Expats who escape to a new life overseas leaving a pile of debts behind in Britain may be in for a nasty financial shock.
Many believe that if they are outside the reach of British courts, they are also beyond the reach of their creditors.
But this is not necessarily the case, depending on who they are.
The first problem for debt-laden expats who see fleeing to another country as their only financial solution is that British courts can make orders to put charges or seize any assets left behind, such as a house or other property.
Judges will also grant creditors county court judgments that will blight their credit ratings and stay on record for at least six years.
HMRC’s long reach
In extreme cases, the courts can also make someone bankrupt in their absence for a debt as small as £750.
Some creditors also have a privileged status.
Unfortunately for many hoping to evade the tax man, HM Revenue & Customs (HMRC) is one of them.
HMRC has Mutual Assistance in the Recovery of Debt agreements with many countries, so it’s a good idea to mug up on the list to make sure your expat destination is not one of them if you owe the tax man money.
Details of how unpaid tax debts affect expats are listed in HMRC’s Insolvency Manual, which is in-house guidance for tax inspectors.
“We can and do ask tax authorities in other countries to claim money owed to us in the UK off expats living under their jurisdiction,” said an HMRC spokesman.
“We also offer a reciprocal service for other authorities with debtors who are now living in Britain.”
Benefit cheats
In the case of UK tax debts, interest and penalty charges continue to mount up while the debt remains unpaid.
Other debts, such as loan or mortgage arrears, unpaid credit card balances and even student loans can follow expats around the world.
However, private companies generally find chasing down a debt harder than HMRC.
The government is also running a high profile campaign in Spain to catch benefit cheats who have moved there but still claim welfare payments in Britain to which they have no entitlement.
“How the courts treat debts depends on who the money is owed to and whether the person owing the money left the country to deliberately avoid paying or made arrangements with their creditors before they left,” said a spokesman for debt charity Stepchange.
