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moving abroad at some unknown time

Financial discussion for any financial queries for Expats
Arborbridge
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moving abroad at some unknown time

#403531

Postby Arborbridge » April 12th, 2021, 9:35 am

I've been asked to look at setting up an ISA or other investment vehicle for my daughter. One fly in ointment is that, although she is a UK resident with a house here, there is an idea that she and her family may move back to NZ where they used to live. It may never happen - with kids in school etc and husband working in Dubai - it is only a glimmer of an idea, but more than a zero possibility.
At present, I'm thinking of advising her to open an ISA and cross the emigration bridge later if it ever happens.
I haven't a clue what would happen to any capital accumulated in a UK ISA if they should emigrate.

Has anyone else researched this event? One wonders whether people in this situation are able to leave the funds in the UK ISA, or whether people just withdrawn the cash and start again wherever they move to.

Any broad brush information or personal experiences would be welcome.

Arb.

richfool
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Re: moving abroad at some unknown time

#403543

Postby richfool » April 12th, 2021, 10:01 am

Arborbridge wrote:I've been asked to look at setting up an ISA or other investment vehicle for my daughter. One fly in ointment is that, although she is a UK resident with a house here, there is an idea that she and her family may move back to NZ where they used to live. It may never happen - with kids in school etc and husband working in Dubai - it is only a glimmer of an idea, but more than a zero possibility.
At present, I'm thinking of advising her to open an ISA and cross the emigration bridge later if it ever happens.
I haven't a clue what would happen to any capital accumulated in a UK ISA if they should emigrate.

Has anyone else researched this event? One wonders whether people in this situation are able to leave the funds in the UK ISA, or whether people just withdrawn the cash and start again wherever they move to.

Any broad brush information or personal experiences would be welcome.

Arb.

As far as holding an ISA when becomes non UK resident for tax purposes, the assets can be left in the account without any issues, and dividend income arising can continue to be received tax exempt and can be re-invested within the ISA, but no new funds can be added.

I wouldn't know about the requirements of the New Zealand tax authorities, though I would anticipate that the ISA funds or dividends arising may well have to be declared there.

Arborbridge
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Re: moving abroad at some unknown time

#403552

Postby Arborbridge » April 12th, 2021, 10:22 am

richfool wrote:
Arborbridge wrote:I've been asked to look at setting up an ISA or other investment vehicle for my daughter. One fly in ointment is that, although she is a UK resident with a house here, there is an idea that she and her family may move back to NZ where they used to live. It may never happen - with kids in school etc and husband working in Dubai - it is only a glimmer of an idea, but more than a zero possibility.
At present, I'm thinking of advising her to open an ISA and cross the emigration bridge later if it ever happens.
I haven't a clue what would happen to any capital accumulated in a UK ISA if they should emigrate.

Has anyone else researched this event? One wonders whether people in this situation are able to leave the funds in the UK ISA, or whether people just withdrawn the cash and start again wherever they move to.

Any broad brush information or personal experiences would be welcome.

Arb.

As far as holding an ISA when becomes non UK resident for tax purposes, the assets can be left in the account without any issues, and dividend income arising can continue to be received tax exempt and can be re-invested within the ISA, but no new funds can be added.

I wouldn't know about the requirements of the New Zealand tax authorities, though I would anticipate that the ISA funds or dividends arising may well have to be declared there.


OK thanks. At least that's a first base to work on!

Alaric
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Re: moving abroad at some unknown time

#403619

Postby Alaric » April 12th, 2021, 12:45 pm

ReallyVeryFoolish wrote:There's no issues really, but as far as I know, no country recognises an ISA in the UK as a tax shelter.


SIPPs on the other hand are usually recognised and also may be eligible for transfer into a local equivalent. Agents specialising in such transfers have reputations for high charges though.

TahiPanasDua
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Re: moving abroad at some unknown time

#403629

Postby TahiPanasDua » April 12th, 2021, 1:45 pm

During my 42 years overseas I came across a few tax scams by otherwise upstanding pillars of the UK community. One ploy was the hiding of offshore assets to be accessed in the UK by seemingly untraceable overseas credit cards. Another involved individuals who managed to add to their ISAs while overseas. I don't know how they did it but it was initially ignorance of the law. They were shocked to be told it was illegal but, as far as I am aware, they continued to add funds every year. A pile of risk for relatively small returns.

Such evasion may not be widespread and maybe I just associated with gangsters!!!!

The real money I saw being made illegally was through insider trading which was surprisingly widespread but that is a tale for another day.

TP2.

Arborbridge
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Re: moving abroad at some unknown time

#403793

Postby Arborbridge » April 13th, 2021, 9:06 am

Thanks for the replies so far. It seems the current thinking with my daughter is to start getting capital saved into an ISA this year to make something happen before time dribbles away. If ever the move to NZ comes about, she will have to look at her options then, but if all else fails she will have some savings she can liquidate and use for house purchase.

She has been putting of this investment decision for a couple of years being nervous of the stock market, despite my urging. I think this all came about because she lost several thousand pounds on a misadventure in Leeds United - an investment "tipped" by her mother's boyfriend. I only heard about it after then event which makes me quite sad to think of.

Looking at my own average results over ten years and her 0.1% fixed interest (or whatever it is) has tilted the balance.

We've made Wednesday week decision day, when we will decide what to do, and who with.

bofh
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Re: moving abroad at some unknown time

#403811

Postby bofh » April 13th, 2021, 10:05 am

Hi,

As others indicated, NZ taxes residents on their worldwide income (see 2A on page 6):
https://assets.kpmg/content/dam/kpmg/nz/pdf/January/beyond-borders-individuals-kpmg-nz.pdf

I see there is a double-taxation treaty (DTT) between the UK and NZ which is essential bedtime reading if significant funds are at stake.

From my own experience, ISAs end up being treated by the foreign tax office as a General Investment Account from a tax perspective. In my situation, I compared two potential scenarios:
a) I plan to return to the UK as a tax resident some day and would like the benefit of that ISA money then. In that case, my investment strategy should shift to either (a) buying no/low yielding investments and holding for the long-term, or (b) working out how the foreign tax office taxes capital gains, dividends and carry forward of losses. The UK has generous allowances which may or may not exist in NZ. Obviously need to consider other sources of capital returns/yield
b) I will be away long enough that in all likelihood there would be important life events where I would want to use that ISA money.

After considering both of those, I decided that the best thing I could do in the short term (before becoming non-UK tax resident) was to bank some significant open profits whilst leaving the cash in the ISA wrapper. Furthermore, I took out a new *flexible* ISA during the early part of the tax year whilst UK resident tax and added 20K. This money can then be instantly removed from the ISA should it be needed for cashflow reasons and then put back later in the same tax year (assuming still UK tax resident). This affords some flexibility if plans are not totally fixed. With normal ISAs once the money is removed, it can't be put back in without taking out a new subscription (i.e. affects the current years ISA allowance). Of course, once no longer UK tax resident, then no more ISAs can be legally subscribed to.

The last point I'd make is to check the terms and conditions of the ISA providers as it relates to the UK residence of the customer. There have been various threads in this forum in the past covering this topic at length so worth a gander. It's possible to be both UK resident and not a UK tax resident, but this is an area that requires professional advice IMHO.

Hope that helps,
-b

Deev8
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Re: moving abroad at some unknown time

#421314

Postby Deev8 » June 22nd, 2021, 2:03 am

bofh wrote:As others indicated, NZ taxes residents on their worldwide income


And beyond that NZ has a slightly unusual approach to the taxation of investments outside of NZ (and Australia) - Income to be declared in the annual tax return is calculated as 5% of the value of the investments at the start of each tax year. There are exceptions and exemptions from this, and it can get complicated.

Importantly NZ has a 4 year exemption from paying tax on overseas investments (and numerous other types of overseas income) from that time that one first becomes a NZ tax resident.

Information "from the horse's mouth" can be found on the NZ Inland Revenue Department website - https://www.ird.govt.nz/international-t ... -residents and https://www.ird.govt.nz/roles/nz-tax-re ... /exemption

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Re: moving abroad at some unknown time

#422837

Postby Lootman » June 27th, 2021, 1:02 pm

ReallyVeryFoolish wrote:There's no issues really, but as far as I know, no country recognises an ISA in the UK as a tax shelter. So there is no special exemption from taxes due in New Zealand should such a liability arise there.

I wonder how, as a purely practical matter, a UK expat in NZ (or anywhere else) would go about reporting ISA income and gains to that foreign tax authority?

For a start, something like an ISA is not going to produce a consolidated tax certificate to enable such reporting.

And then even if it did, the tax year is quite possibly different in NZ (I have no idea). And then there is the little matter of the currency conversion.

So in practice it would be a huge amount of work to comply with that simple request. Which leads me to suspect that most people so affected either liquidate their ISA before they set off, or else just bury it under the carpet.

Deev8 wrote:
bofh wrote:As others indicated, NZ taxes residents on their worldwide income

And beyond that NZ has a slightly unusual approach to the taxation of investments outside of NZ (and Australia) - Income to be declared in the annual tax return is calculated as 5% of the value of the investments at the start of each tax year. There are exceptions and exemptions from this, and it can get complicated.

That is insane. So NZ assumes that you realised a 5% return regardless of whether you did or did not realise anything?

I had heard that Australia taxes unrealised capital gains, i.e. runs on a mark-to-market basis. But this is even worse.

Maybe the UK tax system isn't so bad after all?

gryffron
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Re: moving abroad at some unknown time

#423283

Postby gryffron » June 28th, 2021, 11:34 pm

In theory - you can continue to hold an ISA whilst living and tax resident abroad.

In practice - there are significant practical problems, ISAs don’t provide tax reports (Consolidated Tax Certificate). And so it is hard to know what the income was, in order to report it. For the same reason, many brokers will simply refuse to hold ISAs for foreign tax residents :( (if they’re told about it)

Of course the (marginally) good news is you can easily liquidate an ISA in short order should it be more convenient to do so. Then you lose the future benefits should you return to UK. But at least there is no reason to avoid opening an ISA “for now”.

Gryff

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Re: moving abroad at some unknown time

#423627

Postby Deev8 » June 30th, 2021, 5:58 am

Lootman wrote:That is insane. So NZ assumes that you realised a 5% return regardless of whether you did or did not realise anything?


That is effectively the default assumption using what they call the "Fair Dividend Rate" method of assessing income from non-NZ investments. Don't ask what's fair about assuming a 5% dividend yield. At the time this change to the taxation of non-NZ investments was introduced the Minister of Finance said that people shouldn't be concerned about it because it would only affect "a few rich pricks"!

That default approach only applies if the total return (dividends received plus capital gain) from non-NZ investments is at least 5%. If it is lower then the actual total return is assessed as income, but no tax credit is given in the case of an overall annual loss.

The annual tax return does involve a reasonable amount of work, but the alternative is to limit investments to companies the are listed on the NZ Stock Exchange which is less than ideal. Yes the tax year is different to the UK - it starts on 1st April, rather than 6th April which does mean that consolidated tax certificates are ineffective.


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