British Tax Man Eyes Ex-Pat Estates In New Zealand

Media Release
Date 13th July 2009

British Tax Man Eyes Ex-Pat Estates In New Zealand

Britons settled in New Zealand should not assume that they are immune from UK inheritance tax, even if they have taken New Zealand citizenship, warns Auckland-based Ken Holmes Financial Services.

The credit crunch has led to British tax agencies scouring the world for untapped revenue, which can be a nasty surprise for ex-pats. Ken Holmes, managing director of Ken Holmes Financial Services explains: `The UK Inland Revenue doesn’t necessarily accept your nationality or citizenship to be a definite reflection of your domicile. While it is not difficult to change your country of residence, it is trickier to change your domicile once it has been established, meaning that anything you own worldwide over $810,000 will be subject to 40% UK inheritance tax.’

Domicile of Origin is acquired at birth based on your father’s domicile (or mother’s if she is unmarried) and it remains the domicile unless you force a change during your life time. This can mean that if your father was UK domiciled at the time of your birth but you have been living in New Zealand say, for the past 50 years, you could in theory still be UK domiciled for the sake of inheritance tax liability.

Ken points out: `To change domicile you have to convince the UK tax authorities that you intend to remain in your country of current residence for life. This requires the proper collection and presentation of evidence to prove this intention is genuine. A lot of New Zealand residents assume that the fact they are permanently living here with little or no ties to the UK is sufficient evidence. This is not the case and we’re starting to see UK revenue inspectors looking at New Zealand residents much more closely.’

Ken advises anyone who thinks they may be liable to take financial planning advice: `We’re telling our clients in central Auckland and the Eastern suburbs that they shouldn’t assume that the UK tax man accepts that they are no longer UK domiciled. Significant action has to be taken during your lifetime to prove to the UK tax man that your intention is fact.’

If you want to be domiciled in New Zealand you must makes a submission to the Capital Taxes Office in the UK and sever most ties with the UK. Usually this means closing all British bank accounts, selling all assets in Britain and even organising your funeral in New Zealand. If you are granted a new domicile of choice it takes three years for the loss of UK domicile to become effective for IHT purposes.

Other helpful steps include;

• Taking New Zealand citizenship and changing your passport

• Joining social organisations in New Zealand and severing links with any social organisations in the UK

• Voting in New Zealand elections

• Make a will under New Zealand law

About Ken Holmes Financial Services

Ken Holmes Financial Services specialises in financial advice, insurance and investment services in central Auckland and the Eastern Suburbs.

http://www.kenholmes.co.nz

ENDS

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