Tax will probably be the last thing on your mind as you pack up your home and relocate to the country of your dreams. However, it may become your main focus if you fail to leave your tax affairs in order in the country you have just left. If you also fail to leave a forwarding address the problems may quietly fester away and you may be accruing daily interest and penalties. One thing is certain, it won’t go away! These days we see countries working together to collect outstanding taxes. In the UK, HMRC has a team called the Mutual Assistance in the Recovery of Debt team (MARD), and other countries have similar arrangements. The rules are very complicated, but the bit you need to remember is that a tax debt left behind is likely to reappear in the form of a tax demand from one of these teams.
Put simply, MARD is an arrangement which allows certain countries to ask HMRC for assistance in obtaining information, serving legal documents or recovering a tax or duty debt. All foreign tax debts referred under these arrangements are recovered in the same way as UK income tax debts. As this is definitely something to avoid, we thought a guide explaining what you should do as you leave or come back into the UK might be useful.
Leaving the UK
Tell HMRC – who will tell you if you need to complete a Self Assessment form, P85 (leaving the UK, getting your tax right) or both. They will use the information you give them to decide if you are due a refund or owe tax, and to decide on your residency status. You may have to continue completing UK self assessment returns if you keep any property or investments in the UK.
Consider whether you wish to pay voluntary National Insurance contributions while you are away. It might be useful if you intend to claim the UK State Pension.
If you are entitled to tax credits or Child Benefit in the UK, you may still be able to receive them after you have left. This will depend on how long you are leaving for and what country you are going to.
Arriving in the UK
Tell HMRC – who will use the information you give them to determine your residency status and whether you are due to pay UK tax.
Inform the tax authority of the country you are leaving and give a forwarding address.
Capital Gains Tax (CGT). Tax rules vary from country to country. For example, if you are selling property, you need to understand the CGT rules of that country. It is not unusual to see cases where a lack of CGT understanding has subsequently led to massive tax bills and penalties. Often, on investigation, it is clear that if the correct tax advice had been given when the property was first purchased it could all have been avoided. Costs for legal advice may seem high but complicated rules and language barriers can leave you vulnerable.
This article is by Tax Help for Older People (operated by registered charity no 1102276), offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066