Taxing Matters

The British government doesn’t treat its exiles very well. For example, whilst the pensions of pensioners living in the UK increase every year in line with inflation, the pensions of most expats are fixed at the time they retire. Inflation erodes the pension’s value over time, and what starts out as a trivial sum becomes a pittance.

But then expats don’t have a vote, and since governments are driven by expediency, rather than a moral compass, the expat will be done over every time.

For example, there’s the the discriminatory taxation of expats. Rev. Jonathan Mayhew is famous for proclaiming “no taxation without representation”, whilst James Otis put it a little more directly: “taxation without representation is tyranny”. Both these gentlemen were American just before American independence. They had no vote, just as I have no vote today. I guess British taxation was as odious then as it is now.

There’s discrimination in the treatment of inheritance tax for people with foreign spouses: whilst someone with a British spouse can leave ₤300,000 to their partner tax-free, a foreign spouse only gets a ₤65,000 allowance.

Now, I don’t like the idea of the tax man taking 40% of my hard-earned cash when I die. One way of getting around this is to be non-UK domiciled. Basically you have to prove that you’ve severed your links with the UK. Then only your UK assets are subject to UK inheritance tax. There’s no way I’d ever even consider returning to the UK to live – in my mind my domicile is now Thailand. If for some reason I had to leave Thailand I’d relocate to somewhere else in South East Asia. The tax man, however, may have a different idea – particularly when the prospect of stealing my savings when I’m gone arises.

In an attempt to clarify my domicile I wrote to the tax man. He was written back, refusing to comment on my domicile because … I’m not UK resident. Quite frankly, I think that’s outrageous; there shouldn’t be such uncertainty when it comes to taxation.

Anyway, I’m now in the process of moving my pension to Guernsey, where it will be beyond the tax man’s greedy grasp. I’m also contemplating moving the bulk of my investments to Luxembourg. This won’t exempt them from inheritance tax if I’m deemed to be UK domiciled, but will if I’m not. Such are the hoops we must leap through.

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