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What Brexit answers do we have one year on from the referendum?

By Rob Kay, Senior Partner, Blevins Franks

In the aftermath of the UK general election’s unexpected outcome, we reach the milestone of one year since Britain voted to leave the EU. What do we know today about how Brexit might affect expatriates in France?

Has the UK election changed anything for Brexit?

Faced with a hung parliament as the Conservatives failed to win by majority, Theresa May secured support from Northern Ireland’s Democratic Unionists (DUP) to retain leadership.

The election outcome, however, is generally considered a public rejection of her hard-line “no deal is better than a bad deal” Brexit approach. The big question now, then, is whether she will be able to pursue a ‘hard Brexit’ or yield to pressure for a softer strategy.

UK Brexit minister, David Davis has since indicated that there has been no change in the government’s intention to pursue a form of ‘hard Brexit’ by removing the UK from the single market and seeking a unique customs arrangement.

How long until things change?

By triggering Article 50 earlier this year, Theresa May put Britain on course to leave the EU on 29th March 2019. That deadline still stands, so EU membership and associated rights for expatriates living in France should remain until that date at least.

Brexit negotiations were able to go ahead and started on 19th June as planned before the election.  David Davis  met with chief EU negotiator, Michel Barnier, to discuss the timetable and priorities for the negotiations ahead.

In an official statement after the talks both men confirmed that securing reciprocal rights for citizens remains at the top of the agenda. Davis revealed the government plans to set out the UK’s “offer” for guaranteeing the rights of EU citizens on Monday 26th June. The next stage of talks – set to focus on this issue – are then due to begin in the week beginning 17th July.

Theresa May has made it clear she agrees, provided guarantees are mutual. The terms of new reciprocal agreements, however, could prove less favourable for expatriates than today. Now is the time to look into securing your position in France – before rules change – if you want to maintain current benefits.

Should you expect higher taxes?

With taxation being a domestic – not an EU – matter, the tax treatment for other French residents should not change post-Brexit. The UK/France tax treaty will continue to set the rules for taxing expatriates.

However, some UK assets may be treated differently in France after Brexit. For example, once UK bonds become non-EU assets, they will no longer qualify for beneficial tax treatment given to EU assurance-vie and capital redemption bonds. That means no fixed rates and no tax credit. If this affects you, take professional advice to review your approach.

Pounds or euros?

In these changeable times, the value of sterling is clearly vulnerable – the unexpected election news prompted the pound to drop 2% against the euro overnight.

Although currencies can swing both ways, if you have no choice but to convert from pounds to euros at a particular time – for example, by withdrawing UK pension income – this volatility can be costly. Living in France, you should receive some income in euros to reduce currency exchange risk. Look for structures that let you hold investments in multiple currencies or consider transferring UK pensions to arrangements offering currency flexibility.

What about UK pensions?

While Brexit should not affect accessing or transferring UK pension funds, one uncertainty is the annual inflation increase in State Pension payments. Not currently guaranteed for expatriates outside the EEA, this could be an easy way for the Treasury to save money in 2019.

The UK’s new ‘overseas transfer charge’ may suggest post-Brexit changes for private pensions. Expatriates transferring to Qualifying Recognised Overseas Pension Schemes (QROPS) may benefit from tax-efficiency, estate planning advantages and flexibility over UK pensions. But since 9th March, transfers to QROPS outside the EEA attract 25% taxation unless you live in the same jurisdiction – and liability lingers for five years.

Currently, this does not affect transfers to QROPS based within the EEA, like Malta or Gibraltar. However, Brexit offers the Treasury more scope to recoup revenue from Britons in Europe, so could prompt further penalties on pension transfers or make it harder to take advantage of today’s high transfer values for ‘defined benefit’ pensions. Consider acting now under current rules, but take personalised, regulated advice to avoid pension scams and ensure a suitable approach.

With so much uncertainty ahead and current opportunities potentially expiring in around 18 months, now is the time to review your financial planning and explore your options. With the right strategy in place, you can plan accordingly as Brexit unfolds.

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice. 

For more financial articles written for expatriates visit the Blevins Franks website at www.blevinsfranks.com

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