Expatriates

Expatriates normally fall - for tax purposes - in the "Non-Doms" category (see the Tax page for further details). In broad terms, this currently allows those expatriates meeting the requirements of the Non-Doms taxation regime to be taxed on their foreign income and capital gains on a "remittance basis" (i.e. only if the funds are remitted to the UK). During 2008 a number of restrictions were introduced to the taxation regime for Non-Doms, noticeably including limits on the time expatriates can enjoy the "remittance basis" without being taxed (currently, after a number of years, non-doms need to pay a £30,000 charge every time they still want to claim the remittance basis).
 
In December 2011 the draft clauses of the financial bill for 2012 were released by the UK Government, proposing some changes to the taxation regime for Non-Doms starting from the tax year 2012/2013 (i.e. as from 6th April 2012):
 
  • It is proposed that the remittance basis charge be increased from £30,000 to £50,000. This, however, shall also be accompanied by the introduction of a longer term during which Non-Doms can avoid such charge (the newly proposed test is if a Non-Dom has been a UK resident for 12 or more of the 14 years prior to the year of the claim).
  •  
  • It is proposed to introduce new rules to enable Non-Doms to remit funds to the UK in exemption of taxes if such funds are utilised for investment in an eligible trading company or an eligible stakeholder company.
  • It is proposed that an exemption be applied to the proceeds of a sale in the UK of an asset which was purchased abroad out of unremitted foreign income and imported in the UK under an exemption rule. Such proceeds shall be exempt as long as these are taken out of the UK or invested in a qualifying company (see preceeding point) within 45 days of the sale.
  •  
  • It is proposed that sums held within a personal bank account in foreign currency (i.e. not Gbp) will not be in the scope of capital gain tax.

UK Approach to US Anti Tax Evasion Legislation

On 08.02.2012, the UK Government issued a joint statement with the Governments of France, Germany, Italy, Spain and the United States, setting out an agreed approach to the US “FATCA” legislation, which aims to combat cross-border tax evasion.
 
This focuses on an intergovernmental approach to information exchange, which addresses certain legal difficulties and compliance burdens that would otherwise arise for financial institutions affected by FATCA.
 
Welcoming the joint statement, David Gauke, Exchequer Secretary to the Treasury, said: “The Government is committed to tackling tax evasion, wherever it takes place.  This joint statement builds on the close cooperation of all the countries involved, and of the European Commission, in tackling cross-border tax evasion and provides a practical way forward that should reduce the burdens on the financial sector”.
 
 
 
 
 
 
 
 
 
 
 
 
Did you know that expatriates can claim child benefits, regardless of the level of their income? Visit our  Child Benefits page
 
 
 
Would you like to read more about Taxation of Non-Doms?  Visit our Books Store page.
 
 
 
 
 
 
 
 
 
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INFLATION

Inflation Rate Fell in 2012

The start of 2012 saw a fall in the UK inflation rate. The Consumer Price Index (CPI) fell to 3.6% in January and the Retail Price Index (RPI) fell to 3.9%. This was largely attributed to the 2.5% increase in VAT during last year (which no longer affects 2012 figures).
 
The UK Government expects the inflation rate to continue to fall during 2012. The Bank of England target rate for inflation is currently set at 2%.
 
Expatriates can find further information on the website of the Office for National Statistics.
 
 
 
 
 
Do you need information on the cost of living in the UK? Visit our Cost of living & Salaries page 
 

LONDON 2012 OLYMPIC GAMES

Expatriates Relocating to London This Summer

With the Olympic Games starting in July 2012, expatriates that are planning to relocate to London this summer are probably going to face a number of issues.
 
With over half a million visitors expected in London during the Olympic period, likely disruptions to border controls, transport services and the rental properties market should prove to be the source of major problems for expatriate families trying to relocate to London.
 
The housing market in London in particular should be the main issue. Demand is likely to outstrip supply and expatriates moving to London this summer should consider alternatives such as areas outside London or temporary accommodation.
 
Expatriates can follow the latest on the Olympic Games on the official website. 
 
 
 
 
 
 
 
Are you interested in a checklist of things to do before you move to the UK? Visit our  Before you Move page.
 
 
 
 
 

FINANCIAL SERVICES

The Common Financial Mistakes Made By Expatriates 

Mr Nat Davison of Personal FX, a specialist in foreign exchange solutions, writes for our expatriate audience an article on the subject of common financial mistakes made by expatriates.
 
Underestimating the cost of living

One of the biggest mistakes made in that first move abroad is to underestimate just how much it may cost to live in a new and unfamiliar country. The danger is that in their preparations people tend to budget for food, utilities and other essentials on a like-for-like basis with their home domicile. The solution is to assume you will need far more than planned for in your original budget as costs for these items can vary wildly from country to country.    

Underestimating moving costs

Putting together a budget for the move overseas is essential - but factor in that between budgeting and moving there may be external changes, such as  in foreign exchange rates and local cost of living increases. One area where people often can be caught out is in the numerous one-off and fixed costs, such as for legal services, expenses around property purchase or rental, local administration costs and peculiar taxes that can rapidly eat into the most carefully calculated budget.

Living beyond your means

When people first arrive in a new country, the new and exciting surroundings often put them into ‘holiday mode’. For the first three to six months they want to absorb the culture and the bright lights of their new country of residence and they spend like they are on holiday. Hand in hand with this is ensuring sufficient emergency funds are put by, that will not be touched, unless absolutely necessary.

Being caught out by local taxes

Tax systems vary quite considerably from country to country (as do the legal systems). This can especially affect people moving to work abroad in Europe, where some countries have harsher tax systems than in the UK: Income in the Netherlands is subject to payroll tax and personal income tax, while countries like Spain have lower income tax but far higher capital gains tax, for instance.

Inadequate Will writing

While many expats will have written a Will in the UK, once they move abroad this may not be recognised in their new country of domicile.

Having an overseas bank account

Make sure you set up bank accounts in the country in which you want to make domestic payments, such as for utilities. Not to do so could see you paying excessive and unnecessary bank charges.

Forgetting to inform HMRC

A common mistake people make is forgetting to inform HMRC of their non-UK status. This can easily lead to an individual being sought after for tax in both the UK and their new country of residence. Form P85 is the one that needs to be completed.

Life insurance cover

Most UK written life insurance policies may provide limited or no cover at all outside of the UK. It is important that anyone working or living in a new country reviews any insurance policies they may have in place to ensure they properly cover them both for their new domicile as well as for their individual needs.

Pensions and NI contributions

If you have a pension in the UK, either ensure that you maintain contributions to it or set up an alternative scheme. This will depend on your individual circumstances. Likewise, if you are intending to return to the UK later in life and wish to draw a state pension then maintaining national insurance contributions is essential.

Not factoring in exchange rates

Exchange rate fluctuations are inevitable and can have a huge impact on your budget. In these uncertain economic times, speaking to a specialist is a necessity. Companies such as Personal FX, will offer you a proactive market monitoring service. This is designed to secure you the best exchange rate possible in your given timeframe. Ultimately, only once you have bought your currency will you know how many Pounds you have at your disposal. To remove the risk of adverse currency fluctuations ask the specialist about a Forward Contract; a type of ‘buy now, pay later’ service that they should offer.

 
 
 
 
 
 
 
Do you want to know more about Foreign Exchange? Visit our Currency Converter page.
 
 

PROPERTIES

London Rental Market

Giles Barrett, Associate at Knight Frank, reports on the London rental market.
 
2011 was a very mixed year for the London rentals market. The year started strongly with solid demand across the board and by the end of June rents had surpassed their 2007 peak. However, as the year progressed the brakes were applied due to a gloomy economic outlook and a flurry of negative financial press. The Centre for Economic and Business Research (CEBR) revised its forecast in October for 27,000 city job losses and in the same month the renowned City recruiter McKinsey announced a 22% reduction in City job availability. This (along with a seasonally quiet Christmas period) saw rents falling slightly towards the end of the year. In spite of this, 2011 saw rent rises of 6.7% (KF Research) and the forecasts from the industry leading agents suggest that prices will rise a further 4-5% in 2012.
 
The main reason that rents continue to rise despite a weaker demand is the fundamental shortage of property and, unusually, this has been the main narrative in both the sales and lettings markets over the last few years. However, it does depend what you’re looking for and where you’re looking. In Central London for example, LONRES (a respected and very well subscribed agent-to-agent database) has just reported in their Winter 2012 report that the most over-supplied properties are two bedroom flats (which may present an opportunity for those looking in this sector) followed by three bedroom houses and the most under supplied are two bedroom houses followed by five bedroom family houses. This does vary greatly from area to area and it is worth pointing out to those coming to London that the markets vary hugely in a relatively short distance. For example, a one bedroom flat in Clapham may cost you £350 p/w to rent whereas, just five miles away in Kensington, the same sized one bed could cost you double the amount so prioritise your search and enlist the help of a good local agent to advise you on likely prices so that you can hit the ground running when you arrive.

When it comes to making an offer be prepared to pay close to the asking price. It will, of course, vary from property to property but with stark supply the good flats and houses can be oversubscribed and, on balance, it is still a landlord’s market. Other helpful advice is that offers are not one dimensional and it is not always about the best price. Other factors may include your ability to commit for a longer term, perhaps you can pay some rent  in advance and, if your company is relocating you, make a point of stressing that to your agent. In these uncertain economic times the reassurance of a company backing could just push you to the front of the queue.
 
Expatriates can find further details in the reports section of the Knight Frank's website.
 
 
 
 
 
 
 
What about housing? Visit our Housing (Buy or Rent?) page.
 
 

EDUCATION

Study Technology

Greenfields School has shared with Expats Plaza an article that was wirtten for them by R.J. Ellory about Study Technology. This consists of tools and techniques teachers can use to improve the learning rates of students. These same tools and techniques can be used by students themselves to improve their ability to understand and to use the materials they read and study.  
 
Expatriates can click here to read an extract from the article and find further details on the website of Greenfields School.
 
 

International Baccalaureate Diploma

Several schools that offer the International Baccalaureate have published on their website the results attained by their pupils during the latest IB Diploma exams. The IB Diploma top score is 45 (six subjects are examined, each with a score up to 7, plus 3 additional points can be awarded for extra activities).
 
Although the average scoring alone does not give an overall picture of the quality of the teaching in the various schools, this can be used by expatriates currently looking for a school suitable for their children as an indicator of the level of achievement by the students attending the relevant school. 
 
 
 
 
 
 
Do you want to know more about education in the UK? Visit our Education page. 
 

GOLFING

Social Golf Events for Women

Golfing is quite a popular sport among expatriates. There are many fantastic golf courses in the UK that welcome visitors, particularly in and around London. Expatriate women which are newcomers or that are just approaching golf, might find it interesting to further explore social golf events. These are very good occasions to socialise with other expatriates and networking while improving their golf skills. 
 
Expatriates can find further information by reading this article that was written for Expats Plaza by Off the Red Tees.
 
 
 
 
 
 
 
 
 

IMMIGRATION

Limit on Tier 2 (General) for 2012/13

On 28.02.2012 the Migration Advisory Committee (MAC) published a report on the limit on Tier 2 (General) for 2012/13 and associated policies.

In October 2011 the Government asked the MAC to advise at what level should the limit on Tier 2 (General) be set at for 2012, taking account of the economic, labour market, social and public service impacts of the limit; and of the uptake of Tier 2 (General) and intra-company transferee visas in 2011/12. The MAC was also asked to consider some associated policies, including the intra-company transfer route, the resident labour market test and the minimum skill level for Tier 2. This report presents the MAC's findings and recommendations.

 
 
 
 
Do you want to know more about working in the UK? Visit our Working page.  
 
 
 
Expats Plaza is the website for the Expatriates living in the UK