While the fantasy of being a high net-worth individual with multiple assets located across the globe may seem alluring, it can be incredibly complex and challenging to manage these successfully.
This is borne out by the challenges facing Russian oligarch Roman Abramovich, whose assets in the UK (including Chelsea Football Club) were frozen as part of the government’s sanctions on Russia.
But how can you successfully manage international assets while minimising tax payment lawfully? Let’s find out!
1. Structure Your Financial Affairs Using Legal Expertise
Before you attempt anything else, we’d recommend liaising with a legal tax expert to ensure that your financial affairs are structured in a compliant and efficient manner.
This way, you can legally mitigate and minimise tax inefficiencies, while capitalising on local and international loopholes (we’ll touch more on a couple of these below) to help those of you with assets dotted across the globe.
This may take time depending on the range of value of your assets, but it’s crucial if you’re to minimise your annual tax burden without falling foul of the necessary laws.
2. Consider Paying Tax on a Remittance Basis
If you live in the UK but don’t intend to live there permanently and hold a broad range of international assets, you may be able to pay tax strictly on a remittance basis.
In laymen’s terms, this means that you won’t have to pay tax on your income and returns sourced from overseas, as long as they’re not remitted into the UK.
Interestingly, this was a focus of media attention recently, after it was revealed that Rishi Sunak’s wife had such a tax arrangement after the Chancellor had announced a significant hike in National Insurance for everyone.
Of course, the subsequent media pressure forced Sunak’s partner to subsequently pay full UK tax on her overseas income, but this remains a viable option for other high net-worth individuals with a lower profile!
3. Claim Main Residence Relief for Foreign Holiday Homes
There also remains nothing in the UK’s body of tax legislation that says an overseas holiday home cannot be listed as a Brit’s main residence for Capital Gains Tax purposes.
In fact, a holiday home can be treated as your main residence by making an election that this effect (usually within two years of you buying the property).
Of course, the property will need to be owned directly by you, while following this process formally will ensure that you’re exempt from some (or maybe all) of any capital gains tax imposed in the UK.
Just remember that you’re only allowed to claim one main residence, while if you’re married, you can only list one between you. So, this should only be considered if you’re not intending to sell your UK home any time soon (or hope to avoid getting divorced in the near term!).