Inheritance Tax Threats Go Unheeded by Affluent Expats Benefitting from ‘Golden Visa’ Programs

According to David Lesperance, a tax expert specializing in advising wealthy expats, many British expats who have moved to Dubai are not aware of the inheritance tax issue. Lesperance has spoken to dozens of expats who were not informed in advance of this concern. He explains that if an expat residing in Dubai passes away, HMRC informs the executors of their estate that inheritance tax applies based on their domicile status. Since the deceased person still has connections to the UK, such as family, property, or even visits, they are considered domiciled in the UK and are therefore subject to inheritance tax on their worldwide assets. Lesperance emphasizes that the UAE would never allow a person to remain a resident indefinitely, hence the tax liability for expats still considered domiciled in Britain.

Lesperance notes that many expats mistakenly believe they can evade inheritance tax by living “off the grid.” However, he warns that tax authorities have become more sophisticated in investigating individuals and their ties to the UK. He explains that authorities can scrutinize someone’s internet presence, credit history, and mobile phone records to determine if they have any connections to the UK for inheritance tax purposes.

In terms of estate planning, Lesperance highlights that expats can still employ common strategies like gifts and trusts to mitigate their inheritance tax liability. However, he emphasizes that the majority of British expats in Dubai are unaware of their obligation to pay inheritance tax and therefore do not engage in such planning.

Furthermore, The Telegraph recently revealed that HMRC is intensifying its efforts to crack down on wealthy “day counters” who may have exceeded their allowable stay during the pandemic. The tax authority is particularly concerned about wealthy individuals from foreign tax havens who may have taken advantage of the “exceptional circumstances” exemption and overstayed their welcome. If caught violating the rules, these individuals could face taxation on their global income and assets, along with penalties ranging from 30% to 100% of the taxes owed.