EU-resident Britons with UK-based advisers, bank accounts and investments may be limited in what they can do now that UK financial firms cannot use the EU ‘passporting’ regime. And do UK advisers have the local knowledge to structure your assets tax-efficiently for your country of residence?
As we move towards the end of 2021, Brexit is no longer a novelty, but we are still learning exactly how we are or may be affected. While in many ways day-to-day life hasn’t changed for UK expatriates, there are some inconveniences – some minor, some not so minor.
One Brexit consequence that is causing concern and difficulties for many British expatriates in the EU is financial advice and services – we are receiving a lot of questions about it.
The Brexit trade deal did not cover financial services, which meant the previous ‘passporting’ regime came to an end on 31 December 2020. While post-Brexit negotiations could change things in the future, you do need to establish if your financial planning – and adviser – will stand up to the challenges that Brexit brings today. Here are four key considerations.
1. The end of passporting
If you have a good relationship with your UK-based financial adviser, you may understandably wish to continue using them, despite now living in a different country. However, you need to make sure they can legally continue to advise you now that the UK is no longer an EU member state.
Until the end of 2020, UK-based financial businesses could ‘passport’ out of the UK and into Europe – but since 1 January 2021, this no longer applies.
‘Passporting’ enables cross-border transactions between EU member states through shared financial regulation. It was previously possible because the UK Financial Conduct Authority (FCA) was bound by the same rules and standards as other regulators in the EU. Now the UK has left the EU, the regulation of financial activity and consumer protection no longer lines up on both sides. So, unless a mutual deal is agreed on financial services in future, the EU no longer permits ongoing passporting arrangements for UK financial businesses and advisers.
Some UK financial firms have put arrangements in place to be able to continue working in an EU country post-Brexit, but others have not. Many expatriates with EU residential addresses have received letters from UK banks, financial advisers and investment institutions advising that they can no longer support them.
2. The limits of UK advice
If you still retain UK investments, a UK-based adviser may be able to continue supporting you there. But if you hold savings and investments with an EU-based institution, they may no longer accept instructions, such as top-ups, from a UK adviser. The financial regulator in France, for example, had confirmed it would be illegal for French banks and insurance firms to do business with a provider who is not authorised in the country post-Brexit. Similarly, while the Central Bank of Ireland enabled a three-year grace period for servicing existing insurance contracts, it will not allow unregulated entities to renew or create new policies from 2021.
We can expect similar positions to be taken by other EU regulators seeking to protect consumers in their country, so this could limit the planning opportunities for expatriates using UK-based advisers.
Also, check if there are any practical challenges to keeping a UK-based adviser. Do you have to travel to the UK for meetings and paperwork requirements? Consider how this would work in situations where you need funds quickly or are unable to travel through illness or travel restrictions.
Any questions? Arrange to speak to one our advisers
3. The advantages of local knowledge
As well as the legal and practical implications, consider whether an adviser based in a different country is best placed to help you take advantage of opportunities available to you in your country of residence. For example:
- Do they fully understand the intricacies of the tax regime and how it interacts with UK taxation?
- Do they have in-depth knowledge of the local residence, domicile, tax, succession law and reporting rules?
- Do they know about – and have access to – tax-efficient solutions that offer significant benefits to EU residents?
- Who will pay the bill or face the consequences if they get things wrong?
While UK-based advisers may be experts on the ins and outs of the UK system for residents there, it is unlikely that they have the same in-depth knowledge for another country.
4. The suitability of UK planning
Remember: financial planning that is tailored for a UK resident is unlikely to remain suitable once you become resident elsewhere. Ideally, you should review your arrangements before you move to minimise taxation when changing residency and make the most of tax-efficient opportunities in your new home.
If you are holding on to UK savings and investments, beware that they can lose their tax benefits once you are living abroad. Once they cease to be EU/EEA assets and you are no longer a UK resident, they could potentially attract a higher tax bill, in either or even both countries.
Meanwhile, EU residents have access to locally-compliant alternatives that can offer other advantages besides tax-efficiency – such as multi-currency and estate planning flexibility – so explore your options. Depending on your circumstances, many British expatriates in countries like Spain, France, Portugal, Cyprus and Malta have found that reviewing and adjusting how and where they hold their capital has significantly improved their tax position.
It has never been more important to ensure your financial affairs are both compliant and suitable for your life abroad. Secure financial peace of mind by talking to an experienced, locally-based adviser.
Blevins Franks – Brexit-ready
At Blevins Franks, we are committed to providing all our EU-based clients with a high-quality service well into the future and so had been planning for Brexit for some time. We were well prepared, with arrangements in place which enabled us to continue to service our clients, without interruption, right from 1 January.
So when we are approached by expatriates who are wondering what to do now that their UK
financial institution has withdrawn a service, we are pleased to be able to say that we are fully authorised to work in the EU and provide regulated advice on their savings and investments in 2021 and beyond.
Our local advisers are regulated, authorised and have the experience and knowledge to advise on all aspects of financial and tax planning in post-Brexit Spain, France, Portugal, Cyprus and Malta.
Get in touch to find out how we can help you.