In Focus: Tax  

Expats with voting rights face Treasury tax take

Expats with voting rights face Treasury tax take
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British expats who have been lobbying for the right to vote in UK elections might get their wish - but this will come with a 'tax sting in the tail', a tax director has warned.

In chancellor Rishi Sunak's Budget on March 3, he confirmed more British expats living overseas and non-resident in the UK for tax purposes would be entitled to vote in British elections in future on an ‘indefinite basis’.

This is in contrast to the position since 2002, whereby only non-resident British nationals who’ve been overseas for 15 years or less remained entitled to vote in UK elections. 

However, this voting right may also bring future tax takes from the Treasury. Robert Salter, tax director at Blick Rothenberg, said: “British expats overseas should consider carefully whether they wish to take advantage of this extended franchise.

"It could cause problems in the future and mean that they are liable for UK taxes, especially inheritance tax.

“This is particularly the case for wealthier expats, who may have moved abroad to minimise their exposure to UK taxes.”

He acknowledged it can be very difficult to break one's domicile of origin, so remaining registered to vote in the UK can seem attractive. 

However it could mean that an expat has retained a UK domicile, and therefore remain liable to UK IHT on death.

Salter explained: “Anybody who is UK domiciled in accordance with our common law, will – on death - be subject to UK IHT on their worldwide assets.

"This won’t be a problem for many expats, because they have quite limited assets and wouldn’t be liable to IHT regardless of their domicile status or because they may legitimately retain deep links to the UK and have, for example, a clear intention of retiring here in due course.

"But for others, it could make a major difference to the funds that they are able to pass on to their children and grandchildren.”

On Tax Day, March 23, an announcement on IHT rules and reliefs had been expected, but the chancellor refrained from making any sweeping changes to thresholds or reliefs.

However, the Treasury did clear up the form-filling process and updated the reporting restrictions for estates where the deceased was not domiciled in the UK.

As reported by FTAdviser, Jesse Norman, financial secretary to the Treasury, said it was "cutting IHT red tape for more than 200,000 estates every year, dramatically reducing the amount of paperwork many families fill out."

This means that more than 90 per cent of non-taxpaying estates each year will no longer have to complete IHT forms when probate or confirmation is required from January 1, 2022.

Reporting regulations will also be updated for estates where the deceased was never domiciled in the UK but owned indirect interests in UK residential property.

Read FTAdviser In Focus' latest CPD guide: Four Things You Should Know About IHT. This qualifies for an estimated 60 minutes' worth of structured CPD.