Taxes, Wills and Pension Schemes for British Expats in the UAE

By David Erhardt of STM Group

What is domicile, why does it matter?

Do you know the difference between domicile and residency? If you’re an expat working and living in the UAE, you should. Even without any UK assets, if you’re still UK domiciled you can be taxed on any, and all, worldwide assets, which could mean an unexpected, and heavy, Inheritance Tax (IHT) bill for your beneficiaries and loved ones.
The issue of UK domicile is a complex one. It has been defined by the courts as one’s ‘permanent home’, but care should be taken with this definition, because it can sometimes be deceptive (for example, a person could be domiciled in a country which they have never visited!). This is because while domicile is a question of fact, it is also a conclusion of law which is determined by the application of a set of legal principles.
In addition to seeking advice on personal circumstances, expats (at the very least) would need to prove that they are living abroad permanently, with no intention of returning to the UK, with clear and unequivocal evidence supporting this. 
Furthermore, even if expats establish non-UK domicile, it is important to note that any change in circumstances or ties could affect or reverse this status.
Most importantly, simply moving abroad does not mean leaving UK IHT behind. UK IHT depends not on where the retiree resides, but rather where they are domiciled – and this, for many British expats, is still the UK. 
Lynette Chaudhary, International Tax Manager at STM Fidecs, adds that, ‘in addition to seeking UK advice, the expat should ensure they seek advice in their new home.’

Importance of wills in the UAE

Where wills are concerned, it is increasingly common for multiple wills to be drawn up, each one dealing with assets in separate localities.
 If you’re moving to and buying a property in the UAE, for example, but also own property in the UK, it could be recommended that you draw up two wills to deal separately with the assets in each country.
In such circumstances, one major concern is whether the wills work together. Many wills contain clauses revoking all other wills, so this must be omitted in the case of multiple wills. Another key consideration is the existence of contrasting legal systems which dictate the division of estates. In the UAE, for example, a nation governed by Sharia Law, in the absence of a will all assets will be passed to the oldest male relative, who may not necessarily be the benefactor’s intended beneficiary.
To add to this, it’s important that the right official is overseeing these matters. Consulting an expert regarding such matters in your new country of residence is essential. 

And, keep reviewing your affairs. Laws regarding tax and residency change, so you need to be sure your wishes are still covered by the provisions you’ve put in place.

Added value of QROPS/QNUPS pension plans

While QROPS or QNUPS are well-known as beneficial pension schemes, they also can prove to be a prudent choice for an estate planning strategy, as they allow for the transferring of invested funds to beneficiaries or the estate in potentially non-taxable ways in the case of death. Again, with a wide choice of plans available, in a number of jurisdictions, consultation with an expert to tailor any plan to your circumstances is essential.

For further information, please email or telephone the pensions team in Gibraltar on (+350) 200 52476 for a confidential, no obligation discussion.

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David Erhardt is responsible for the Pensions Division of STM Fidecs, part of STM Group Plc. Becoming a member of the...

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