By Rob Kay, Senior Partner, Blevins Franks
If you live in France but take financial advice from the UK, what do you need to think about as full Brexit approaches?
Reassuringly, even if there is a no-deal Brexit, citizens’ rights for UK nationals legally settled in France by 31 December 2020 are protected under the UK-EU Withdrawal Agreement. There are no such guarantees, however, in the area of financial services, which could affect whether you can continue to receive UK-based advice and services as an EU resident.
With no certainty that negotiations will be resolved in time, make sure you check that your financial planning – and adviser – will stand up to the challenges that Brexit may bring. Here are four key considerations.
- 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 after the Brexit transition period.
Under today’s rules UK-based financial businesses can ‘passport’ out of the UK and into Europe – but this will no longer apply after 31 December 2020.
‘Passporting’ enables cross-border transactions between EU member states through shared financial regulation. It is currently possible because the UK Financial Conduct Authority (FCA) is bound by the same rules and standards as other regulators in the EU. But once the UK leaves the EU, the regulation of financial activity and consumer protection may not continue to line up on both sides. As such, unless a mutual deal is agreed on financial services, the EU will not permit ongoing passporting arrangements for UK financial businesses and advisers from 1 January 2021.
Some UK financial firms have put provisions in place to continue working in an EU/EEA country post-Brexit, but others have not. We have already seen letters from major UK banks to EU-based clients, advising they will be withdrawing services and recommending they make arrangements now with an alternative provider who can support them.
Make sure you understand your provider’s legal position for clients in France.
- 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, from 2021 they may not accept instructions, such as top-ups, from a UK adviser. The financial regulator in France, for example, has already confirmed it will be illegal for French banks and insurance firms to do business with a provider who is not authorised in the country. Similarly, while the Central Bank of Ireland has 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, make sure you check if there will be any practical challenges to keeping a UK-based adviser. Will 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 if you are unable to travel through illness or sudden travel restrictions.
- The advantages of local knowledge
As well as the legal and practical implications, you should also review whether an adviser based in a different country is best placed to help you take advantage of opportunities available to you in France.
Will they fully understand the intricacies of the tax regime in France and how it interacts with UK taxation? Will 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 French residents? Who will foot 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. Nor should they!
- 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 in France. Once they cease to be EU/EEA assets from 2021 and you are no longer a UK resident, they could potentially attract a higher tax bill, in either or even both countries. Meanwhile, French 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.
As full Brexit draws ever nearer, it has never been more important to ensure your financial affairs are both compliant and suitable for your life in France. Secure financial peace of mind by talking to an experienced, locally-based adviser, as soon as possible before the 2020 Brexit deadline.
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; individuals should seek personalised advice.
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