High net worth individuals moving abroad to escape the tax burden boosting the bottom line for governments across the globe is only likely to continue.
But without proper guidance from wealth planners they could face tax bills running into the tens of thousands.
This is according to Adam Liddelow, independent financial adviser at Hoxton Wealth, who told delegates at Health & Protection’s Global Mobility and Health Summit that the outward movement of high net worth individuals is only likely to continue due to increased regulation and “almost constant tax increases”.
Leaving it too late
Liddelow also warned that countries often have different ways of taxing individuals and the longer issues are not dealt with, they can compound over time leading to very large tax bills.
He cited the example of a US client who has invested money in the UK, but didn’t realise he needed to be IRS compliant and also didn’t realise that he had to file his accounts with the IRS every year.
“Fast forward a decade and he did realise this and he did submit correctly to the IRS, they don’t just look at the one year he missed,” Liddelow said. “They look back at all of the 10 years. They charge interest on all of the tax that you haven’t paid and they left him with a bill that was in the tens of thousands of pounds.
“If he had just sought some advice before that, we could have easily structured things in the right way and cut that bill in half.”
Differing tax treatments
A further consideration is that some investment vehicles may be very tax efficient in one country, but not in another.
“One example of this is ISAs which are very tax efficient in the UK, but pretty much the rest of the world do not recognise them as tax free and will tax them if you are a resident of that country,” he added.
Working with accountants
Consequently, Liddelow stressed the importance of brokers working with accountant specialists.
“As wealth planners we can offer a lot of value, but we also work hand-in-hand with a tax specialist as well because they can give us that final seal of approval on all of the tax aspects that we do,” he said.
