A slew of new tax rules have come into effect in the UK and Europe bringing with them tough new regulations which could cost expats dearly.
One of the most important is the UK’s ‘annual tax on enveloped’ dwellings.
For most people this will not be an issue, since it only focuses on properties worth more than £2 million and which are held by, what the government calls a ‘non-natural person’ but what is technically a company.
There’s a sliding scale of charges involved and those owning homes worth more than £20 million will be hit with an annual charge of £140,000.
However, for anyone who may be affected by the new rule or may be wondering what to do next, a tax expert says the best course of action may be to do nothing.
Statutory residence test
The advice comes from Janet Hoskin, who works for law firm Pinsent Masons, and she says many of those affected may be tempted to restructure their property ownership to avoid the new tax.
They should be made aware though that some corporate entities will not be counted as non-natural persons and these include trustees or a company acting as a trustee of a settlement.
The process of switching from one type of ownership to another may not only be more expensive than paying the charge but it also may incur a charge when it wasn’t due to be payable.
There’s also a case to be argued for someone to pay the charge if that’s the cheaper option than paying inheritance tax.
The UK also sees a new statutory residence test which gives better clarity to whether someone should be considered as being UK-resident for tax purposes.
The rules may be clearer but the criteria are still complicated though there is helpful information on the HM Revenue and Customs website.
Supercars snapped by tax man
In addition, British expats living in Spain must now declare all of their financial assets to the tax authorities and will be taxed accordingly.
Though the authorities in Spain and the UK rely heavily on self-declaration of assets and financial circumstances, spare a thought for the Italian tax authorities who are using increasingly novel ideas to catch tax evaders.
Their latest scheme is to check the licence plate of a supercar they see being driven and compare it to their tax records.
If the person isn’t declaring enough in income to buy a supercar they warrant an investigation.
The downside of this move, while generating an increase in tax income, is that Ferrari and Maserati car dealers are complaining that their sales have fallen heavily as result.
