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Londdon Expatriate buy to let Mortgage

Capital Gains Tax changes for expatriates and overseas buyers brings the UK in line with other global property markets…

The UK government published draft legislation that detailed changes to Capital Gains Tax (CGT) on the sale of properties for overseas and expatriate  investors. This brings changes for the UK in line with other property markets and aligns overseas and expatriate property investors the same as UK resident home-owners.

From 6 April 2015, non-resident UK property investors will be charged on gains made from the sale of their property of between 18% and 28%, this is the same rate as resident home-owners in the UK. The UK government has deemed any UK property owner who spends less than 90 nights in their property to be a non-resident investor and CGT will also be charged on off-plan properties. Other key points arising from the draft legislation are provided below.

The changes mean that non-resident UK property owners will need to consider obtaining a valuation of their property. We work with a number of valuers to assist you in obtaining a recent valuation should you need one.

If you need to clarify any points relating to the changes to the CGT legislation, we advise property investors to seek tax advice from a UK tax specialist with knowledge in this area.

Who will be affected by this new legislation?

From 6 April 2015, CGT will be imposed on disposals of residential UK property by non-resident individuals, trustees, estates and close companies.

Off-plan properties will also be treated as fully completed residential properties, so if a non-resident individual re-sells a property before the completion of a project then they will be liable to CGT on any gains arising after 6 April 2015.

The government has not extended the CGT charge to non-resident institutional investors disposing of shares or units in a collective investment scheme, provided they are ‘diversely held’ and not a mere vehicle used by private individuals to avoid the new tax. Non-resident institutional investors will be subject to a ‘narrowly controlled company’ test and a and a ‘genuine diversity of ownership’ test to ensure individuals are not transferring their interest in UK residential property to a non-resident company in order to escape the tax.

What is the rate of CGT for individuals?

The tax rate for non-resident individuals will be the same as the rates applicable to UK resident individuals. Using today’s tax banding’s, gains under around £32,000 will be liable for 18% charge and any additional gain will attract a charge at 28%.

Non-resident individuals from most countries will also be able to use the annual exemption, currently £11,000, to reduce the CGT payable.

In the unlikely event that a non-resident individual’s property is worth less on 6 April 2015 than was originally paid for the property, the non-resident owners can elect that the gain is calculated using the original base cost.

What is the rate of CGT for companies?

The tax rate for non-resident companies who dispose of residential UK property will be the same as the UK corporation tax rate, which is currently 20%.

Non-resident companies will also benefit from the associated allowances which come with corporation tax.

Can I claim relief using the principal private residence (PPR) exemption?

Non-resident owners of UK properties will be able to claim the same PPR relief as UK taxpayers, so long as they have resided in the property for at least 90 nights that year.

This new 90-night measure will came into effect on 6 April 2015.

What is the reporting procedure?

Where the non-resident individual or company already submits tax returns to HMRC, the reporting of the gain and payment of any tax can be made as part of the self-assessment tax return.

Otherwise, delivery of a return and payment of any outstanding tax must be made within 30 days of the disposal. 

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London Expat Mortgage

CONSULTATION ON WEAR AND TEAR ALLOWANCE

In the Summer Budget 2015 the Government confirmed its intention to introduce measures to improve how landlord’s businesses are taxed.

The new measures which are detailed in the full Consultation Document are designed to provide consistency and fairness in the taxation of rented properties. However, you still have until 9 Octoberto submit your comments and responses to the consultation.

An outline of the new measures is given below and we’ve also produced a handy fact sheet which you can print out:

The changes

The current 10% Wear and Tear Allowance which allows landlords to reduce the tax they pay, regardless of whether they replace the furnishings in their property, will be replaced. From April 2016 landlords will only be allowed to deduct the costs they actually incur for replacing furnishings in their rental properties.

Eligibility

All landlords will be eligible for the relief respective of whether they let their properties on an unfurnished, part furnished or fully furnished basis. However, Furnished Holiday Lets and commercial premises are excluded.

NOTE: The relief will only cover replacing existing furnishings – landlords cannot claim for the initial purchase of furnishings (i.e. when they buy a new property and furnish it for the first time).

How it will work

Landlords will be able to claim for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use; such as beds, wardrobes, tables, sofas, fridges, washing machines, carpets, curtains, cutlery and crockery.

However, if the landlord sells the item being replaced, the sale price of that item must be deducted from the purchase price of the replacement and the tax relief can only be claimed on the remainder.

Further, landlords cannot claim for ‘improvements’. If the replacement item is an improvement on what was there before (i.e. a washing machine is replaced with a washer-dryer), then only the cost of a like-for-like replacement can be claimed.

NOTE: Fixtures integral to the building (i.e. baths, toilets and boilers) that are not normally removed by the owner if the property was sold are not included.

The impact

Landlords will no longer need to decide whether their property is sufficiently furnished to make a claim as the relief because applies to all rented properties no matter the level of furnishing.

With the current 10% allowance, the higher the rent, the larger the tax relief. In some areas of the country, 10% is not sufficient to cover the actual costs incurred. The proposal will ensure landlords can claim their actual costs and provide a level-playing field for landlords wherever they operate in the country.

However, there will be a significant administrative and record keeping burden placed on landlords in order to claim the tax relief.

REF: Association of Residential Lettings Agents and HMRC

mortgages for expatriates

Premierexpatmortgages.com: The UK expat mortgage specialists

Welcome to Premierexpatmortgages.com, the official website of Premier Expat Mortgages. Globally renowned as one of the most experienced expatriate mortgage brokers for financing property deals, Premier Expat Mortgages specializes in providing Expat Mortgage UK financing services to international property investors that are based offshore away from the UK as well as global based expatriates. Being located in Hong Kong Premier Expat Mortgages has close associations with the UK based expat lenders, the UAE and Asian expat lenders and we have the expertise to fulfill the expat mortgage financing needs of international property investors.
Premier Expat Mortgages is a completely independent offshore mortgage brokerage that is competent in sourcing ex-pat mortgages from the whole of market enabling us to secure applicants the most competitive mortgage product. As we are recognized as Expat Mortgage financing specialists in UK property, we are capable of finding the most lucrative deals for our clients along with negotiating the most competitive terms to make the process much easier. We work with major lenders such as Royal Bank of Scotland, Lloyds Bank, Clydesdale Bank through to private banks such as Barclays and Investec. We work closely with each of our individual clients and endeavor to tailor the mortgage financing so as to meet and exceed their requirements. Premier Expat Mortgages strives hard to provide expert Expat UK Mortgage financing advice for new mortgage financing and refinancing for expatriates and also in helping them to secure overseas based life insurance. We also provide the most effective solution to refinance any UK property to release funds or help clients reduce their current mortgage rate. .
In addition to expat mortgages we provide expert advice and knowledge of commercial mortgages, bridging finance and secured loans. We work hand in hand with major developers around London such as Berkley Group, Linden Homes, Barratt Homes and Persimmon to provide new investment property in and around Central London to our clients. We also provide unparalleled property management and property furnishing services to clients and interested parties. Premier Expat Mortgages not only makes efforts to help clients with their UK mortgages, but is also proficient in helping clients with international mortgages worldwide.
Irrespective of whether you are taking a UK expat buy to let mortgage into consideration or are a resident returning to the UK and looking for a residential mortgage, Premier Expat Mortgages is the best overseas mortgage broker that can provide you with offshore mortgage financing for your next purchase. No matter what your UK Expat Mortgages financing needs are, we are always ready with our determination and guidance to walk you through the process.
Premier Expat Mortgages in all are here to help you locate your new build property, secure your overseas mortgage financing, help clients secure furnishings for the property and then find the ideal tenant to let your new build or existing property portfolio out to.
Just dial 852 9247 7065 and feel free to consult your next project with our experts. You can visithttp://www.premierexpatmortgages.com/ to get further information about us.

How To Obtain A UK Mortgage When You Are An Expat or Overseas Resident

To obtain a mortgage whilst based overseas for the UK property market isn’t always that easy anymore as clients are dealing with banks that are based overseas generally. These overseas lenders take a more serious view to applications as they don’t always have the means to credit check applicants income sufficiently. There is the important fact that income can be from various sources or that the applicant is self-employed so does not derive income from a standard working salary such as being employed by an employer. Overseas lenders will invariably use a number of ways to assess the finances and the source of income for the mortgage they are underwriting on behalf of the client. Firstly lenders will use a stress tested rental ratio and were are assuming this is a buy to let mortgage as most expats or overseas residents tend to buy for investment purposes. A lender will do this is working out that the rent is 125% of a stress tested rate. At the moment this is 5% or 6% dependent on which lender is approached. If this doesn’t sufficiently cover financing the property the lender will then look at the income and expenditure of the applicant. Lenders generally like to see that all expenditure for day to day living includes all living costs, mortgages, loans and day to day living expenses and doesn’t exceed 60% of the applicants total income. This is known as a debt to income ratio. If this passes the lender will then ask the applicant to supply the below documentation

· Proof of ID (Passport & Drivers Identification Licence) 1 each for joint application·

. Proof of Address(Utility bill or Rental Lease)

· 6 Months Bank Statements

· 6 Months Salary Pay Slips

· Current statements of existing mortgages

· 3 Months bank statements of rental income monies (if any)

· Others upon request(assets, bank deposits, savings, liabilities etc)

The general process to proceed on applying for a mortgage is as follows but will be different for all lenders as they have their own in-house criteria of rules and the way they settle and process mortgages through to the completion stage.

Process for Applying for a Mortgage

1. Prepare application and supporting documents

2. Package and submit to lender

3. Provide further documents lender requires

4. Lender grants Agreement to Lend*(Agreement In Principal) (3-4 Weeks)

5. Agreement In Principal sent to client

6. Client signs and returns Agreement In Principal top the lender

7. The lender creates a mortgage account for the clients mortgage payments and rental income to be deposited

8. Client pays lender fee

9. The lender instructs valuer to value the property

10. Client pays valuation fee

11. Valuer surveys property

12. Valuer returns valuation report to lender

13. Lawyers instructed

14. Lawyers performs searches and prepares Report on Title

15. Lawyer submits Report On Title to lender

16. Lender releases funds to lawyers

17. Lawyers exchanges funds and title

18. Property Completed

19. Full process 8 to 12 weeks

Clients will need to be aware of the tax implications and stamp duty requirements which can be found on the below websites

https://www.gov.UK/stamp-duty-land-tax/overview

*(AIP) Agreement In Principle to lend

https://www.gov.UK/topic/personal-tax/capital-gains-tax

Gerard Ward has experience arranging UK mortgages for 15 years and assists overseas purchasers and UK expatriates buying in the United Kingdom. I can also source mortgages in various other countries.

If you have a UK pension plan and are leaving the UK for a short period of time you may be likely to stop or halt your pension while you are away from the UK. UK Expat Pension Reviews has been formed to help UK expats with their retirement and pension needs and help them find their way through the maze of pension rules and what you can and cannot do. Its of paramount importance that the decision you make is the correct decision from the start as this can have a profound effect on the likely value of your pension on retirement should the incorrect decision be made.

There are two types of pensions available at to UK based onshore residents and these are Defined Benefit or better known as a Final Salary scheme. The second type is a Defined Contribution scheme which is a self-contributory scheme which is sometimes termed a Self-Invested Personal Pension Plan (SIPP). The former is what used to be considered a gold plated pension scheme as your employer invested contributions in to a pension for you and then upon your retirement you would receive a pension amount until you pass away. The latter is where you would take out a pension scheme and contribute your own money and your company would match this amount to a certain limit and then on retirement you would have your pensionable pot of money to buy an annuity. In light of the recent pension changes in 2015 no UK pension holders have to purchase an annuity scheme if they don’t want to anymore and there are a number of options available to them.

What Are The Pension Options?

In 2006 Britain’s pension framework was overhauled and to simplify the transfer of a pension the Qualified Recognized Overseas Pension was created.  This was done to comply with an EU directive in order to allow people to take their pensions to where they to retire if that are overseas and not in the UK.

These days too many companies offer ROPS without considering the other options available to the client of which currently there are 3 options.

  • Pension Options

1: Leave your pension where it is with the current provider

-The charges and costs of your current pension provider and the funds it is held in are competitive and do not warrant changing.

2: Change Pension Provider

  • The charges in your current pension plan are expensive which will have the effect of reducing your pension pot value. Cheaper options are available enabling your pension pot to grow faster and better offering increased funds for your

3: Look at moving your pension to a Recognized Overseas Pension Scheme.

  • You have established that you are not retiring to the UK or you are going to be offshore from the UK for 5 years or more. A Recognized Overseas Pension Scheme is a stronger alternative to keeping a UK pension. We will describe the benefits in the next section.

Initial Questions

How long are you going to be away from the UK?

How long have you been away from the UK for already?

Where will you be retiring to?

Pension’s Time bomb

Many current British Pension Schemes are in deficit and are unable to pay Defined Benefit (Final Salary) schemes as they are not funded sufficiently. If a company goes bust or is unable to pay the pension the scheme is then passed over to the Pension Protection Fund. This is not funded by the government but takes over the assets of the pensions and then charges a levy each year and the aim is to invest these monies to hopefully fund each person in the fund when needed. It remains to be seen whether the PPF can invest the funds wisely enough and only the future will tell.

Risk Profile and Investment Product Selection

One of the most important aspects of the investment recommendations should be matched against the clients risk profile to ensure that the investment fulfills and achieves the client’s retirement objectives. We will do this via a full financial fact find so we can determine the risk profile and establish a clear investment plan.

What are the rules to allow you to move your pension overseas!

  • The main qualifying rule is that you have been offshore for 5 years and you intend to retire abroad. You can still transfer into a ROPS even if you haven’t been offshore for 5 years but you can’t claim the benefits until you have and reach the age of 55.

Pension Review Process

The process is very straightforward to see how the pension performs:

1: After speaking with the advisor and performing a full fact find we then discover there are some benefits to transfer the pension

2: We provide you with a Letter Of Authority which enables us to find more in depth details of your pension from the provider such as the company, pension value and any fees and costs associated with the current pension.

3: The Letter of Authority is submitted by UK Expat Pension Reviews to the pension provider requesting further information.

4: The pension provider will then supply UK Expat Pension Reviews with all the details and we then pass this on to our pensions department. They then perform a Critical Yield Analysis which is looking at the costs of the pension and if the costs can be found elsewhere for a lower charge. This is where we can assist you in growing your pension with cheaper charges over the long run and compounding the pension pot meaning  a higher or bigger value upon retirement.

5: Based on where you are retiring we can then establish what the best option is for your pension. 1.Stay put in your current pension plan.

2.Transfer to a cheaper more efficient pension provider or

3.Look to transfer into a Recognized Overseas Pension Scheme for the benefits this offers.

Benefits of a ROPS

  1. Up to 30% Tax Free Lump Sums compared with 25% in the UK

With a UK Pension scheme typically 25% can be taken as a tax free lump. With a QROPS you can be eligible to 30% as a tax free lump sum.

  1. The Lifetime Allowance

2014/15               £1,250,000

2015/16               £1,250,000

2016/17               £1,000,000

If the Lifetime Allowance is exceeded the excess is taxed at 55% if taken as a lump sum or 25% if taken as income. There is still income tax to also be applied. So for a pension pot of £2,000,000 in 2016/17 for exceeding the LTA the pension holder will pay £550,000 to the HMRC for working hard and saving more for their pension. Transferring to a QROPs avoids this penalty

3: Income taxed in country of residence

A non-UK tax resident can request for pensions payment to be paid out gross. With a QROPS, clients can transfer to a more favourable tax jurisdiction such as Malta, Isle of Man or Gibraltar. For example if your pension is held in Gibraltar the income tax rate there is 2.5%. So for a higher rate taxpayer that would have paid 40% at source on their pension in the UK now pays 2.5% saving 37.5%.

  1. Final salary schemes

A defined benefit, also known as a final salary scheme, is the most generous pension you can receive.  The schemes have meant most  close, restrict access or reduce benefits because as they are expensive to operate. If the pension scheme collapses or the employer becomes insolvent the UK Pension Protection Fund (PPF) takes over the scheme.  The PPF is not Government backed and functions by charging a levy on pension schemes it looks after. 90% of your pension will be protected with a cap of £32,761 per annum. Larger pensions are impacted more by this. If you have a large pension passing this on to your beneficiaries is an option with a QROP’s as passing away with a final salary scheme your pension can die with you or your spouse may receive 50% of the payments.

  1. No Income Tax charge on death- Outside the scope of the 45% tax charge

With a UK pension should a person aged below 75 pass away they can pass their pension to a nominated person tax free. If they die over age 75 there is a tax charge of 45% on passing this to the beneficiary. With a Recognised Overseas Pension Scheme the holder can take the benefits at 55 and pass on their pension upon death with no tax liability.

  1. Exchange rate risk

A good rule of thumb is to have income in retirement paid out in the country currency where you plan to retire. The constant changes in currency rates would leave the pension pot open to currency exposure and constantly changing rates meaning you could receive sufficiently less over time with each rate change.

  1. Worldwide investment Funds and Strategies and ongoing advice

A QROPS can be invested a huge range of investment funds across many different currencies using various fund platforms or offshore bonds.  This gives the pension holder the chance to monitor and make these funds work harder rather than not closely monitoring the performance as many don’t do. The investment can be tailored to the investor’s individual needs. Is the money invested in the correct areas, and with the best Fund Managers or have highly regarded managers left the company as with Neil Woodfords decision to leave Invesco Perpetual. Transferring your pensions to a QROPS will bring your assets together and a wealth manager can help to advise and monitor the pension investments.

  1. Returning to The UK (90% of the pension is taxable)

On returning to the UK if a person is drawing their pension from a ROPS in retirement then tax is only paid on 90% of the income. This is because it is classed as foreign income so less tax is payable.

  1. Portability, flexibility and Consolidation

Recognised Overseas Pensions are designed for the 21st century expatriate in that the government understands that hardly any people work for one company for their whole life and work in the same country anymore. With people picking up pensions in many different jobs before they leave the UK it can be difficult to keep track and monitor these pensions. ROPS allows the pension holder to consolidate all of the pensions under one roof so to speak and again make them work harder. ROPS gives the flexibility to tailor your pension for where you plan to retire to even if that’s the UK. A ROPS can be considered similar to a SIPP (Self Invested Pension Plan).

  1. Maximising a Spouses Pension

With a UK pension if the pension holder dies the pension is usually passed to their spouse but at a reduced 50% rate until they die. With a ROPS it is possible to transfer 100% of the fund to provide a spouses pension.  This may be through an annuity or income drawdown arrangement.  Many people may wish to consider transferring to a QROPS to ensure the pension asset is able to provide a more substantial retirement income for their spouse.

  1. Early Retirement

With a ROPS its possible to retire and draw on you pension funds from the age of 55 which can be earlier than in the UK. The transferor has to be a non-resident from the UK for at least 5 years though.

  1. Pension Income Tax Planning

The income payable from a pension is fully taxable as income and is therefore taxable at a member’s highest marginal rate of between 0-45%.Is using a QROPs this can be limited to 2.5% if utilising the correct country to invest the pension pot

15 Inheritance Tax (IHT)

If a client is planning on never returning to the UK and lose their Domicile of Origin this can help them in not having to pay Inheritance Tax. The person would have to take legal advice from a professional but a ROPS is an ideal vehicle as it takes your pension out of the UK. All ties have to be cut to enable this but many people are doing this and enjoying better retirements in cheaper countries

  1. Early Retirement from a Final Salary Scheme

Final Salary Schemes often have q early retirement penalties for those who wish to draw their pension before the normal retirement age. Typically a scheme may impose a penalty, known as an actuarial reduction, of 0.5% per month. This means if you retire 12 months early the penalty is a 6% reduction in your annual pension income. If you retire 5 years early the penalty increases to 30% of your annual pension If you are looking to retire early then transferring to ROPS is a big advantage.

  1. UK Pension Legislation

The UK government is constantly changing the regulation of pensions, changing allowances and invariably taxing them more. Moving to a ROPS would avoid this as you would effectively just be managing a fund of your own for retirement. Judging by the last few years and the unexpectedness of the UK government they can continue to severely limit the benefits current ROPS owners receive. The UK has serious deficit in the pensions area and who know what changes they could make to deal with its deficit.

  1. Bankruptcy

In the UK in the event of bankruptcy a court can order a charge against your pension. Hence when you start drawing this tax free sum and them part or all of your monthly income could be paid to a creditor. With a ROPS this would be outside of the jurisdiction of the UK so this would severely limit that option to reclaim monies back from your pension pot.

  1. Divorce Settlements

Courts can place a pension sharing order in the UK against your pension. With a ROPS it would be up to the trustees of the scheme to allow or deny this. Also if a client wishes to settle a cash amount agreed with an ex-spouse they could do this via a ROPS with much more ease.

 

What Can be held in a QROPS?

  • Pension Assets •Cash •Alternative Investments •Land •Shares •Commercial Property •Investments

 

Things to Remember

If a pension holder has a large pension income that was to go into the Pension Protection Fund. For example if the holder was to receive  £50,000 per annum on retirement then they would lose millions because the PPF would only protect up to a maximum of £32,761.07. The PPF is funded by a levy on pension schemes (which many are in trouble themselves) and the scheme is not guaranteed by the UK Government, its ability to make pension payments could be seriously troubled. By taking a ROPS and doing a cash equivalent transfer they take control of their own pension funds and removes it from the risk of the pension scheme going bust.

Since their launch in 2006, the popularity of QROPS (Qualifying Recognised Overseas Pension Schemes), an HMRC-recognised overseas pension, continues to grow amongst expatriates and individuals considering a move overseas.

Demand for QROPS has experienced annual growth – which looks set to continue throughout the future as the market continues to mature, and more people become aware of their considerable benefits. The recent ‘Pension Flexibility 2015’ changes to UK pensions have also had a limited but important impact on the 20 benefits of QROPS set out below.

Frequently Asked Questions

Who can transfer their pension into a QROPS?

Anyone that has been overseas for 5 years or more and plans to retire overseas. Even if you are still in the UK you can apply for a ROPS but you cant take the benefits until you have been offshore for 5 years and reach the age of 55.

When I transfer into a Recognized Overseas Pension Scheme can I take 100% of my pension of course after paying tax?

No you can only take 30% as a tax free lump sum. If you were in the UK this would be 25%. The UK government is still at present deciding whether to let offshore pension holders access to taking 100% like the pension reforms of 2015 in the UK allow UK residents to do.

Can I return to the UK with a ROPS?

Yes there are still advantages of returning back should you do this for any unexpected reason or family circumstance. The ROPS would act like a SIPP but the major advantage at the moment is that upon return you would only pay tax on 90% of the pensionable income.

Can I setup a Recognized Overseas Pension Scheme myself to avoid using an advisor?

This option isn’t really possible due to the complexity of the ROPS and the advice needed. There is advice needed in areas from the fact find and first review through to where to base the ROPS and then through to the choosing of the bond and investment funds to invest in. The benefits are already immense for the ROPS holder and the charges involved never outweigh the savings made by the pension holder transferring to the ROPS.

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Address Mortgage House, St Stephens Lane, Mid Levels, Hong Kong, S.A.R